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Ibbaka Water Tap Workshop

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An overview of the key considerations when thinking about approaching pricing questions: value, segmentation, pricing methods and stratagies.

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Ibbaka Water Tap Workshop

  1. 1. 1 I Ibbaka&©&2018 Pricing'Enablement'for' Water'Tech'Companies' PRICING&PRACTICES&AND&METHODOLOGY& karen@ibbaka.com rashaqa@ibbaka.com' steven@ibbaka.com October&22,&2018
  2. 2. TODAY’S(GOALS 2 I Ibbaka(©(2018 ➔ Introduce(key(concepts,(tools(and(methodologies(to(enable(good(pricing ➔ Provide(a(common(language(towards(creating(a(pricing(framework ➔ Understand(key(strategic(decisions(in(pricing ➔ Work(through(key(pricing(issues
  3. 3. OUR$PATH$TODAY 3 I Ibbaka$©$2018 1. Why$Pricing$Matters 2. Basic$Approaches$to$Pricing 3. Pricing$Core$Concepts 4. Market$Segmentation 5. Pricing$Design 6. Value$Communication$ 7. Key$Takeaways
  4. 4. THE$TEAM 4 I Ibbaka$©$2018 Karen&Chiang Managing$Partner Steven&Forth Managing$Partner Rashaqa&Rahman Principal$Consultant Karen$is$responsible$for$Ibbaka's$ strategy$execution$(delivery,$ operations,$and$product).$She$ ensures$that$Ibbaka$clients$derive$ value$from$with$each$engagement.$ Karen’s$domain$expertise$includes:$ goPtoPmarket$strategy—specializing$ in$value$drivers,$market$ segmentation$and$pricing.$She$is$ passionate$about$performance,$the$ team,$and$the$dynamics$needed$to$ achieve$managed$growth. Steven$leads$Ibbaka’s$strategic$ direction$and$key$relationships.$He$ is$an$expert$in$marketing$strategy$ (segmentation,$targeting,$revenue$ models,$pricing)$human$&$ organizational$performance,$ learning$and$knowledge$ management.$Named$one$of$the$ top$10$pricing$authorities$in$the$ world,$Steven$has$helped$ companies$from$Fortune$500$to$ startPups$drive$returns$and$increase$ profits. Rashaqa$works$closely$with$Ibbaka$ clients$to$develop$valuePbased$ market$segmentations$and$pricing$ architectures,$that$help$make$ pricing$a$critical$part$of$their$ innovation$and$growth$strategy.$A$ firm$believer$in$continuous$ improvement,$Rashaqa$is$a$part$of$ the$forwardPlooking$team$at$Ibbaka$ dedicated$to$bringing$new$ approaches$to$improve$pricing$ strategy$and$execution$for$our$ clients.$
  5. 5. GETTING&TO&KNOW&EACH&OTHER 5 I Ibbaka&©&2018 What&is&your&role? What&would&you&like&to&get&out&of&today’s&session?
  6. 6. SOME%COMMON%PRICING%QUESTIONS 6 I Ibbaka%©%2018 How%should%we%charge? How%much should%we%charge? How%should we%price%a%new%product% entering%a%market? Are%we%leaving%money%on%the%table? Are%we%pricing%too%high? How%do%we%price%in%quick%response%to% our%customers? How%do%we%defend%our%pricing? How%do%we%stop%ad%hoc%discounting? How%do%we%price data? Where%does%the%cost%of%raw%materials% fit%into%pricing?
