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Uncovering an Innovative Monetization Strategy
to Keep Your Organization Relevant
An innovative monetization strategy requ...
Innovating within your
“monetization strategy” (your
revenue model, business
model and pricing strategies)
is paramount to...
Finding Micro Moments of Opportunity for
Monetization Strategy Innovation by Analyzing the
Customer’s Journey.
Customer
Ac...
”Innovation in pricing brings
new-to-the-industry approaches
to pricing strategies, to pricing
tactics, and to the organiz...
The Customer Insights Map focuses on
both the EX and CX using what we call
Convergence/Divergence bands. These
bands show ...
“Amazon has pursued a growth
trajectory rather than a profit one.
I think everyone would agree that
their strategy has bee...
Alphabet / FB $ Ads
Apple $ Hardware
Microsoft $ Software
Amazon $ Products
The Monetization Strategy Found in the Big 5 T...
Tweaking and raising prices is
necessary over time. The way to
innovate a transactional price
increase is to adjust prices...
Innovative price
optimization requires
leveraging data and even
deploying complex
algorithms to evaluate
nuanced changes i...
Monetization Strategy Starts with Empathy.
When an organization
shows empathy toward
their employees and their
customers, ...
Hard disk manufacturers
invested $6.5 billion in research
and development. As a result of
that investment, storage
capacit...
Price Elasticity of Demand (E)
=
(% Change in Quantity Demanded)
*
(% Change in Price)
Price Elasticity of Demand and
Your...
Yes, pricing is a process.
If you’re not familiar with price
elasticity, the 30,000 foot definition is
this — price elasti...
By surfacing new pricing loops,
analyzing buyer behavior via
complex price elasticity equations
(like the one represented ...
Determining Your Value Metric as the Foundation for
Price-to-Value Propositions.
Your value metric is how you charge for
w...
Determining a Monetization Strategy
Value Metric.
Determining a value metric isn’t
quite as easy as one might think.
When ...
Conjoint Analysis in Monetization
Strategy.
Choice-based conjoint analysis (CBC), in
its most simple form, is when an
orga...
Analyzing the Purchase Decision Process Along
the Customer Journey to Find the Best
Monetization Path.
Putting together re...
A data loop encompasses the
entire data collection
process, from gathering data
to gleaning insights. The goal
of any data...
In a SaaS pricing strategy study by Price
Intelligently, you can see that companies
that conducted an annual pricing revie...
Tracking the right metrics across
the customer journey will shed light
on how well you’re paying back
your CAC and what yo...
Data visualization is key to helping executives and organizations gain
additional buy-in on just about any initiative. Str...
This analytics dashboard showcases
total user engagement across an
entire year on a specific channel.
It says a lot about ...
Innovation requires a lot more
than a bump in price or a flashy
sale.
Here are several examples and
ideas to help inspire ...
It’s safe to say that the freemium
model has taken over the B2B world.
A freemium model is fairly
straightforward. You, as...
In April 2016, the company was
humming along just fine without
a freemium model.
To build a better customer
experience, th...
When you get down to the bones of monetizing anything, it’s really just
about exchanging value for dollars, right? That’s ...
Drift’s Approach to Value-Based Pricing.
Drift meets buyers where
they are in their journey,
meaning that an individual
ju...
Pulsemotiv Walking a
Similar Path.
This is another project underway at
the RocketSource Labs division.
Instead of taking t...
Value-added pricing is exactly what
it sounds like — a value-added
pricing strategy adds value above
and beyond what you’r...
As you can see, these companies
traverse B2B and B2C markets. From
Dollar Shave Club, a company well-
known for providing ...
Here’s the problem. This model
has become so popular that it’s
no longer innovative and, in fact,
might even be reaching
e...
Tiered pricing strategies allow users
to upgrade to various levels, leaving
a lot of wiggle room to innovate on
the “unlim...
Brands have an opportunity to
monetize more strategically by
differentiating based on features
and moving to a tiered pric...
Tiered Pricing Strategies Win in a Subscription
Market. Proposify’s Pricing Page is a Prime Example of a Company
Doing Tie...
In the pay-per-whatever model, your
customers only pay when they use
your service. Consumers can attach a
usage figure to ...
Mention, a social monitoring SaaS company, employed a pay-per-whatever
pricing strategy which increased average revenue pe...
Understanding the buyer’s
journey is so critical for e-
commerce. Rather than
constantly ebbing and flowing
with discounts...
There’s a huge market for selling
virtual goods, such as gems to buy
accessories within a video game or
gift cards to pay ...
