One of the first things I ask about with a new product team is “how will a customer justify paying for your product?”
An apparently simple question, but I often get blank stares. Here’s a thumbnail of the problem and the process, along with a tiny spreadsheet template. Continue reading
We recently finished a major pricing exercise with a start-up in the enterprise software space: tuning up their prices, improving their upgrade model, and looking at alternative pricing metrics (i.e. what to meter when quantifying the customer’s usage). A great opportunity to match quantitative models against actual customer behaviors.
During the engagement, the client’s sales team identified some real-world messiness that we (as product managers) would prefer to ignore: high-end customers who demand enterprise-wide licenses – instead of limited-use licenses tied to volume. These are sometimes called “all you can eat” or AYCE deals. Let’s describe the situation, then explore a few of the messy conclusions. Continue reading
As seasoned product managers, most of us eventually have to phase out old versions and completely eliminate old products. This is called End of Life (EOL) or End of Service (EOS), and is important weed-clearing. It’s generally motivated by our internal economic needs: rebalancing resources in our product portfolio, reducing support costs, moving customers to the latest version, abandoning products that can’t pay for themselves.
Wearing our software product management hats, it’s easy to think that all problems should be solved with software. (To a hammer, everything looks like a nail.) Software PMs need to be looking for opportunities to combine professional services with software – because services can be highly profitable, meet customer needs more quickly, and market-test ideas for future products. Continue reading
Rich Mironov led a workshop for SVPMA on “Pricing, Business Models, and What Things are Worth: How to make money in difficult times. “
When: Saturday, April 25th, 9AM – Noon
Where: TechMart, 5201 Great America Parkway, Santa Clara
Registration: http://svpma.org/workshops.html
Cost: SVPMA Members $25, Non- Members $40. ($10 additional on day of event)
This half-day workshop covered the essentials of pricing, business models and profit engines: how we make money from our products, and how we can make more? We focused less on specific prices (how much is it) than on matching prices to customer-perceived value and on pricing units (per seat, per photo, per share of stock sold). We also talked about getting value from later product releases, where customers see value in Release 3 and 4 and 5 and 6.
This was a fun, interactive morning. Team exercises included pricing a never-before-shipped service for a hot-hot (but imaginary) tech start-up and ideas on pricing product management consulting services.
Take-aways:
As a member of SVPMA’s board, Rich was excited to have this opportunity to share with the broader Silicon Valley community.
Pricing, Business Models, and What Things are Worth
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About the SVPMA
The Silicon Valley Product Management Association (SVPMA) was founded to address the needs of Product Managers, Product Marketing Managers and other professionals working within the Product Management field. The goal of the SVPMA Workshop Series is to provide our members hands-on, interactive product management training delivered by leading consulting and professional services companies, lecturers and trainers.
Rich Mironov led a discussion for SDForum’s Marketing SIG and Start-up SIG
What: “Strategic Pricing for Start-ups, New Products and Innovations”
When: April 20th, 630PM – 9PM
Where: Orrick, Herrington & Sutcliffe LLP, 1100 Marsh Road, Menlo Park
Event Page
Cost: No charge for SDForum members, $15 at the door for non-members
Pricing is hard, and most companies don’t spend much time thinking about it. Often, it’s decided late in the development cycle, tactically, and copied from competitors that we hope did their homework. Startups and companies with innovative new products may not have an existing competitor to copy the wrong answers from. Instead, they have an opportunity to define the right business model and pricing to tilt the marketplace in their favor.
Using some real-world examples plus an imaginary product, we’ll explore:
* how would customer value your product (or service)?
* what is the right pricing unit? (by the month, by the seat, by the download, stock trade, answer, GB of storage, movie, social connection…)
* will this support your business model?
* how will you keep making money over time?
SDForum Strategic Pricing For Start Ups
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Rich Mironov gave a talk at MIT’s Sloan School of Management on “Strategic Pricing for Start-ups, New Products and Innovations.” This was for Sloan/MIT students and community members only, hosted by the MoMIT, MIT Mobile Media and Internet Technology Club.
What: “Strategic Pricing for Start-ups, New Products and Innovations”
When: Noon, Feb 25th (Weds)
Where: Sloan School/MIT, 50 Memorial Drive, Cambridge, MA
The talk was on basics of pricing strategy for start-ups and companies with truly new offerings – that don’t have existing competitors or market assumptions about prices, pricing units, or business models. It includes a real-life case study from a successful (IPO) start-up where Rich led product management/product marketing/pricing.
During a miserable week of domestic air travel during June, I noticed new fees suddenly appearing for checked baggage and in-flight soft drinks. That caused an announcement about a new airline to catch my eye – an airline offering a radically different approach to pricing. It re-raised a topic that we explore with many clients: shifting the basis of competition by changing pricing units.
On June 6th, a new airline called Derrie-Air started advertising fares based on total passenger weight, with the slogan “Pack Less. Weigh Less. Pay Less.” A flight from Philadelphia to Los Angeles was priced at $2.25 per pound – with each passenger paying based on body weight plus luggage. Thus a supermodel carrying only a fashion tote could get to LaLaLand for $210 while Big Uncle Ralph and his steamer trunk would be $830. Continue reading
This article captured an April 2007 talk I did at SVPMA. The original slide deck is here.
I’m talking with more and more with companies considering a shift from traditional licensing models to hosted software-as-a-service (SaaS). It’s important to recognize the radical changes such a move may force within your entire company. This column serves up a metaphor for the mental and organizational adjustments needed to move from a “product” model to a service business. Continue reading
Much of my consulting lately involves on-demand services (aka software-as-a-service, or “SaaS”). I’m seeing ever-growing interest from business customers in subscription pricing and online services, especially since they pay much less “up front” versus software licensing. This necessarily slows down early revenue to the vendor and intensifies the need to upsell your installed base. Continue reading