Pricing for Value… not Price

You have spend nights, tears and money to develop a fantastic new Product. You are excited, now getting ready to launch it to the market, but there is a big unknown: PRICE! You know that establishing the right pricing is one of the most critical step for your Venture. Unfortunately, many innovative Startups fail to capture their true value potential because of inadequate pricing.

Avoid common Pricing pitfalls

  • Lowest bid wins it all

    Confronted with uncertainty, many Entrepreneurs are looking for ways to undercut the “market”. It is a common misconception that a low price will increase the likelyhood of success. In reality offering the right Value is key to sustainable success.

  • Do not blindly follow the pricing herd

    There is a large wave of solutions which are being priced through a monthly subscription fee model. While this brings many advantages, your customer group might be used to a very different model e.g. one-time fixed price.

  • Free “Proof of Concept”

    Winning a first customer is a challenge for most new Ventures. Getting a track record has often priority to first revenues. However, offering a Free solution does not demonstrate if you provide true customer value, or confirm Readiness to Pay.

  • Project consulting temptation

    Selling a new solution often requires some pre and post sales consulting. While these consulting revenues help pay the bills, they are not scalable, non-recurring, postpone price discovery and distract valuable resources away from building a great product.

Maximise customer perceived value

  1. Anchoring value through a high price point

    It is key to position the Value point for your product as high as possible. This provides an “anchor” for any future reference of value. It also pushes you to offer true benefits. Second it is very difficult to “work your way up” from a low price point.

  2. Match customer value points

    Remember that customer perceived value extends way beyond pricing. This augmented value includes reputation, brand, leadtime or quality. It is an opportunity to revise your Product delivery, Make vs Buy to best match key customer value.

  3. Maximise value from product Features

    Acknowledging that each customer within the defined segment will have different needs, you should take the opportunity to establish a feature-based pricing model. This will further guide your product roadmap towards the most valued features.

  4. Simple pricing to optimise readiness to pay

    From day one, your pricing should support customer readiness to pay. A subscription, % or unit based pricing can enhance the stickiness of your product and bind customers over a longer period of time. Sometimes pricing simplicity can increase customer value.

Implement a successful Value Based Pricing

  1. Define your target customer

    Pricing is a reflection of perceived customer value and hence highly depends upon your target customer base. One helpful framework for this is to use a user Persona.

  2. Assess market value

    Survey and evaluate the customer perceived value for each persona and the product being offered. This includes evaluating the pain points, product features, and eventually readiness to pay.

  3. Validate customer benefits

    Understand how you create value for each customer. It is important to quantify specific process-level benefits derived from cost reduction, higher efficiency or increased quality .

  4. Setting the Price

    Your price will be reflect additional value creation, price of competing solutions or products and value capture strategy e.g. Premium pricing. You might include feature-based or subscription based pricing as appropriate.

  5. Lean Pricing method

    Continuously gather specific pricing feedback and market intelligence to narrow down which features ‘ideal customer profiles’ will value the most. This will also allow to fine tune the value capture and pricing, particularly important in rapidly evolving Software markets.

In essence, shifting to a Value-based pricing model will not only maximize profits but more importantly foster an on-going understanding of your customer value proposition. For some it might come as a surprise on what customers truly value, focusing on product features you didn’t know were important .

We are curious to hear back from you and your specific experience as you implement this value-based pricing for your business!

Smart fundraising for startups

We receive many investment requests from Technology Startups, Impact investing to even ICO’s. Some have great businesses to share; others underestimate the fundraising trap.

We talk with Balz Roth, a professional Business Angel, investor and board member for SMEs and technology startups. Various successful exits of technology startups to companies like Intel (Lemoptix), Monolithic Power Systems (Sensima) and Everyware (Safe Swiss Cloud). Balz is also a Venture Partner at Go Beyond, an international business Angel Network.

Read Now Slideshare presentation or

listen Now to the audio podcast for this Webinar.