  7. 7. WHY$PRICING$MATTERS
  8. 8. WHY$PRICING$MATTERS 8 I Ibbaka$©$2018 Pricing$is$where$it$all$comes$together How$you$create$ value Who$you$ sell$to How$you$ communicate$ value How$you$ capture$value
  9. 9. BASIC&APPROACHES&TO&PRICING
  10. 10. PRICING'METHODS 10 I Ibbaka'©'2018 Method Advantages Disadvantages Use0When Cost'Plus Well understood Predictability Focus'internally Generally'underprices Costs not'understood Client'controls'the'offer and' how'value'is'received Market Following Focus'is'on'competition'and' willingness'to'pay Responsive'to market Passive Does'not'reflect'value There'is'no'differentiation Commodities Value'Based Focus'on'client Most'flexible'(supports'different' pricing'strategies) More complex'to'implement Requires'deep'understanding'of' customer'business'&'upfront' investment Offers'are'differentiated Dynamic Very'responsive Applies'AI'and'Machine'Learning Complex'to'implement Can'confuse'market When'value'changes'rapidly' Used'to'price'transactions
  11. 11. CASCADING(CHOICES(IN(PRICING 11 I Ibbaka(©(2018 Winning(Aspirations Where(to(Play How(to(Win Capabilities Systems
  12. 12. CASCADING(CHOICES(IN(PRICING 12 I Ibbaka(©(2018 Winning(Aspirations Where(to(Play How(to(Win Capabilities Systems What(are(your(pricing(goals? What(segment(are(you(targeting? How(are(value(and(pricing(connected? What(is(your(pricing(model? How(is(value(communicated? How(is(pricing(optimized? How(are(discounts(managed? What(skills(are(required? What(data(is(needed? What(relationships(matter? Market(segmentation Price(management(and(optimization CRM(and(Marketing(Automation
  13. 13. You$cannot$optimize$for$everything,$a$good$pricing$strategy$ requires$clear$alignment$on$goals • Category)growth)(float)all)boats) • Category)share)(get)a)bigger)share)of)the)pie) • Revenue)(top)line)growth) • Gross)profit)(net)profit)is)impacted)by)too)many)other)variables) • Unit)economics)(Lifetime)Value)of)Customer,)LTV/CAC)ratio) • Facility)utilization)(where)this)has)a)big)impact)on)costs) ➔ Trying)to)optimize)for)multiple)goals)is)difficult ➔ Optimization)goal)often)changes)over)the)technology)lifecycle) PRICING)STRATEGIES)K OPTIMIZATION 13 I Ibbaka)©)2018 Alignment)on pricing)goals is)critical Are$you$ aligned?
  14. 14. Skimming'(or'Premium)'– charge(the(maximum(price(that(your(pricing(power(allows((often(in(order(to( invest(heavily(in(continuing(innovation(and(value(creation(for(customers) Market'Following'– price(relative(to(a(market(leader(or(price(giver Penetration – price(as(low(as(possible(to(grow(the(overall(market(or(to(increase(category(share PRICING(STRATEGIES(F THE(THREE(STRATEGIES 14 I Ibbaka(©(2018
  15. 15. Pricing'changes'over'the'Moore'technology'lifecycle PRICING'CONCEPTS'– PRICING'OVER'THE'LIFECYCLE'1 15 I Ibbaka'©'2018
  16. 16. Innovators)and)Early)Adopters)Buy)for)Different)Reasons PRICING)CONCEPTS)– PRICING)OVER)THE)LIFECYCLE)2)(Initial)Phases) 16 I Ibbaka)©)2018 Innovators)tend)not)to)pay)but)influence)Early)Adopters Early)Adopters)pay)a)premium)for)a)competitive)advantage
  17. 17. Value&Driver&Structure&Changes&Between&Bowling&Alley&and&Tornado PRICING&CONCEPTS&– PRICING&OVER&THE&LIFECYCLE&3&(Early&Majority) 17 I Ibbaka&©&2018 Bowling&Alley&Buyers&Reference&Each&Other Value&Drivers&Specific&to&Their&Vertical Tornado&Buyers&Buy&Because&Everyone&is&Buying Switch&to&Horizontal&Value&Drivers
  18. 18. Main%Street%B2B%Buyers%Are%More%Economic%Value%Driven PRICING%CONCEPTS%– PRICING%OVER%THE%LIFECYCLE%4%(Late%Majority) 18 I Ibbaka%©%2018 On%Main%Street Solutions%Proliferate Targeted%at%Tight%Niches Without%Differentiation%Commodity%Pricing% Prevails
  19. 19. Laggards'Buy'Technology'Bundled'Into'Other'Solutions'They'Already'Have PRICING'CONCEPTS'– PRICING'OVER'THE'LIFECYCLE'5'(Laggards) 19 I Ibbaka'©'2018 Laggards'Don’t'Buy'Technology'Solutions They'Buy'Solutions'They'Are'Familiar'With and'Already'Have
  20. 20. PRICING'CORE'CONCEPTS
  21. 21. THE$POWER$OF$PRICING$AND$VALUE 21 I Ibbaka$©$2018 Pricing$is$a$powerful$lever$to$improve$revenue,$ profit$or$market$share ➔ However,(without(value(there(is(nothing(to(price
  22. 22. PRICING'AND'VALUE 22 I Ibbaka'©'2018 Price'should'reflect'value ➔ Pricing'and'value'are'closely'connected ➔ When'the'value4price'connection'breaks'people'are'unhappy
  23. 23. PRICING'AND'VALUE 23 I Ibbaka'©'2018 Fairness((( Is'pricing'proportionate'to'the'value'being'received? Consistency( Are'the'same'principles'used'for'different'offers? Transparency( Is'your'pricing'easy'to'understand?'Do'people'understand'how' much'and'when'they'will'pay? ➔ Pricing'should'support'desired'behaviours ➔ Does'your'pricing'enable'good'water'practices?