In addition to in-app, virtual
currencies – coins & gems – Tennis
Clash users are presented with an
opportunity to acquire...
A hybrid pricing strategy starts with
retention and showing how to keep the
customers on board, but then drives that
data ...
One company who did this well was
Meet Edgar.
After launching in 2014, Meet Edgar
grew to $150K MRR with 2,922 paying
user...
Innovating on a monetization strategy isn’t about shifting things around to drop
more people into a funnel. Today’s fastes...
Insulate your business
from disruption.
Learn more at
RocketSource.co/Blog/Monetization-Strategy
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Uncovering an Innovative Monetization Strategy to Keep Your Organization Relevant

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An innovative monetization strategy requires much more than meets the eye. While many organizations focus their efforts on acquiring new customers and filling the funnel, the most successful companies focus instead on retention.

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Uncovering an Innovative Monetization Strategy to Keep Your Organization Relevant

  1. 1. Uncovering an Innovative Monetization Strategy to Keep Your Organization Relevant An innovative monetization strategy requires much more than meets the eye. While many organizations focus their efforts on acquiring new customers and filling the funnel, the most successful companies focus instead on retention. Today’s experience economy requires that you either innovate on old revenue models or introduce new pricing strategies that better align with the modern consumer’s journey.
  2. 2. Innovating within your “monetization strategy” (your revenue model, business model and pricing strategies) is paramount today. These practices also enhance business models, build new paths-to-purchase, boost loyalty and much more. The Rise of Monetization Strategy Among Innovative Brands Companies Who Use the Term “Monetization” The Growth of Interest in the Term “Monetization”
  3. 3. Finding Micro Moments of Opportunity for Monetization Strategy Innovation by Analyzing the Customer’s Journey. Customer Acquisition Lifecycle Retention Experience Customer Retention Lifecycle Evaluation Consideration Research Emotional Trigger Engagement Inform Conversion Purchase Inform Evaluation Consideration Research Emotional Trigger Engagement Exit Acquisition Experience Acquisition is a flashy nuance of growth that earns a lot of press. Revenue models, pricing optimization and adjusting pricing strategy must all be intertwined with an interconnected customer journey funnel and customer journey mapping that extends from acquisition to retention.
  4. 4. ”Innovation in pricing brings new-to-the-industry approaches to pricing strategies, to pricing tactics, and to the organization of pricing with the objective of increasing customer satisfaction and company profits.” - Harvard Business Review Innovating on Revenue Models via StoryVesting. The Base Components Needed 3I’s Key Strategic, Tactical, & Growth Levers StoryVesting 3P’s Bow Tie Funnel INVENT INNOVATE IMPROVE
  5. 5. The Customer Insights Map focuses on both the EX and CX using what we call Convergence/Divergence bands. These bands show how all the people directly involved in the journey are feeling at every single touchpoint. Specifically, when it comes to revenue model innovation, I look squarely at the point between the first and second concentric circles. If I see a massive divergence, I know that there’s a problem. A Customer Insights Map Fine Tunes the Experience in Your Monetization Strategy. The divergence between the customer experience and the employee experience at this stage of the journey signals there’s friction when shifting from emotional to logical reasoning.
  6. 6. “Amazon has pursued a growth trajectory rather than a profit one. I think everyone would agree that their strategy has been to please customers and, in doing so, grow their market share.” - Anne Goodchild Is Your Monetization Strategy Still Relevant? Amazon’s Long History of Innovating Monetization Strategy to Continuously Spur Growth
  7. 7. Alphabet / FB $ Ads Apple $ Hardware Microsoft $ Software Amazon $ Products The Monetization Strategy Found in the Big 5 Tech Companies. AlphabetApple Microsoft FacebookAmazon
  8. 8. Tweaking and raising prices is necessary over time. The way to innovate a transactional price increase is to adjust prices across the customer journey and funnel. In doing so, you not only acquire more customers, but also retain more. The Dangers of Blindly Raising Prices. What Do Your Customers Value the Most? When increasing prices, honor what your customers value the most, then add value that meets those needs.