This webinar will provide hands-on, practical insights and tools towards a successful Fundraising:

  • Do I really need 3rd party money to achieve my goals?
  • Which Investors are most likely to be a good fit for my Business and development stage?
  • Key steps towards a great first Investor meeting and the first Term Sheet
  • Critical ways how to take the relationship further and get through Closing

He will draw from his broad investment and Entrepreneurship experience to provide exciting insights and practical examples. You will have the opportunity of a live chat to ask relevant questions.

B2B markets: Delivering top line growth

How to get traction with large organisation as a startup

As per the 2017 European Scale-up report, contrary to Silicon Valley, where 2 out of 3 startups are consumer oriented, 60% of European scale-ups are B2B focused. Initiating, building and maintaining productive relationships with large customers are challenges for many startups.

Read Now Slideshare presentation or

listen Now to the audio podcast for this Webinar.

Adapting to a different operating framework

To become successful at driving sales in a Business-to-Business environment, it is critical for any Entrepreneur to first accommodate to a very specific operating framework.

Large customers are primarily assessing new innovation against Return on Investment, validating how it will help them increase profitable sales. In the background, the Entrepreneur will have to establish deeper relationships with a small number of companies. A further focus will be to cater for a Person-to-Person selling across multiple stakeholders. And above all, to be patient, acknowledging slower decision process of large organizations.

Executing the Key account sales process steps

In the established context, it will be important to manage the related end-to-end process:

  • Robust pre-sales approach
  • Well prepared sales interface
  • Thorough post-sales follow-up

To prepare for the sale, it will be critical for the Entrepreneur to get-out and understand the industry structure and its dynamics, so also to articulate a solid, simple Value Proposition. Beyond the market focus, it will also require to research customer organization and identify the true decision makers, their readiness to pay and seek early adopters.

During the sales process, it is very critical to listen to customers, so as to deliver what they need. To build credibility, the Entrepreneur will need to apply full human resources bandwidth to gain management trust, similarly to Venture Capital discussions. During this critical phase, the focus should remain on key contract items: scope, liability, IP ownership and termination terms. The Entrepreneur should always be weary what its organization signs and seek legal advice whenever appropriate.

The management of the post-sales process is a fundamental building block to success. The Entrepreneur will have to expand its discussion and reach to other functions within the customer organization. It should be useful to consider implementing a Key Account penetration plan but also some simple but effective web-based sales pipeline management tools. Finally, the Entrepreneur should ensure not to be blindsided by the urgency to get the order on the table and prepare for the next sales opportunity.

About the Author

Roberto Magnifico, Chief Commercial Officer, with the Startup ActLight SA.

He draws from his broad key account sales and senior management experience to provide exciting insights and practical examples. You will have the opportunity of a live chat to ask relevant questions.

Fake it before you make it !

We enjoy working with diverse Entrepreneurs and Ventures, also on supporting them on their path to Market Launch.

Before moving too quickly towards Product & solution development, we recommend each Entrepreneur to focus:

“Make sure
you are building
the right it,
before you build it right!”

They are a lot of excitement around Minimum Viable Product, Product-Market-Fit and other Prototypes.

We find the use of “Pretotype” a great way to focus on what matters – the customer and market adoption.

” Pretotypes make it possible to collect valuable usage and market data to make a go/no-go decision on a new idea at a fraction of the cost of prototypes: hours or days instead of weeks or months, and pennies instead of dollars.”

Download and read along in this short, practical and useful guide called Pretotype It

Making a great first impression

We receive many investment requests from Technology Startups, Impact investing to even ICO’s. Some have great businesses to share; others underestimate the fundraising trap.

Fundraising can become a substantial distraction from getting your business off the ground with real customers.

We felt it could be useful to share some experience-based guidance for Entrepreneurs to manage the “Fundraising” process, starting with a great Teaser. And increase your chances for application to possible “Accelerators”, Startup competitions or ICO’s.

Download your copy below

WP_Teaser_Picture

The Power of your Investment Teaser