  24. 24. A"DEEPER"DIVE"INTO"VALUE 24 I Ibbaka"©"2018 What%is%value? 1. Is%for%a%specific%customer%(or%segment) Does"not"depend"on"costs Is"not"the"value"of"the"customer"to"the"vendor 2. Is%relative%to%the%alternatives There"is"always"an"alternative The"alternative"is"not"necessarily"your"direct"competitor 3. Has%emotional%and%economic%components Today,"both"B2C"and"B2B"requires"economic"and"emotional"value"drivers If"either"are"nil"or"even"weak,"pricing"power"evaporates
  25. 25. EMOTIONAL)VALUE 25 I Ibbaka)©)2018 Maslow’s(Hierarchy Provides)a)good)way)to)frame)emotional)value Basic)functionality)(that)drives)most)economic) value))is)not)a)powerful)way)to)frame)emotional) value The)higher)up)the)hierarchy)you)can)position)your) offer)the)more)pricing)power)you)will)have Self(Esteem Community Security Basic(Functionality Self Realization Pricing(Power
  26. 26. EMOTIONAL)VALUE 26 I Ibbaka)©)2018 Role%Specific Emotional)value)tends)to)be)role)specific You)need)to)map)it)for)each)role)in)your) stakeholder)map For)some)roles,)lead)with)emotional)value,)for) others)lead)with)economic)value)drivers Self%Esteem Community Security Basic%Functionality Self Realization Pricing%Power
  27. 27. ECONOMIC'VALUE 27 I Ibbaka'©'2018 Economic'Value'Estimation'(EVE) Developed'by'Tom'Nagle Value'drivers'measure'the'impact'of'your'solution' on'your'customer’s'P&L'relative'to'an'alternative Always'consider'your'own'shortcomings'and' unique'costs'relative'to'the'alternative Next'Best Alternative Positive Value Drivers Negative Value Drivers Differentiation Value Normal Price Range
  28. 28. ECONOMIC'VALUE 28 I Ibbaka'©'201828 I Ibbaka'©'2018 ECONOMIC'VALUE'DRIVER EXAMPLES Increase revenues Increase market'size Increase'market'share Improve'pipeline'metrics Decrease'operating'expenses Increased'ROI/efficiency Increased'effectiveness Decreased'input costs Decrease'operating'capital Reduced'inventory Faster'collections/accounts'receivable Decrease'capital'investment Get'more'productivity'from existing'assets Defer'capital'investments Decrease'risk Reduced'disruption/increased'uptime Reduced'liability Better'compliance Increase'options Ability'to'cover'edge'cases Ability'to'choose'between'multiple' suppliers Ability'to'scale'usage'as'required Next'Best Alternative Positive Value Drivers Negative Value Drivers Differentiation Value Normal Price Range
  29. 29. DIFFERENTIATED)VALUE 29 I Ibbaka)©)2018 Customer)Needs Your)Offer Alternative Unmet)Needs Irrelevant Functionality Irrelevant Functionality Potential)to)Innovate
  30. 30. DIFFERENTIATED)VALUE 30 I Ibbaka)©)2018 Customer)Needs Your)Offer Alternative Unmet)Needs Commodity Your Differentiation Competitor Differentiation Irrelevant Functionality Irrelevant Functionality Potential)to)Innovate
  31. 31. DIFFERENTIATED)VALUE 31 I Ibbaka)©)2018 Customer)Needs Your)Offer Alternative Unmet Needs Commodity Your Differentiation Competitor Differentiation Irrelevant Functionality Irrelevant Functionality Price)of) Alternative Options Risk CapEx OpCap OpEx Revenues + Value)Drivers Shortcomings Unique)Costs 2 Value)Drivers Potential)to)Innovate
  32. 32. CASE%STUDY
  33. 33. WATERTRAX'CASE'STUDY'BACKGROUND' 33 I Ibbaka'©'2018 • Offers'a'software'service'that'helps'government'agencies'(municipalities)'and'utilities,'monitor'and' manage'their'water'and'wastewater'system'data' • Using'technologyRdriven'data'collection,'data'management,'and'reporting,'WaterTrax'equips'its' clients'to'streamline'their'regulatory'practices'and'ensures'compliance' • Municipalities'get'realRtime'data'and'analysis'of'their'ability'to'meet'quality'water'standards' • Founded'in'2001,'as'an'application'service'provider' • WaterTrax'merged'with'Aquatics'Informatics'in'July'2017
  34. 34. WATERTRAX'CASE'STUDY'PRICING'ATTRIBUTES 34 I Ibbaka'©'2018 1. Reflect'value'D Value'takes'into'account'budget'capacity 2. SubscriptionDbased'D Enables'scaling'of'revenue,'based'on'the'size'and'growth 3. Viewed'as'affordable'by'their'buyers'D Fairness'is'a'lens'for'affordability
  35. 35. WATERTRAX'CASE'STUDY'ECONOMIC'VALUE'DRIVERS'– 1'of'3 35 I Ibbaka'©'2018 Decrease'Operating'Expense • Saving'time'is'the'key'economic'driver'for'their'customers' • Time'saved'by'technicians'leads'to'improved'operational'efficiency • Also'provided'customers'with'an'ROI'based'on'the'amount'of'time'saved'by'its'technicians' through'task'automation,'which'would'free'up'resources'for'other'tasks
  36. 36. WATERTRAX'CASE'STUDY'ECONOMIC'VALUE'DRIVERS'– 2'of'3 36 I Ibbaka'©'2018 Decrease'Capital'Investment • Better'planning'and'allocation'of'expenditures • Data'and'analysis'enabled'customers'to'better'predict'and'avoid'or'take'action'more'quickly'on' water'quality'issues • This'enabled'municipalities'to'better'plan'and'allocate'budgets'and'capital'expenditures,' potentially'also'reducing'their'overall'operational'expenditures • The'budgets'for'WaterTrax'buyers'typically'comes'out'of'OPEX.''
