The document provides an overview of pricing models and considerations for B2B and B2C SaaS companies. It discusses three main factors that influence pricing: profit pools, cost structure, and industry stage of development. It also covers internal pricing factors like customer base, costs, and cost of capital. The document provides guidance on pricing to capture value, elasticity, pricing strategies, two-sided markets, and pioneer customer pricing.
Gauging the growth stage enterprise software business litwiller - july 2012Dave Litwiller
ย
Functional dashboard of select measures which empirically provides strong indication of future growth and performance
Profiles whether an enterprise software producer is likely in, and to remain in, the top quintile of its peer group as it moves through the band from $10 million in annual sales to over $30 million (typically, from 40 to 100 employees and beyond)
Deloitte vendavo sept 2010 - outcome based approachTheo Slaats
ย
Vendavo Pricing Seminar Dรผsseldorf september 2010
Presentation by Theo Slaats, co-leader Deloitte EMEA Pricing and Profitability Management Center of Excellence
How Collinson Grant helps retailers to maximise operational excellenceCheshire East Council
ย
Collinson Grant helps retail businesses to become more profitable. Our consultants have worked in food, fashion, personal care, electrical, DIY and sporting goods; and for large multiples, specialist/niche chains, luxury brands and discounters.
This presentation explains how we find opportunities for improvement in the supply chain, for savings at head office and in the procurement function, and describes the programme management skills we bring to bear to realise them.
The work we do for retailers includes:
improving the performance of supply chains; reducing costs of supply, improving merchandise availability; and minimising margin loss;
installing and integrating multi-channel planning and operating processes; improving systems, organisation and controls, and reducing operating complexity and costs;
increasing the effectiveness of procurement and reducing indirect expenditure on GNFR;
reducing indirect costs and improving productivity of, and return on, assets employed โ people, inventory, space and cash;
improving operating results by managing change programmes or by restructuring after acquisitions or disposals.
We apply tools and techniques used to improve performance at the sector's largest organisations. Our consultants are experienced senior managers who have completed major projects for Tesco, Levi Strauss Europe, Boots, Dixons, Argos, Marks and Spencer, Burberry and Kingfisher.
Collinson Grant aims is to give clients a financial return worth ten times the amount spent on our services. We only recommend action if we believe it will lead to a sustained improvement. We are not afraid to give bad news, or to champion ideas that may not be welcome.
Find out more at www.collinsongrant.com or e-mail Les Murray: lmurray@collinsongrant.com
EY Growing Beyond: How high performers are accelerating ahead Nov 2012Stephan Kuester
ย
Working closely with businesses across the globe we see an ever increasing gap emerging between high and low performers and have identified key approaches the high performers have been taking to achieve sustainable growth. Certain key strategies emerge that are at the heart of business success with four key drivers that remain throughout: customer reach, operational agility, cost competitiveness and stakeholder confidence. You may find these insights helpful when discussing your own strategy for future growth.
Article The Strategy Accelerator - Which businessmodels and strategies are va...Alfred Griffioen
ย
How to improve your businessmodel and find an attractive position in the value chain or value network. How valid are the strategies of Porter, Treacy & Wiersema and the BCG portfolio matrix in this internet age and globalised world? The strategy accelerator gives a concise alternative, combining the Resource Based View and strategic marketing.
Gauging the growth stage enterprise software business litwiller - july 2012Dave Litwiller
ย
Functional dashboard of select measures which empirically provides strong indication of future growth and performance
Profiles whether an enterprise software producer is likely in, and to remain in, the top quintile of its peer group as it moves through the band from $10 million in annual sales to over $30 million (typically, from 40 to 100 employees and beyond)
Deloitte vendavo sept 2010 - outcome based approachTheo Slaats
ย
Vendavo Pricing Seminar Dรผsseldorf september 2010
Presentation by Theo Slaats, co-leader Deloitte EMEA Pricing and Profitability Management Center of Excellence
How Collinson Grant helps retailers to maximise operational excellenceCheshire East Council
ย
Collinson Grant helps retail businesses to become more profitable. Our consultants have worked in food, fashion, personal care, electrical, DIY and sporting goods; and for large multiples, specialist/niche chains, luxury brands and discounters.