  9. 9. Innovative price optimization requires leveraging data and even deploying complex algorithms to evaluate nuanced changes in the market, while simultaneously matching those results with costs and inventory levels to laser in on optimal price points and maximize profits. Price Optimization Puts the Customer First. PriceLabs is helping Airbnb innovate through dynamic pricing strategies. Beds/Listing Price Bathrooms/Listing Price Bedrooms/Listing Price Fitted Values vs. Residuals
  10. 10. Monetization Strategy Starts with Empathy. When an organization shows empathy toward their employees and their customers, shifts in monetization strategies are better received. This empathy can reduce employee churn and increase the lifetime value (LTV) of the customer. EMPLOYEE CUSTOMER
  11. 11. Hard disk manufacturers invested $6.5 billion in research and development. As a result of that investment, storage capacity improved 1,000%. Still, those manufacturers failed to eventually price their innovations correctly, resulting in a net loss of $800M. Innovative Monetization Strategy Drills Down to the Bottom Line. The Importance of Bottom Line Growth Across a Long- Term Monetization Strategy. 1,000 70% -$800m $6.5b Invested in R&D Over 4 Years
  12. 12. Price Elasticity of Demand (E) = (% Change in Quantity Demanded) * (% Change in Price) Price Elasticity of Demand and Your Monetization Strategies. Innovating on Your Monetization Strategy with a Forward Thinking Approach Perfectly Inelastic Perfectly Elastic Relatively Elastic Unit ElasticityRelatively Inelastic
  13. 13. Yes, pricing is a process. If you’re not familiar with price elasticity, the 30,000 foot definition is this — price elasticity is the incremental change that can affect demand in a product. It’s the following equation, which tells you how likely a person is to buy based on fluctuations in the price. Optimizing Monetization Strategy via Pricing Elasticity Data Loops. Factors That Determine Demand & Price Elasticity Demand Curve Shift Movement Along Demand Curve
  14. 14. By surfacing new pricing loops, analyzing buyer behavior via complex price elasticity equations (like the one represented here, which features numerous interconnected factors), utilizing the Customer Insights Map, and closing data loops with reliable statistics, we’re able to start creating and testing pricing strategies. Determining Price Elasticity of Demand via a Sophisticated Data Loop. Theory Theory in Practice Our Approach Price Elasticity of Demand
  15. 15. Determining Your Value Metric as the Foundation for Price-to-Value Propositions. Your value metric is how you charge for what you sell. The Hotjar team has clearly determined that pageviews are the biggest value metric to their audience. Potential Hotjar customers make the decision to buy based on whether or not they’re getting enough traffic to their site. How much they’ll pay is dependent on how many visitors they see each day.
  16. 16. Determining a Monetization Strategy Value Metric. Determining a value metric isn’t quite as easy as one might think. When your pricing strategy makes it difficult for customers to predict how much they’ll actually pay, they’ll struggle with the logic behind whether your product is right for them. Mixpanel found this out the hard way last year as they shifted to a new pricing model. Mixpanel’s Pricing Strategy Shift to More Predictability
  17. 17. Conjoint Analysis in Monetization Strategy. Choice-based conjoint analysis (CBC), in its most simple form, is when an organization presents several features or attributes and asks the respondent to choose between them. Hierarchical- Bayes conjoint analysis offers a variety of options and factors. The goal with both is to determine which points make or break a specific price in their mind while simulating an actual buying experience. What Hierarchical -Bayes Conjoint Analysis Looks Like in Qualtrics
  18. 18. Analyzing the Purchase Decision Process Along the Customer Journey to Find the Best Monetization Path. Putting together revenue models and pricing strategies that sync across the user’s experience in that micromoment move from emotional to logical reasoning is one of the hardest things to get right because purchase decisions are so dang complex... Cognitive Bias Codex, 2016
  19. 19. A data loop encompasses the entire data collection process, from gathering data to gleaning insights. The goal of any data loop is to continually keep a pulse on what’s happening in all aspects of the market — with customers, employees or just about anything else you want to track. The Importance of a Data-Driven Pricing Process. Experimental Design Data Collection & Segmentation Analysis & Decision Basic Statistical Model
  20. 20. In a SaaS pricing strategy study by Price Intelligently, you can see that companies that conducted an annual pricing review saw a blip in bottom line growth. However, companies that approached price optimization on a continual basis saw significant increases in bottom line growth by boosting their LTV:CAC ratios. In addition, the time it takes to pay back CAC happens almost immediately when price optimization is taken into account. Continual Price Optimization Drives Bottom Line Growth. Payback Periods for Different Pricing Commitments Impact on Efficiency LTV/CAC vs Pricing Commitment No Pricing Function Yearly Pricing Review Continual Price Optimization No Pricing Function Yearly Pricing Review Continual Price Optimization
  21. 21. Tracking the right metrics across the customer journey will shed light on how well you’re paying back your CAC and what your LTV:CAC ratio looks like. If it doesn’t match your expectations, that probably means that what you’re doing is focused more on the acquisition side of the funnel, leaving massive opportunity on the retention side of the funnel. Conversion Metrics to Monitor When Analyzing a Monetization Strategy.