  37. 37. WATERTRAX'CASE'STUDY'ECONOMIC'VALUE'DRIVERS'– 3'of'3 37 I Ibbaka'©'2018 Decrease'Risk' • By'mitigating'costly'outcomes'of'poor'water'quality • “It'is'hard'to'put'a'figure'on'the'value'of'reducing'risk”' • Insufficient'water'quality'can'impact'the'health'of'the'entire'ecosystem,'not'just'human'health • There'can'be'dramatic'environmental'and'social'impact'costs;'for'example,'the'Walkerton'crisis • resulted'in'2300'people'falling'ill' • 6'fatalities • an'economic'impact'assessed'at'over'$64.5M.
  38. 38. WATERTRAX'CASE'STUDY'EMOTIONAL'VALUE'DRIVERS 38 I Ibbaka'©'2018 Basic&Functionality • People'expect'to'have'clean'water Community • Public'service'provides'and'is'part'of'the'community Security& • Establishing'peace'of'mind • Tragedies'like'Walkerton'can'be'better'avoided' • “I'will'sleep'at'night'knowing'that'the'data'is'not'impacted'as'a'result'of'human'error” Self&Realization • Municipalities'and'water'technician'take'pride'and'ownership'in'knowing'that'they'are'keeping'their' communities'safe • Better'transparency'and'data'management'enables'municipalities'to'use'structured'information'to'better' inform'the'public'that'they'serve
  39. 39. UNDERSTANDING+STAKEHOLDER+VALUE++ EXERCISE'1
  40. 40. EXERCISE'– UNDERSTANDING'STAKEHOLDER'VALUE 40 I Ibbaka'©'2018 Roles Emotional,Value, Drivers 1 2 3 Economic,Value, Driver 1 2 3 Citizen, Outcomes 1 2 3 Brainstorm,ideas 1. Pick'a'Product,Line 2. Brainstorm'the'Stakeholders 3. Brainstorm'the'Emotional,Value,Drivers 4. Brainstorm'the'Economic,Value,Drivers 5. Brainstorm,Citizen,Outcomes;'identify'if'they'are' emotional'or'economic 6. Map,Stakeholders,to,Value,Drivers
  41. 41. EXERCISE'– UNDERSTANDING'STAKEHOLDER'VALUE 41 I Ibbaka'©'201841 I Ibbaka'©'2018 ECONOMIC'VALUE'DRIVER EXAMPLES Increase revenues • Increase market'size • Increase'market'share • Improve'pipeline'metrics Decrease'operating'expenses • Increased'ROI/efficiency • Increased'effectiveness • Decreased'input costs • Ease'of'integration'with'other'systems Decrease'operating'capital • Reduced'Inventory • Faster'collections/accounts'receivable Decrease'capital'investment • Increased'capital/equipment'longevity,'decreased'obsolescence • Get'more'productivity'from existing'assets Decrease'risk • Increased data'security • Reduced'disruption/increased'uptime • Reduced'liability • Better'compliance Increase'options • Ability'to'cover'edge'cases • Ability'to'choose'between'multiple'suppliers • Ability'to'scale'usage'as'required • Ability'to'have'customized'solutions
  42. 42. EXERCISE'– UNDERSTANDING'STAKEHOLDER'VALUE– WRAP'UP 42 I Ibbaka'©'2018 Brainstorm*ideas 1. Pick'a'Product*Line 2. Brainstorm'the'Stakeholders 3. Brainstorm'the'Emotional*Value*Drivers 4. Brainstorm'the'Economic*Value*Drivers 5. Brainstorm*Citizen*Outcomes;'identify'if'they'are' emotional'or'economic 6. Match*Stakeholders*to*Value*Drivers What*did*we*learn? 1. How'well'do'we'know'the'stakeholders'and'how'they' interact? 2. Where'are'the'emotional'value'drivers'clustered'(what' level'in'the'Maslow'hierarchy)? 3. Are'the'emotional'value'drivers'different'for'different' stakeholders? 4. Were'the'economic'value'drivers'clustered? 5. Are'the'economic'value'drivers'different'for'different' stakeholders? 6. Where'are'the'citizen'outcomes'clustered? 7. Are'they'mostly'emotional'or'economic?