This presentation explains how we find opportunities for improvement in the supply chain, for savings at head office and in the procurement function, and describes the programme management skills we bring to bear to realise them.
The work we do for retailers includes:
improving the performance of supply chains; reducing costs of supply, improving merchandise availability; and minimising margin loss;
installing and integrating multi-channel planning and operating processes; improving systems, organisation and controls, and reducing operating complexity and costs;
increasing the effectiveness of procurement and reducing indirect expenditure on GNFR;
reducing indirect costs and improving productivity of, and return on, assets employed โ people, inventory, space and cash;
improving operating results by managing change programmes or by restructuring after acquisitions or disposals.
We apply tools and techniques used to improve performance at the sector's largest organisations. Our consultants are experienced senior managers who have completed major projects for Tesco, Levi Strauss Europe, Boots, Dixons, Argos, Marks and Spencer, Burberry and Kingfisher.
Collinson Grant aims is to give clients a financial return worth ten times the amount spent on our services. We only recommend action if we believe it will lead to a sustained improvement. We are not afraid to give bad news, or to champion ideas that may not be welcome.
Find out more at www.collinsongrant.com or e-mail Les Murray: lmurray@collinsongrant.com
EY Growing Beyond: How high performers are accelerating ahead Nov 2012Stephan Kuester
ย
Working closely with businesses across the globe we see an ever increasing gap emerging between high and low performers and have identified key approaches the high performers have been taking to achieve sustainable growth. Certain key strategies emerge that are at the heart of business success with four key drivers that remain throughout: customer reach, operational agility, cost competitiveness and stakeholder confidence. You may find these insights helpful when discussing your own strategy for future growth.
Article The Strategy Accelerator - Which businessmodels and strategies are va...Alfred Griffioen
ย
How to improve your businessmodel and find an attractive position in the value chain or value network. How valid are the strategies of Porter, Treacy & Wiersema and the BCG portfolio matrix in this internet age and globalised world? The strategy accelerator gives a concise alternative, combining the Resource Based View and strategic marketing.
Celebrate โ Pricing Power
Pricing principles that capture value and enhance profitability
Pricing can no longer be an after-thought, with the pricing strategy and rate structure applied after the service offering is developed. Increasingly, clients want unique pricing structures that include shared accountability โ this applies not only to agencies, but is part of a larger trend across many service-business industries. Successfully aligning interests requires integrating the pricing strategy as a core component of the offer โ using price to help determine: What is included? How is success defined? How services are delivered. This discussion will take lessons learned from both advertising, and other segments to frame the role of pricing in the sales process. We will also discuss the ways leading-class pricing organizations find success with client procurement teams โ who have been very effective at driving down rates. This includes the importance of differentiating cost vs. fees vs. value. Successful alternative fee programs are not positioned as new forms of discounting, but are leveraged as a different way to measure and compensate for value. And, finally, we will discuss the concept of "losing on price."
Speaker:
Scott Lippstreu, Principal, Deloitte Consulting LLP
Delivering measurable results through pricing (DMRTP) outlines challenges faced by organizations in delivering transformational results through pricing and approaches that have proven to be effective in overcoming those challenges. I delivered this presentation at PPS fall 2011 conference in Las Vegas
Learning from other sectors: How did low-cost business models change an industry?
By: Raรบl Sรกnchez, Director, Strategy & Operations, Deloitte, Barcelona, Spain
Celebrate โ Pricing Power
Pricing principles that capture value and enhance profitability
Pricing can no longer be an after-thought, with the pricing strategy and rate structure applied after the service offering is developed. Increasingly, clients want unique pricing structures that include shared accountability โ this applies not only to agencies, but is part of a larger trend across many service-business industries. Successfully aligning interests requires integrating the pricing strategy as a core component of the offer โ using price to help determine: What is included? How is success defined? How services are delivered. This discussion will take lessons learned from both advertising, and other segments to frame the role of pricing in the sales process. We will also discuss the ways leading-class pricing organizations find success with client procurement teams โ who have been very effective at driving down rates. This includes the importance of differentiating cost vs. fees vs. value. Successful alternative fee programs are not positioned as new forms of discounting, but are leveraged as a different way to measure and compensate for value. And, finally, we will discuss the concept of "losing on price."
