Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Product pricing: how to extract more value

1,244 views

Published on

My presentation on Melbourne Product Camp 2013. Brief intro in pricing : how smart pricing can help increase revenue and profit from your product. Topics touched: price discriminations, two part tariffs, versioning, bundling.

Published in: Business, Technology
  • Be the first to comment

Product pricing: how to extract more value

  1. 1. Image credit: vasta
  2. 2. ONE PRICE Price Q-ty P Q Dead value Dead value Captured value Captured value (or revenue) = PxQ
  3. 3. 3 PRICE LEVELS Captured value (or revenue) = Ps*Qs + Pp*Qp+Pb*Qb Dead value reduced ~twice! Price Q-ty Ps Qs Dead value Dead value Captured value Pp Pb Dead value Dead value Captured value Captured value Qp Qb
  4. 4. WHEN YOU CAN DO IT There are 2 conditions that must be met to practice price discrimination: • There are at least 2 distinct segments of customers • It is impossible (or at least very hardly possible) to do arbitrage CONTROVERSY As a rule customers don’t like it. What can be done: • Frame it as a discount rather than price increase • Don’t show lower price to higher paid customers if it is possible
  5. 5. HOW IT CAN BE DONE • Classical price discrimination (the same product priced differently) • Student, senior, army force, health card prices • Geographical • Gender based • Tourist prices • Bulk discounts • 2 part tariffs • Coupons • Versioning
  6. 6. VERSIONING Image credit: Gwoodhouse
  7. 7. VERSIONING (CONTINUED) Issues to consider: how many versions? • Versioning cost (approach to development) • Creation • Support and operation • Cost to make customer decision process more complex • Increased sales/marketing cost
  8. 8. BUNDLING Image credit: snazzyguy
  9. 9. BUNDLING WTP, Joe WTP, Sue Videoshop $50 $100 Photoprime $100 $50 Price set Joe pays Sue pays Total value Videoshop= $100 Photoprime=$100 $100 (VS only) $100 (PP only) $200 Videoshop= $50 Photoprime=$50 $50+$50=$100 $50+$50=$100 $200 Bundle- Videoshop +Photoprime = $150 $150 $150 $300
  10. 10. HOW IT WORKS. REAL LIFE EXAMPLE My side project Altima Lookbook: an extension for Magento e-commerce More info: http://shop.altima.net.au/altima-lookbook-professional.html
  11. 11. HOW IT WORKS. REAL LIFE EXAMPLE We have 3 price levels: • Altima Lookbook Free ($0) • Altima Lookbook Professional • Community edition $85 • Enterprise edition $210 More info: http://shop.altima.net.au/altima-lookbook-professional.html
  12. 12. HOW IT WORKS. REAL LIFE EXAMPLE Key numbers after 5 months of enterprise licence introduction More info: http://shop.altima.net.au/altima-lookbook-professional.html Number of Enterprise licences purchased, % of total paid orders 18% Number of Enterprise licences purchased, % of total revenue 34% Extra value captured (% of total revenue) 20%
  13. 13. QUESTIONS? ?
  14. 14. THAT’S IT Thanks for your attention Alex Levashov alex@levashov.biz LinkedIn: http://au.linkedin.com/in/alevashov/

×