  43. 43. MARKET'SEGMENTATION
  44. 44. MARKET'SEGMENTATION 44 I Ibbaka'©'2018 Segmentation*is*needed*to* Understand how'similar'groups'of'customers • Get'value • Will'respond'to'value'messages Package*offers • Different'segments'will'often'need'different'offers Design*pricing • Understand'the'value'metric'and'connect'to'pricing'metric • Decide'if'different'tiers'are'needed
  45. 45. MARKET'SEGMENTATION 45 I Ibbaka'©'2018 Groups'with'similar'demographics'can'actually'be'very'different'in • Beliefs • Values • Behaviours • Economic2Incentives Belief21 Belief22 Value'1 Value'2 Value'3 Value'4 Esteem Community Security Revenue Costs Investment Risk $
  46. 46. MARKET'SEGMENTATION 46 I Ibbaka'©'2018 Groups'with'similar'demographics'can'actually'be'very'different Lives&in&a&castle Wealthy In&stable&marriage 69&Years&Old Lives&in&a&castle Wealthy In&stable&marriage 69&Years&Old
  47. 47. MARKET'SEGMENTATION 47 I Ibbaka'©'2018 Groups'with'similar'demographics'can'actually'be'very'different
  48. 48. KNOW%YOUR%DIFFERENTIATION% EXERCISE'2
  49. 49. EXERCISE'– KNOWING'YOUR'DIFFERENTIATION 49 I Ibbaka'©'2018 Without'differentiated'value,'there'is'nothing'to'price.'A'deep'understanding'of'your'customer' segments'is'the'foundation'to'valueRbased'pricing.'In'this'exercise,'we'will'explore'your'value' proposition'and'market'positioning. Instructions: •'Identify'your'customer'needs •'Identify'2'to'3'alternatives'to'your'offer'and'list'their'value'propositions •'List'the'value'proposition'for'you'offer(s) •'Complete'the'Venn'Diagram
  50. 50. EXERCISE'– KNOWING'YOUR'DIFFERENTIATION 50 I Ibbaka'©'2018 Instructions: •'Identify'your'customer'needs •'Identify'2'to'3'alternatives'to'your'offer'and'list'their'value' propositions •'List'the'value'proposition'for'you'offer(s) •'Complete'the'Venn'Diagram • Is'your'offer'differentiated? • How'would'you'establish'value'relative'to'the'competitor?' • How'does'your'differentiation'map'to'what'you'customers' value? • What'do'you'need'to'learn'about'your'prospective' customers? • Is'your'offer'at'risk'of'getting'commoditized? • Is'there'an'opportunity'to'sell'any'other'valueYadded' services?'Would'it'satisfy'the'client? • What'objections'might'you'expect'and'how'will'you'deal' with'them? ➔ WITHOUT0DIFFERENTIATED0VALUE0THERE0IS0NOTHING0TO0PRICE
  51. 51. PRICING'DESIGN
  52. 52. VALUE&METRIC&AND&PRICING&METRIC 52 I Ibbaka&©&2018 Pricing'Metric The&Unit&in&Which&You&Price (Litres&of&Paint) Value'Metric The&Unit&by&Which&You&Provide&Value (Square&Meters&Covered)
  53. 53. INTELLIGENT'FILTERS 53 I Ibbaka'©'2018 The'Internet'of'Things'(IoT)'is'opening'new'pricing'models Combine'filters'and'valves'then'add'sensors Apply'machine'learning'to'the'data Price'on'purity'of'volume'that'passes'through
  54. 54. VALUE&METRIC&AND&PRICING&METRIC 54 I Ibbaka&©&2018 ➔ There&are&generally&multiple&value&metrics&for&any&product&or&service&(economic& and&emotional) ➔ Pricing&metrics&generally&(but&not&always)&use&economic&value&metrics ➔ The&best&pricing&metrics&track&value&metrics
  55. 55. VALUE&METRIC&AND&PRICING&METRIC 55 I Ibbaka&©&2018 ➔ There&are&generally&multiple&value&metrics&for& any&product&or&service&(economic&and&emotional) ➔ Pricing&metrics&generally&(but&not&always)&use& economic&value&metrics ➔ The&best&pricing&metrics&track&value&metrics Makes&it&Easy&to&Buy Tracks&Value Discriminates&Segments Makes&it&Easy&to&Buy Enforceable Simple Pricing&Metric
  56. 56. PRICING'DESIGN'– PRICING'ARCHITECTURE 56 I Ibbaka'©'2018 How$many$tiers? Role$of$each$tier? • Do'the'top'and'bottom'tiers'create'the'right' value'frame? • Is'there'an'upsell'assumption? • What'is'the'expected'volume'distribution'across' tiers • What'is'the'expected'revenue'distribution' across'tiers Bundle$for$each$tier? Fencing'(how'will'you'guide'buyers'to'the'tier'that'is' best'for'them?)