Speaker:
Scott Lippstreu, Principal, Deloitte Consulting LLP
Delivering measurable results through pricing (DMRTP) outlines challenges faced by organizations in delivering transformational results through pricing and approaches that have proven to be effective in overcoming those challenges. I delivered this presentation at PPS fall 2011 conference in Las Vegas
Learning from other sectors: How did low-cost business models change an industry?
By: Raรบl Sรกnchez, Director, Strategy & Operations, Deloitte, Barcelona, Spain
Property & Casualty Commercial Lines Underwriting: The New PlaybookCognizant
ย
P&C commercial lines carriers are experiencing a global transformation that will compel them to reexamine their operating models, implement direct-to-consumer strategies, reengineer their processes and technologies, and achieve and sustain profitable growth in the age of digital.
When it comes to scrutinizing costs, most insurance companies can say โBeen there, done that. Got the t-shirt.โ Managers are familiar with the refrain from above to trim here and cut there. The typical result is flirtation with the latest management trends like lean, outsourcing and offshoring, and others. However, the results tend to be the same. Budgets reflect last yearโs spend plus or minus a couple of percent in the same places.
Where is your corporate focus; cost cutting or value proposition? Sustainable future growth must come not only from a cost-obsession, but a value-obsession. Check out this white paper from Northpoint Advisors.
Chapter 5Competitive Advantage, Firm Performance, and BusinessWilheminaRossi174
ย
Chapter 5
Competitive Advantage, Firm Performance, and Business Models
ยฉ 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.
No reproduction or further distribution permitted without the prior written consent of McGraw Hill.
Because learning changes everything.ยฎ
Learning Objectives
Conduct a firm profitability analysis using accounting data to assess and evaluate competitive advantage.
Apply shareholder value creation to assess and evaluate competitive advantage.
Explain economic value creation and different sources of competitive advantage.
Apply a balanced scorecard to assess and evaluate competitive advantage.
Apply a triple bottom line to assess and evaluate competitive advantage.
Use the why, what, who, and how of business models framework to put strategy into action.
ยฉ McGraw Hill
The AFI Strategy Framework
Access the text alternative for slide images.
ยฉ McGraw Hill
Case Study: Microsoft vs. Apple
Both founded in the mid-1970โs, (Bill Gates/Steve Jobs)
Microsoft dominated the PC industry with Windows, the defacto OS 90% of PCโs.
Preloaded onto IBM and other PCโs, they created applications to run seamlessly for all.
Microsoft Office Suite , (Word, Excel, Outlook, PowerPoint)
Duplicated this in the corporate world using servers.
By 2000, Microsoft was most valuable company globally at $510B
Microsoft Market Cap today: $1.6T
After struggling with less than 5% of the PC market, Apple was revitalized in 2001
Introduction of the Ipod and digital portable music. Followed quickly by iTunes.
2007 introduced the smartphone, 2010 introduced the iPad
By 2012, Apple was most valuable company globally at $620B
2015: Apple Watch 2017: iPhone 10x $1000.00
Apple Market Cap today: $1.9T
ยฉ McGraw Hill
M vs. A shows that overtime, competitive advantage is transitory. It is hard to gain a competitive edge in the first place, and even harder to sustain it.
4
An Overview of Frameworks Discussed
Three traditional frameworks to measure and assess firm performance:
Accounting profitability.
Shareholder value creation.
Economic value creation.
Two integrative frameworks, combining quantitative data with qualitative assessments:
Balanced scorecard.
Triple bottom line.
ยฉ McGraw Hill
5
Three Traditional Performance Dimensions
What is our accounting profitability?
