PRICING INNOVATIONS - University of Minnesota · Technology Pricing Innovations Marketing Product...

@pricingpros

1

www.pricinginnovations.com/codefreeze

1

PRICING INNOVATIONS

From Good Product to Good Business Using Visualization to Build the Right Business

@pricingpros

2


2

2010

2012 2015

2014

2003

Product Development

CommercializationMBA

Consulting2016

Pricing InnovationsTechnology Marketing

Product Management

Product Marketing

Business

Chemical Engineer

About me: Esra Kucukciftci

@pricingpros

3


OUR GOAL

1Understand how we can utilize visualization to build the right product

2Use this knowledge to build the right business

3 Talk about specific examples and reference the methods used

In the next 45 minutes or so…

@pricingpros

4


4Before we dive in…

@pricingpros

5


5

@pricingpros

6


6

Great, you have a product. But do you have a business?

@pricingpros

7


of new products fail. The cost of failed new products to the US economy in 2010 alone is USD $260 billion.Source: Product Development and Management Association - PDMA

@pricingpros

8


of new products fail to meet their revenue or profit goals. Source: Simon Kutcher & Associates study across 1,600+ new products across 37 countries.

@pricingpros

9


of the start-ups were still in the business in the end of a six year period.Source: Harvard Business School study across 2,000 VC backed start-ups, between 2004-2010.

@pricingpros

10


of businesses profit from digital.Source: Accenture

@pricingpros

11


Product Cost Price Value Customer

“Product” innovation

11

@pricingpros

12


“Product-focused” innovation

12


@pricingpros

13


Product structure

Cost structure

Offer structure

Pricing structure

13

@pricingpros

14


14

@pricingpros

15


15

@pricingpros

16


16

@pricingpros

17


17

VALUE =

Willingness to Pay – Opportunity Cost

@pricingpros

18


18

Value Stack

Value

Gap

Value Innovation

Value Metric

Product structure

Cost structure

Offer structure

Pricing structure

@pricingpros

19


Cost structure

Offer structure

Pricing structure

Value Stack

Value

Gap

Value Innovation

Value Metric

19

Product structure

@pricingpros

20


1 Identify the gaps in perceived value

& customers’ willingness to pay

2 Quantify the perceived value of

benefits

3 Uncover reference sets that

influence their willingness to pay

Value Gap

@pricingpros

21


21

PaulaPrincipal

Investigator

EvaEvaluation

Professional

UrsUniversity

Central Purchasing Director

GloriaGraduate Student

Whose problem are you solving? 21

@pricingpros

22


22

AM

Background

Demographics

Goals

Challenges

How we help

Common objections

Real quotes

Need differently

Buy differently

Benefit differently

22

@pricingpros

23


23

$1 $2 $5

$25

$45

$20

$15

$2

$-

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

User 1 User 2 User 3 User 4 User 5 User 6 User 7 User 8

Opportunity size in USD millions

Please don’t make me work 23

@pricingpros

24


24

Three use cases make up 80%

0% 1%4%

22%

39%

18%13%

2%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

User 1 User 2 User 3 User 4 User 5 User 6 User 7 User 8

Opportunity size distribution

24

@pricingpros

25


25

Only 70% of the use cases are addressable.

70%

22%

25

Low-High

@pricingpros

26


Functional Transformational SocialEmotional

26What ‘s the value of the benefits?

@pricingpros

27


100 75 500

50

100

150

200

250

300

350

User 5 User 6 User 7

Estimated economic benefits per user per year in USD.

Functional Emotional Transformational Social

What ‘s the value of the benefits?

In B2B, we focus on thefunctional benefits

27

@pricingpros

28


6675 100

0

50

100

150

200

250

300

350


Estimated economic benefits per user per year in USD.

Functional Emotional Transformational Social

What if we cared about emotional benefits?

Comparing these is hard

28

@pricingpros

29


What if we cared about emotional benefits?

Comparing these is easy66 75 100

0

50

100

150

200

250

300

350


Estimated Economic Benefits per User per Year in USD.

Emotional Functional Transformational Social

29

@pricingpros

30


And the last step before we can come up with a pricing window is understanding the buyers’ reference sets.

30

@pricingpros

31


How do customers decide what’s “valuable”?

3131

@pricingpros

32


When it comes to value perception, people are sensitive to differences and not to absolute values.“Coherent arbitrariness” - Dan Ariely et al, 2003

3232

@pricingpros

33


Reference value Differentiation Perceived value

3333

@pricingpros

34


34

www.pricinginnovations.com/veritas

“Perceived value” is the only one that matters and we can influence it.