  57. 57. PRICING'DESIGN'– PRICING'ARCHITECTURE 57 I Ibbaka'©'2018 Hubspot'(marketing'automation) Hubspot includes'a'transactional'component'in'its'pricing. (the'number'of'contacts'in'the'system). It'also'includes'a'one'–time'onboarding'fee. Combining'subscriptions'and'transactional'pricing'can'be'a' powerful'way'to'design'pricing • Predictability'plus'scaling • Closer'connection'to'value
  58. 58. VALUE&COMMUNICATION
  59. 59. • For$price$acceptance,$value$must$be$communicated$effectively • Understand$the$customer’s$buying$process • Consider$each$touch$point$where$the$buyer$builds$awareness,$understanding$and$consideration$of$ value$and$make$sure$that$value$comes$before$price$in$the$revenue$generation$process • Design$communication$so$that$price$is$always$put$in$the$context$of$value VALUE$COMMUNICATION 59 I Ibbaka$©$2018
  60. 60. CUSTOMER)BUYING)PROCESS 60 I Ibbaka)©)2018 Model&the&Decision&Making&Unit&for&each&Buying&Process • Business)Buyer • Technical)Buyer • Economic)Buyer • Procurement • End)User
  61. 61. UNDERSTANDING+CUSTOMER+INTERACTIONS 61 I Ibbaka+©+2018 Look$at$interactions • Between+customer+stakeholders Look$at$exchanges$of • Information • Lines+of+influence Technical gate keeper Procurement Business buyer End+user Influence High Medium Low Information$flow
  62. 62. UNDERSTANDING+CUSTOMER+INTERACTIONS 62 I Ibbaka+©+2018 Technical gate keeper Procurement Business buyer End+user Information*flow
  63. 63. UNDERSTANDING+CUSTOMER+INTERACTIONS 63 I Ibbaka+©+2018 Technical gate keeper Procurement Business buyer End+user Influence High Medium Low
  64. 64. UNDERSTANDING+CUSTOMER+INTERACTIONS 64 I Ibbaka+©+2018 Technical gate keeper Procurement Business buyer End+user Influence High Medium Low Information.flow
  65. 65. MAP$VALUE$TO$ROLES 65 I Ibbaka$©$2018 ➔ Do$all$roles$get$some$form$of$value$with$the$critical$buyer$role$(usually$business$or$economic,$ sometimes$technical,$occasionally$the$end$user)$getting$compelling$value? ➔ Cover$the$full$range$of$roles$(if$there$are$buying$decision$making$unit$roles$with$no$positive$emotional$ and$economic$value$drivers$this$is$a$risk) ➔ Map$value$drivers$to$roles ➔ Design$communication$so$that$price$is$always$put$in$the$context$of$value
  66. 66. KEY$TAKEAWAYS
  67. 67. ➔ Understand)how$you$provide$differentiated$value$to$a$customer$segment ➔ Segment)your$market$based$on$how$different$groups$of$customers$get$value ➔ Connect)value$metrics$and$pricing$metrics ➔ Design)pricing$based$on$value$to$stakeholders$ ➔ Communicate)value$before$discussing$pricing SUMMARY 67 I Ibbaka$©$2018
  68. 68. THREE%THINGS%TO%DO%TOMORROW 68 I Ibbaka%©%2018 1. Checkout%www.Ibbaka.com/self/ assessment 2. Where%are%you%in%your%goDtoDmarket/pricing% journey? 3. What%do%you%need%to%do%to%achieve%your% pricing%goals?%
  69. 69. NEXT%STEPS 69 I Ibbaka%©%2018 Schedule%a%one;on;one%consultation%with%the%Ibbaka%team. steven@ibbaka.com karen@ibbaka.com rashaqa@ibbaka.com
  70. 70. 70 Pricing)consultancy)and)technology)company) built)by)experienced)entrepreneurs We)understand)innovation)because)we)live)it Our)passion)is)improving)product)launch)and)in) market)success)through)better)strategic)pricing) and)execution Understand)the)larger)picture)of)segmentation,) targeting,)value)modeling,)value)propositions) and)pricing)architecture Twitter LinkedInWebsite Steven1Forth Managing)Partner steven@ibbaka.com +1)604)763)7397 Karen1Chiang Managing)Partner karen@ibbaka.com +1)778)628)4085 Rashaqa1Rahman Principal)Consultant rashaqa@ibbaka.com
  71. 71. APPENDIX