Uses standard financial metrics.
What is our shareholder value?
Stock price
How much economic value does the firm generate?
Difference between what a buyer is willing to pay and the cost to produce.
These performance dimensions generally correlate over time:
Accounting profitability and economic value creation tend to be reflected in the firmโs stock price.
Determines the stockโs market valuation.
ยฉ McGraw Hill
6
Accounting Profitability
Accurately assesses firm performance.
Compares firm performance to competitors / industry average.
Available through:
Standardized accounting metrics (GAAP, FASB).
Form 10-K ...
Prospect engagement has never been more complex due to the recent economic and health crisis. To help CROs and sales leaders reassess risk, weโve developed Sapphire Venturesโ COVID 19 Prospect Assessment Model to provide an easy way to build a complete understanding of your prospectsโ health
and outlook across four key factors, so that you can effectively understand how best to engage and adjust your GTM motion.
Infosys Insights: Driving revenue through service innovationInfosys
ย
โServitizationโ (bundling of products with services) has become an imperative in todayโs economy, especially in developed markets. Product companies that do not embrace this concept are bound to face stiff competition from low-cost manufacturers in emerging markets. Key among the risks they face is the prospect of being forced out of the market in the long term. Hence, the benefits of servitization are too compelling to ignore.
This is a partial preview of the document found here:
https://flevy.com/browse/business-document/blue-ocean-strategy-primer-113
Description:
A great complement to the best selling book "Blue Ocean Strategy." Each chapter is summarized in one printer-friendly slide. Points that require more in-depth explanation are developed into additional slides. Save time and get a quick refresh with this primer for you to enjoy.
Enhancement in NDT inspection for operational effectiveness, efficiency and e...Innerspec Technologies
ย
We intend to show that any change shall be linked, not only to improvement, but also to immediate cost reduction so that all management structure can conceive quick implementation as
part of its department strategy & enhancement in their budget cost.
For that, concepts such as effectiveness, efficiency and excellence must be approached. We will give clear saving cost ways which will follow the terminology.
In Financial terms and without a deep analysis, we can conrm cost savings above 30% from current prices are achieved.
This white paper discusses why small businesses are experiencing a decline in lead volume and quality, and acts as a step-by-step guide for lead generation in "the new normal".
Why is this book so important? One of the biggest lessons I have learned within the startup landscape is that even though pricing, together with the business model, remains by far the lever that most impacts revenue, the subject is a sensitive one.
Pricing is a strong โ but often underused โ tool available to capture a share of value created for customers
Pricing is one of the biggest challenges that startup face. The book is a practical toolkit that positively influences the pricing strategies of startups. It reveals insights in the different pricing methods and tactics used by successful companies.
Everyone has great ideas, and many of us have more than one. But how can you evaluate your idea to understand whether itโs good enough to launch as a business?
As individuals or entrepreneurs, we have hundreds of good ideas every month on how to improve life. Some of these ideas are good enough to launch a start-up on. In this presentation, I look at some of the factors any start-up founder should look at in determining when and how to launch his or her startup. This presentation was originally given to the University of Cyprus, Centre for Entrepreneurship. https://www.navigator-consulting.com/post/developing-great-ideas-for-startups-2
Competing to Win in the Media & Entertainment IndustryCognizant
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To outperform in tough times, media and entertainment companies must rejuvenate their business, operating and technology models by jettisoning nonvalue- adding activities and reinforcing core strengths that provide sustainable growth, despite funding challenges.
Enhancing and Restoring Safety & Quality Cultures - Dave Litwiller - May 2024...Dave Litwiller
ย
In an expanding range of tech, AI, and advanced manufacturing industries, there are growing issues and concerns for assuring:
- Product safety and safety-related quality
- User/patient safety
- Employee/contractor safety
As well as the wellbeing of other stakeholders
Optimizing C-Suite Dynamics - Nov 2 2023 - Dave Litwiller - Public.pptxDave Litwiller
ย
In this presentation, Dave Litwiller explores the critical aspects of optimizing C-Suite dynamics in scale-up stage technology companies. Collaborative leadership dynamics are vital in influencing a company's performance during rapid growth and evolving markets. The core model for the C-Suite, inspired by Peter Drucker, identifies the roles of Outside Visionary, Inside Visionary, and Disciplinarian. The CEO team construct is discussed, emphasizing its strengths in reducing CEO isolation and maintaining defined roles.