  22. 22. Data visualization is key to helping executives and organizations gain additional buy-in on just about any initiative. Strategies for monetization are no different. This simple data visualization audit shows exactly what individual users or specific cohorts are doing – and how often they’re doing it. Innovating on Data Visualization to Guide Monetization Strategy. Visualizing and Recognizing Patterns in Consumer Behaviors
  23. 23. This analytics dashboard showcases total user engagement across an entire year on a specific channel. It says a lot about time periods versus specific consumer behaviors and allows you to measure various elements such as engagement, time on app, number of times logged in, or other options. What We’re Doing at Platstack.
  24. 24. Innovation requires a lot more than a bump in price or a flashy sale. Here are several examples and ideas to help inspire your next steps as you approach innovating your revenue models to stay relevant. An Innovative Monetization Strategy With a Forward Thinking Approach. Freemium Value-Based Value-Add Subscription-Based Scaling Services Pay-Per Whatever Tiered Pricing Virtual Goods A Blended Approach
  25. 25. It’s safe to say that the freemium model has taken over the B2B world. A freemium model is fairly straightforward. You, as a business, offer a forever-free option, allowing customers to experience your brand before making a purchase or upgrading to premium status. The Freemium Model. A Non-Negotiable. Companies Using This Strategy
  26. 26. In April 2016, the company was humming along just fine without a freemium model. To build a better customer experience, they decided to give away the core product for free. This constituted a radical shift in their revenue model, and it paid off. Mealime’s Monetization Strategy Shift to a Freemium Model. Mealime has over 1 million all-time users with approximately 15% paying for premium services
  27. 27. When you get down to the bones of monetizing anything, it’s really just about exchanging value for dollars, right? That’s the concept behind Value-based pricing, which anchors the amount you’re charging in the customer’s perceived value of what they’re receiving. This concept goes straight to the heart of our StoryVesting framework because it’s all about aligning the customer’s emotional and logical needs with their brand experience. Value-Based Monetization. Companies Using This Strategy
  28. 28. Drift’s Approach to Value-Based Pricing. Drift meets buyers where they are in their journey, meaning that an individual just starting out will pay less for their conversations with prospects, whereas enterprises with more volume will be charged more for the increased number of conversations they’re having.
  29. 29. Pulsemotiv Walking a Similar Path. This is another project underway at the RocketSource Labs division. Instead of taking the traditional route of applying surface-level metrics to our pricing, we dug deep into the type of value our users need – impacts. Here’s what Pulsemotiv’s value-based pricing approach looks like.
  30. 30. Value-added pricing is exactly what it sounds like — a value-added pricing strategy adds value above and beyond what you’re already delivering. Amazon +$ with Prime Membership Zappos +$ with Free Returns Costco +$ with Customer Service Value-Added Monetization Strategy. Companies Using This Strategy
  31. 31. As you can see, these companies traverse B2B and B2C markets. From Dollar Shave Club, a company well- known for providing razors via a subscription service, to digital software companies such as Slack, to which users pay a monthly fee to access the platform, these businesses have instilled loyalty into their revenue model. Recurring or Subscription- Based Pricing. Companies Using This Strategy Microsoft Stock Prices
  32. 32. Here’s the problem. This model has become so popular that it’s no longer innovative and, in fact, might even be reaching exhaustion. Deloitte found that 47% of consumers polled were actually frustrated by how many services and subscriptions they had signed up for. Subscription Fatigue Leads to Higher Cancellation Rates. Overwhelmed by Subscriptions Intent to Cut Subscriptions Millennials Gen XGen ZTotal Across the board, subscription- based businesses are seeing fatigue set in and cancellations start to rise. Now is the time for companies to innovate on the recurring revenue model approach to drive retention. 24% 28% 28% 30% 40% 43% 29% 33%
  33. 33. Tiered pricing strategies allow users to upgrade to various levels, leaving a lot of wiggle room to innovate on the “unlimited” approach. For example, a tiered approach means your subscription fee could be a baseline price and you could offer the potential to add-on four to five features. Spotify is a great example of a company with room to innovate in this area. Saying Goodbye to Unlimited Subscription-Based Models. Overall Price Sensitivity Price Sensitivity by Age Price Sensitivity by Feature Spotify has missed out on revenue potential by charging a single price for their music streaming service.