  72. 72. WHY$PRICING$MATTERS 72 I Ibbaka$©$2018 Market$Segmentation$demonstrates$your$understanding$your$ market$opportunity • Patterns$of$needs,$attitudes,$behaviors$ • To$identify$customers$who$value$your$differentiation$and$the$value$they$ will$receive • Underpins$calculation$of$market$size Customer$Targeting$shows$you’ve$identified$your$most$ attractive$segment • Prioritizes$your$marketing$investment$(financial$and$effort) • Understand$your$customer’s$buying$process
  73. 73. WHY$PRICING$MATTERS 73 I Ibbaka$©$2018 Customer$Traction$“quantitative$evidence$of$market$demand" • Validation$that$value$is$being$created Price$Optimization ! Pricing$is$the$lever$to$win$higher$profits,$revenue$or$market$share ! Connecting$to$your$buyers$emotional$and$economic needs ! The$correct$pricing$metrics$helps$you$ o to$monitor$price$acceptance o guide$behavior$across$pricing$tiers,$and$ o be$better$prepared$for$competitive$positioning
  74. 74. WHY$PRICING$MATTERS 74 I Ibbaka$©$2018 Unique$and$Differentiated$Value$Proposition • Determines$your$ability$to$realize$your$potential$earnings • Is$always$relative$to$the$next$best$competitive$alternative.$Investors$want$to$ know$that$you$have$done$your$competitive$analysis$ Market$Sizing • Provides$an$indication$of$potential$earnings • Does$your$Total$Addressable$Market$(TAM),$Serviceable$Addressable$Market$ (SAM),$Serviceable$Obtainable$Market$(SOM)$justify$your$valuation$
  75. 75. THE$IBBAKA$APPROACH$- PROCESS 75 I Ibbaka$©$2018 Understand)Value • Research$and$validate$emotional$and$economic$value$drivers$for$all$market$participants$ Segment)the)Market)and)Target)Customers • Find$segments$that$get$value$in$the$same$value$and$buy$in$the$same$way • Target$segments$that$get$the$most$value$with$reasonable$CAC$(Customer$Acquisition$Cost) Design)a)Pricing)Model • Identify$all$of$the$value$metrics$(the)measures)of)how)users)get)value) • Use$these$to$design$the$pricing$metric$(how)users)are)charged)$and$the$pricing$architecture Set)and)Monitor)Prices)and)Performance • Set$prices$to$optimize$for$company$goals$(market$share,$revenue,$profit,$cashflow) • Establish$a$monitoring$system$to$ensure$continuous$improvement Ibbaka$is$the$leader$in$the$application$of$value-based$pricing$to$innovation
  76. 76. THE$IBBAKA$APPROACH$- MARKET$SEGMENTATION 76 I Ibbaka$©$2018 • Ibbaka%develops%market%segmentations%based%on%emotional%and%economic%value%drivers,%buying% processes%and%other%differentiation%axes%that%emerge%bottom%up%from%the%data • Data%used%includes%the%following%(we%integrate%multiple%data%sources%and%types%of%data) • Interview$data • Survey$data$(we$develop$custom$designed$surveys$to$uncover$value$drivers) • Social$media$data • Usage$data$(including$measures$of$engagement$and$predictive$engagement) • CRM$(customer$relationship$management)$data • Invoicing$data • Analysis • Ibbaka’s$proprietary$segmentation$and$clustering$software$is$used$to$find$the$patterns$in$the$data • NLP$(natural$language$processing)$and$sentiment$analysis$is$used$to$handle$text$data$and$integrate$it$with$ quantitative$data • Data$is$cut$and$balanced$multiple$ways$to$find%the%segmentation%frame%that%brings%differentiation%into%focus
  77. 77. MORE%ABOUT%IBBAKA 77 I Ibbaka%©%2018 Ibbaka%is%a%consulting%and%technology%development%company%focused%on%helping%companies%bring& innovations&to&market&and%to%help%them%to%scale. We%do%this%by%bringing%new%approaches%to%market&segmentation,&customer&targeting&and&pricing&design to%our%clients,%and%supporting%them%with%data&science. Our%team%is%an%unusual%blend%of%business%leaders,%service%designers,%software%developer%and%data% management.%See%our%diverse%team%on%the%Ibbaka%website. The%team%has%extensive%experience%in%market%segmentation%and%pricing%at%companies%of%all%scales,%from% Fortune%50%to%preOrevenue%startOups. We%present%frequently%at%marketing,%product%management%and%professional%pricing%events.%Follow%our% blog%at%https://www.ibbaka.com/blog/
