Monetizing Innovation



Find the Willingness to pay (WTP) and segment your users before everything else.

4 types of failures
5 myths
  1. If you build a great product, customer will pay a fair value for it
  2. The new product or service must be controlled entierely by the innovation team working in isolation
  3. High failure rate of innovation is normal and is even necessary
  4. Customer must experience a new product before they can say how much they'll pay for it.
  5. Until a business knows precisely what's it's building, it cannot possibly asses what it is worth.
9 rules for successful monetization
Have the "Willingness to pay" talk early
  1. It will tell you if you have the opportunity to monetize your product, or not
  2. It will help you prioritize features and dsign the product with the right set of features
  3. it helps to avoid the 4 types of faillures
Don't default to a One Size Fits All Solution
  1. Segmentation should break the market down into a few diffrent gruops on witch you can act differently
  2. There is no point in segmenting and then acting the same with the entire market
  3. Describe your segments so you can address them
Configuration and bundling is more science than art
Principle 1
  • "Leaders" features, every customer wants them.
  • "Killer" features: are valued by less than 20% and are not valued at all by more than 20%. Killers can kill a deal if customer who don't value them are forced to buy them in a bundle.
  • "Filler" are nice to have.
Principle 2

Good, Better and Best options

No more than 25% should choose the good, 70% should choose the Better or Best.

Can be more than 3 classes if each configuration match a segment

Insights, tips and tricks
  1. Align with segment
  2. D'ont make it over nine benefit or for products
  3. Make sure your customer and you both benefit
  4. D'ont give too much away in your entry-level product
  5. Hard bundeling will not always work. Allowing to buy the part separately can be good. Hard bundeling works when you have market power and are the dominant player. In other cases, you should go with a mixed bundeling approach
  6. Individual prices need to be higher with mixed bundling
  7. Don't forget bundle price communication
  8. Bundle with integration value that 1+1 = 3
  9. Don't bundle for the sake of bundling
  10. Exploit inverse correlation. Can help to sell the same thing to 2 groups
Go beyond the Price point (how you charge is more important than what you charge)
5 models
  • The subscription model
  • Dynamic pricing
  • price change depending on time of days, or other consideration that impact willingness to pay, demand or supply
  • Auctions
  • Pay as you go
  • Freemium (land and expand)
How to choose
  • How likely are your customers to accept the model?
  • How will future developments impact the model?
  • Does your model fit the stage of your compagny?
  • What your cometitor are doing? Is there a way to set yourself apart?
  • How difficult is the monetiation model to implement?
Market share or Premium Branding?
  • Set clear goals
Pick the right type of Pricing strategy
  • Maximization
    • maximize revenue and MRR, when market share is not crutial
  • Penetration
    • set a low price to increase market share. Land and expand strategy. Important when there is a network effect.
  • Skimming
    • high price first, then decrease slowly to serve everyone. (can be with less luxurious options)
Develop price setting principles
  • Monetisation model
  • Price differentiation or not? (per region?) what is the maximum spread?
  • Price floors, what is the price you'll never go below?
  • Price endings: 0.99 ? .95? .50? $30? in B2B whole number are better.
  • Price increase: Will you increase? how much? how often?
Develop principle for reaction
  • Promotional reaction: how to use promotion as a tactics
  • Competitive Reaction: how to react to competitor price change
From Hoping to knowing
Build a living business case document with WTP, etc..
The Innovation wont speak for itself
  • Crystal clear benefit statements ; not feature descriptions
  • Make benefit statement segment specific
  • measure the impact and refine your value message
Use behavioral Pricing tactics to Persuade and sell
  • Compromise effect: make decision easier for people who can't choose
  • Anchoring tactics: set the context for value
  • Use the price to signal quality
  • Razor/Razor blades (big bias for cheap initial price even if recuring price is higher.
  • Pennies a day pricing (instead of showing the price per year)
  • Psychological price thresholds
  • Don't guess: put behavioral tactics to the test
Maintain your price integrity
  • be patient
  • track
  • do deals deconstructions regularly (why you win or why you loose)
  • Came with at least 3 nonpricing actions before approving a price decrease
  • Before reacting on price, war-game your competitions counterreaction
  • unusually high sales is also a problem: product too cheap?
  • Price wars, the only winning move is not to play