  34. 34. Brands have an opportunity to monetize more strategically by differentiating based on features and moving to a tiered pricing strategy. It’s critical to avoid fall in the trap of overcomplicating the offerings, but rather lean into what the market is willing to pay for and then meet customers there with a pricing option that feels customized for them. Price Sensitivity and Pricing Strategy. Insights Into Your Monetization Strategy via Customer’s Willingness to Pay Product Discount per Customer (One Dot Represents One Customer) Cluster of Homogenous Customers Discount% Product Sales, € Thousands
  35. 35. Tiered Pricing Strategies Win in a Subscription Market. Proposify’s Pricing Page is a Prime Example of a Company Doing Tiered Pricing Well In StoryVesting, analyzing price is predominantly part of the logical side of the brain — the neocortex. Still, how you position logical attributes on the page using visual elements and callouts has more of an impact on the user than a lengthy, data-driven, heavy page. You can see that tiers like this could get complicated quickly if not presented in a way that adds to the experience rather than confuses it.
  36. 36. In the pay-per-whatever model, your customers only pay when they use your service. Consumers can attach a usage figure to the price they’re paying for products or services. Within the StoryVesting framework, the ability to attach a usage metric eases the friction between an emotional need and logical reasoning about whether the offer is relevant to their lifestyle. The Modern Pay-Per- Whatever Model. Companies Using This Strategy
  37. 37. Mention, a social monitoring SaaS company, employed a pay-per-whatever pricing strategy which increased average revenue per account (ARPA) by 296%. Innovative Pay-Per-Whatever Monetization Strategy. Mention Without overly complicating their pricing page, Mention has whittled it down to exactly what they’ve determined their customers will pay for, hitting those logical triggers square on to make the decision process easier.
  38. 38. Understanding the buyer’s journey is so critical for e- commerce. Rather than constantly ebbing and flowing with discounts, understanding those emotional and logical triggers will get an audience to take action and buy, and also retain those customers to come back for another purchase when they’re ready. Leveraging an Innovative Monetization Strategy for E-Commerce. Companies Using This Strategy U.S. Click-&-Collect Sales Retail Ecommerce Sales Worldwide
  39. 39. There’s a huge market for selling virtual goods, such as gems to buy accessories within a video game or gift cards to pay for virtual currency, which can then be used to buy custom emoticons. Not a gaming company? There are still lessons here for you as you analyze your own pricing strategies and revenue models. Selling Virtual Goods as a Monetization Strategy. Companies Using This Strategy 2020 Global Games Market Mobile $77.2B Tablet Games $13.7B Smartphones $63.6B PC $36.9B Browser Games $3.08B Boxed/Downloaded Games $33.9B Console $45.2B
  40. 40. In addition to in-app, virtual currencies – coins & gems – Tennis Clash users are presented with an opportunity to acquire extra virtual goods, including limited-time upgrade opportunities for things like virtual apparel and equipment using real money from a bank account. Those timed pop-up modals spark a fear of missing out, driving the player to take action quickly. Tennis Clash’s Compelling Virtual Goods Pricing Strategy. Tennis Clash’s Innovative Monetization Strategy 700k Downloads $1M Estimated MRR Limited Time Specials
  41. 41. A hybrid pricing strategy starts with retention and showing how to keep the customers on board, but then drives that data back to the acquisition side of the funnel to continually fuel growth. We’re living in a time where digital transformation doesn’t merely allow us to get more creative, it encourages it. Hybrid Pricing Strategies and Revenue Models. Companies Using This Strategy Brand Experience (BX) Framework Customer Experience (CX) Framework
  42. 42. One company who did this well was Meet Edgar. After launching in 2014, Meet Edgar grew to $150K MRR with 2,922 paying users in only 13 months. By 2018, Meet Edgar hit the Inc. 5,000 list and had an estimated annual run rate of $3m. Scaling Services Via Unique Revenue Models.
  43. 43. Innovating on a monetization strategy isn’t about shifting things around to drop more people into a funnel. Today’s fastest-growing companies focus more on strengthening critical metrics such as CTA:LTV ratios, LTV:ARPU, and AOV:LTV. No matter which scenario is right for your business, the end goal is the same. By constantly trying to understand and showcase pricing adjustments and large scale revenue model shifts, you’re able to drive retention and build your bottom line rather than simply adding top line revenue. We’re Helping Organizations Stay Relevant Through an Innovative Monetization Strategy
  44. 44. Insulate your business from disruption. Learn more at RocketSource.co/Blog/Monetization-Strategy

An innovative monetization strategy requires much more than meets the eye. While many organizations focus their efforts on acquiring new customers and filling the funnel, the most successful companies focus instead on retention.

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