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Ibbaka data driven pricing webinar january 2018 slideshare

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See how expanded access to data and new data technologies will transform your approach to pricing. Predictive analytics will make performance-based pricing more common.

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Ibbaka data driven pricing webinar january 2018 slideshare

  1. 1. Transform business performance With integrated pricing data management January 18, 2018 Steven Forth Steven.forth@ibbaka.com
  2. 2. ©2018 Ibbaka. All rights • A bit about your presenter • Why pricing is a powerful lever • The four pricing methods • What is value? • Pricing power • The three pricing strategies • Putting the pieces together • How data used to be used in pricing • How data will be used in pricing • Three trends for 2018 • The importance of predictive analytics What we will cover Key Points 1. Pricing should be based on the value you provide to specific customers or segments 2. Value can be quantified 3. You have more access to data than ever before 4. You can use that data to predict usage and value 5. This will let you innovate on pricing models
  3. 3. ©2018 Ibbaka. All rights Steven Forth • Serial entrepreneur in B2B SaaS, founder of Agreement Express, LeveragePoint, TeamFit • Adviser on pricing at Boston VC OpenView Labs • Co-founder of pricing design consultancy Ibbaka • Combines a passion for innovation and design with a deep knowledge of segmentation, revenue models, pricing About your presenters
  4. 4. ©2018 Ibbaka. All rights Pricing is where everything comes together Why pricing is a powerful lever Value Product and Service Marketing SalesPrice
  5. 5. ©2018 Ibbaka. All rights Cost Plus Market Following Value Based Performance Based The four pricing methods When customer defines deliverables For commodities For differentiated offers When you can predict value
  6. 6. ©2018 Ibbaka. All rights • For a specific customer (or segment) • Economic and emotional • Relative to an alternative What is value
  7. 7. ©2018 Ibbaka. All rights What is emotional value (frame using Maslow) Pricing Power What data will indicate emotional engagement?
  8. 8. ©2018 Ibbaka. All rights • The impact of your offer on your customer’s business (relative to the alternatives) • This can be quantified is your customer is willing to work with you to share data • Critical Question: Does your customer trust you enough to share this data? Do you trust your customers? What is economic value
  9. 9. ©2018 Ibbaka. All rights • There are well developed formal models for understanding the economic value of an offer • For pricing what matters is the differentiation value • Building these models is a guide to what data your application should gather Economic value estimation™ (EVE) Price of Alternative Lower Capital Expenses Lower Operating Capital Lower Operating Expenses Increased Revenue Unique Costs Short-comings Differentiation Value The EVE method was developed by Tom Nagle See the book The Strategy and Tactics of Pricing
  10. 10. ©2018 Ibbaka. All rights • Pricing power is a measure of how much differentiated value you can meaningfully claim • The most important determinant of pricing power is risk – how much risk is there that the value will be realized • Manage this risk and pricing power increases Pricing power Price of Alternative Lower Capital Expenses Lower Operating Capital Lower Operating Expenses Increased Revenue Unique Costs Pricing Power Pricing Weakness Short-comings
  11. 11. ©2018 Ibbaka. All rights The three pricing strategies Price of Alternative Lower Capital Expenses Lower Operating Capital Lower Operating Expenses Increased Revenue Unique Costs Pricing Power Pricing Weakness Short-comings Premium (Skimming) Market Following Penetration
  12. 12. ©2018 Ibbaka. All rights 1. Understand your differentiation value 1. Determine your pricing power 1. Choose one pricing strategy Putting the pieces together
  13. 13. ©2018 Ibbaka. All rights How data was used in pricing • Focus was on transactional data (data collected from invoices and where possible off-invoice credits and costs) • The pocket price waterfall and price scatter plots were the most common analytical tools • Advanced systems tried to estimate willingness to pay (WTP)
  14. 14. ©2018 Ibbaka. All rights • Focus was on transactional data (data collected from invoices and where possible off-invoice credits and costs) • The pocket price waterfall and price scatter plots were the most common analytical tools • Advanced systems tried to estimate willingness to pay (WTP) How data will be used in pricing • To predict usage (predictive Engagement) • To have real-time estimates of value for specific customers as this changes over time (predictive Value) • In aide of performance based pricing
  15. 15. ©2018 Ibbaka. All rights 1. The pace of commoditization will accelerate • Offers will rapidly become similar and easier to substitute for each other 2. Predictive analytics will begin to predict 1. Performance-based pricing models will become more common • The main arguments against performance-based pricing are around predictability See Three Key Pricing Trends in 2018 Three trends for 2018
  16. 16. ©2018 Ibbaka. All rights Combine Value and Usage Data Value Model Usage Model Pricing Model predictive Engagement • Data from Application • Other Applications • External Data predictive Value • Data from Application • Other Applications • External Data Performance Based • Adjusted to optimize for value and engagement • Use predictive analytics to see make costs predictable for the client
  17. 17. ©2018 Ibbaka. All rights • A powerful way to use data (so make sure you are collecting the data you need – in time series) • Reduces risk for buyer and seller (which increases pricing power) • Enables performance based pricing (the pricing model of the future) The importance of predictive analytics
  18. 18. ©2018 Ibbaka. All rights • Look at your data model and the data you collect. • Do you collect the data you need to predict future use? • Do you collect the data you need to estimate the value you are creating for customers? • Have you been transparent with your customers about what data you collect and how you are using it? (You need to do this to build trust) What to do now
  19. 19. ©2018 Ibbaka. All rights • Our focus is B2B SaaS, Industrial Internet of Things and Business Marketplaces (multi-sided market platforms) • Our approach is rooted in understanding how value is created for customers (value creation) and how part of that value can be captured by the vendor (pricing) • Frameworks we use are • Value-Based Market Segmentation and Customer Targeting (define the market opportunity using value drivers and buying process as segmentation axes) • Economic Value Estimation (EVE as developed by Tom Nagle) • Matrix of Competitive Advantage • Multi-tier Pricing Architectures with optimization • Value-Based Sales and Sales Training • Additional tools we apply • Design thinking and service design to drive pricing innovation • Scenario Planning to explore different alternative • Pattern recognition and machine learning software to identify hidden market patterns & opportunities Ibbaka Focus and Approach Price of Alternative CapEx OpCap OpEx Revenue Unique Costs Short- comings Pricing Power Pricing Weakness EVE Model
  20. 20. ©2018 Ibbaka. All rights Contact Us 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 Steven Forth Managing Partner steven@ibbaka.com +1 604 763 7397 LinkedIn TeamFit Karen Chiang Managing Partner karen@ibbaka.com +1 778 628-4085 LinkedIn TeamFit Ibbaka on Twitter Ibbaka on LinkedIn Website

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