34

@pricingpros

35


35

Replace

Augment

IntegrateInnovate

35Uncover the spheres of impact

“Perceived value” is the only one that matters and we can influence it.

@pricingpros

36


36

Ready for your pricing window?

Well, not so fast.

@pricingpros

37


Product structure

Cost structure

Offerstructure

Pricing structure

Value StackValue

Gap

Value Innovation

Value Metric

37

@pricingpros

38


38

1 Uncover different types of stacks

2 Inform your product structure

3 Quantify the economic value per stack

Value Stack

@pricingpros

39


39

Taxi cab

Lifetime Value per User - LTV 39

@pricingpros

40


40

Taxi cab Hourly carflat fee rides


@pricingpros

41


41


Ride-share


@pricingpros

42


42


Ride-share Uber/Lyft


@pricingpros

43


43


Ride-share Uber UberBUSINESS UberPOOL


@pricingpros

44


44

Word of caution:

NEVER visualize one dimensional data with multi-dimensional display.

@pricingpros

45


39

27

14

97 8

6

9

6

31 1 1 1 1 1 1 1 1

Users per Account ID

45

Your offer structure must reflect your value stacks.45

Frequency distributions can greatly inform your

1 Caps

2 Triggers

3 Fences

@pricingpros

46


46

Frequency distributions can greatly inform your offer structure.Percent of revenues per pricing plan

46%

27%

24%

67%

60%

8%6%

16%

Old New Optimized

Plus

Basic

Team

Optimized

@pricingpros

47


47

Stack optimization is slightly different for existing products and technologies.

@pricingpros

48


Now… for the pricing window

48

@pricingpros

49


49 49Competitive pricing

125

360

180

280

530

0

100

200

300

400

500

600

Factor 1 Factor 2 Factor 3 Factor 4 Factor 5

Our new offering

Competitor ACompetitor B

Repeat the factor comparison for each of the target segments.

@pricingpros

50


50 50Strategic pricing

24%

46%

60%

8%16%

Old Optimized

We derive the price by reverse engineering the overall revenue and segmented growth goals, and reconfiguring the product and offer structures accordingly.

Plus

Basic

Team

Optimized

@pricingpros

51


51 51Value-based pricing

100

+24

+18 (10)(6)

126

We derive the price by valuating positively and negatively differentiated benefits in comparison to buyers’ reference sets or to the basis of competition.

@pricingpros

52


Product structure

Cost structure

Offer structure

Pricing structure

Value StackValue

Gap

Value Innovation

Value Metric

52

@pricingpros

53


53

1 Customers who benefit more

should pay more.

2 A good value metric benefits

both you and the customer.

Value Metric

@pricingpros

54


54

What’s the one dimension which would allow your revenues to grow as your buyers’ businesses grow,if you acquired no new customers today?

@pricingpros

55


Sometimes innovating your value metric can be the innovation in and of itself.

A good value metric benefits both you and the customer.

@pricingpros

56


56

PaulaPrincipal

Investigator

EvaEvaluation

Professional

UrsUniversity

Central Purchasing Director

GloriaGraduate Student

Let’s revisit our ed-tech story.

@pricingpros

57

www.pricinginnovations.com/codefreeze57

Basic Plus Team Enterprise

Benefit 1

Benefit 2

Benefit 3

Benefit 4

Benefit 5

Benefit 6

Benefit 7

Innovation in social

science research

Upgrade for more use & better data

management

Upgrade for org-wide use

Upgrade for unlimited studies &

add-on services

57

And let’s finalize our offer structure.

@pricingpros

58


Product structure

Cost structure

Offer structure

Pricing structure

Value Stack

Value

Gap

Value

Innovation

Value Metric

58

@pricingpros

59


“Product-focused” innovation

59


@pricingpros

60


60

“Value-focused” innovation

Go-to-MarketTest & Plan

Cost & ProductStructure

Value Metric & Pricing

Value Stack

Value Gap

Analytics & Metrics

@pricingpros

61


61

Final thoughts…

@pricingpros

62


People don’t buy features; they buy benefits.

@pricingpros

63


63

Visualizing can help your product and business teams to identify, communicate, and build the right benefits that will fuel your growth.

@pricingpros

64


64

THANK YOU

✉ [email protected]

📞 +1 (612) 351-2503

@pricingpros

www.pricinginnovations.com/codefreezewww.pricinginnovations.com

DOWNLOAD

Date post:	20-May-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

PRICING INNOVATIONS - University of Minnesota · Technology Pricing Innovations Marketing Product...

Documents