  78. 78. IBBAKA%STANDARD%PROCESS 78 I Ibbaka%©%2018 1. Understand%pricing%goals%and%confirm%alignment 2. Develop%value%driver%candidates%(economic%and%emotional) 3. Survey%market%to%test,%develop,%expand%value%drivers 4. Interview%market%participants%to%test%and%deepen%insights 5. Combine%survey,%interview,%CRM%and%other%data%to%segment%market%(using%our%proprietary%data%analysis%platform)% – this%can%include%analysis%of%current%clients%to%develop%migration%strategies 6. Select%target%segments% 7. Identify%value%metrics%and%use%to%generate%pricing%metrics 8. Design%pricing%model 9. Design%data%collection%to%measure%performance%of%pricing%model 10. Model%pricing%model%impact%on%key%financial%metrics%(including%unit%economics) 11. Develop%segment%specific%value%propositions 12. Develop%customer%migration%strategy%and%plan 13. Provide%valueXbased%sales%training
  79. 79. CUSTOMER)IMPACT)- BUSINESS)IMPACT)FOR)SAAS)SOLUTION 79 I Ibbaka)©)2018 Initial'Project'– For'Product'Manager • Pricing)model)and)execution)for)entry-level)offer.)Successful)completion)led)to)follow)on)projects. Project'Two'– For'VP'Product • Analyze)market)dynamics)in)core)market.)Discovered)high)risk)of)commoditization)and)price)erosion.) • Value-based)pricing)model)for)core)offer. • Led)to)a)third)project. Project'Three'– For'VP'Product • Market)scoping)for)innovative)business)solution)– market)segmentation,)value)driver)discovery,) customer)targeting,)buyer)profile.)Used)to)drive)positioning)statement)and)product)requirements. Project'Four'– For'VP'Sales'&'Marketing • Value-based)sales)process)and)training)to)execute)on)new)value-based)pricing)model. Project'Five'– For'VP'Product • Assessment)of)OEM)opportunities)for)core)technology
  80. 80. ADDITIONAL(EXAMPLE(PROJECTS(1(OF(2 80 I Ibbaka(©(2018 • Evaluate(viability(of(SaaS(business(from(an(investment(perspective(for(an(earlyAstage(investment(fund( (have(evaluated(more(than(50(businesses) • Coach(SaaS(and(IIoT(business(on(goAtoAmarket(strategy,(planning(and(execution((more(than(20( companies(in(B2B(and(multisided(marketplace(spaces) • Transition(from(Licensed(Pricing(to(Subscription(Model(for(leading(vendor(of(software(to(the(film( industry(– included(revised(pricing(and(modeling(of(impact(on(bookings,(cash(collection(and(revenue( recognition(– company(was(later(acquired • Value(Metric(and(Pricing(Metric(for(Precision(Agriculture(Company((IIoT)(– developed(economic(value( model(and(connected(this(to(pricing(model(and(strategy
  81. 81. ADDITIONAL(EXAMPLE(PROJECTS(2(OF(2 81 I Ibbaka(©(2018 • Market'Segmentation'and'Customer'Targeting'for(blended(safety(management(and(learning(management(system • Product'Strategy'and'Market'Opportunity'Estimation'for(vendor(of(Digital(Asset(Management(platform(– value( driver(identification,(market(segmentation,(customer(targeting,(pricing(of(addMon(functionality • Market'Segmentation'and'Pricing'Architecture'Design'for(a(twoMsided(platform(business(in(the(travel(sector • Training'on'value>based'pricing'for(a(major(medical(equipment(vendor • Pricing'audit for(a(major(medical(equipment(vendor(to(determine(pricing(contradictions(and(enterprise(pricing( opportunities(for(a(major(medical(equipment(vendor( • Impact'of'pricing'on'behavior'– major(study(for(a(government(organization(on(how(pricing(impacts(decisions(made( by(asset(owners(and(certified(professionals,(and(how(that(impacts(safety

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