Key vital sign indicators for C-Suite teams are highlighted, focusing on decision-making and diversity of thought. The distinct challenges of the Disciplinarian role are addressed, including the need for a deep understanding of operational realities. The presentation also touches upon interpreting C-Suite criticisms and common friction areas among team members.
To resolve conflicts and enhance C-Suite cooperation, various mechanisms and strategies are explored, such as conflict resolution procedures, mediation, role changes, and alignment of goals and values. By understanding and addressing these dynamics, organizations can foster a more effective C-Suite.
Market Volatility Considerations for Scale-up Stage Tech Companies in 2023 - ...Dave Litwiller
ย
Leading tools to help prepare for and to navigate increasingly turbulent times for scale-up stage tech firms:
- Scenario planning
- Productivity enhancement drivers, particularly for knowledge-based work
- Instrumenting and monitoring revenue generation dynamics for signs of significant market and customer changes
- Individual, group, and institutional methods to increase the velocity of learning and adaptation, as well as distributed action
- Increasing awareness and sensitivity to changes in customer value proposition and adoption decision mechanics
Improving AI Development - Dave Litwiller - Jan 11 2022 - PublicDave Litwiller
ย
A conversational tour through some things Iโve learned in helping scale-up stage client companies improve their AI development practices, especially where deep neural nets (DNNs) are in use.
Leading Transformation and Accelerating Change at Scale - Apr 20 2021 - Dave ...Dave Litwiller
ย
In response to a burst of requests from the scale-up community for help working through the issues with larger magnitude change initiatives, here is a set of highlight thoughts and preferred approaches.
Applying TQM and the Toyota Production System in Development of Software Arti...Dave Litwiller
ย
Adapting TPS Tools and Techniques for Enterprise TQM to Software, Artificial Intelligence, Machine Learning and Deep Learning Development Organizations
The Agile Learning Organization - Dave Litwiller - Sept 17 2020 - PublicDave Litwiller
ย
Adapting Organizational Capabilities in Scale-up Technology Businesses to Thrive in the Strategic Environment using the Principles of TQM
- Enhance organizational learning capacity and agility
- Build connective capacity across functions and time horizons, to counter tendencies toward silos
- Develop leadership bandwidth at all levels to expand institutional capability for productive change
Future Office Layout and Productivity Considerations for Startups and Scale u...Dave Litwiller
ย
The Covid-19 response which moved much office work to virtual has created a natural productivity experiment in the knowledge economy. The favourable early results being reported by firms with employees working from home are challenging the widespread assumptions about the merit of extremely open offices as were frequently adopted in technology companies prior to the pandemic. For companies that will continue to have offices which are now designing re-occupancy plans, social distancing requirements offer an opportunity to revert to potentially more productive forms of office layout.
Explore our most comprehensive guide on lookback analysis at SafePaaS, covering access governance and how it can transform modern ERP audits. Browse now!
Taurus Zodiac Sign_ Personality Traits and Sign Dates.pptxmy Pandit
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Explore the world of the Taurus zodiac sign. Learn about their stability, determination, and appreciation for beauty. Discover how Taureans' grounded nature and hardworking mindset define their unique personality.
3.0 Project 2_ Developing My Brand Identity Kit.pptxtanyjahb
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A personal brand exploration presentation summarizes an individual's unique qualities and goals, covering strengths, values, passions, and target audience. It helps individuals understand what makes them stand out, their desired image, and how they aim to achieve it.
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
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It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
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Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
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Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Affordable Stationery Printing Services in Jaipur | Navpack n PrintNavpack & Print
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Looking for professional printing services in Jaipur? Navpack n Print offers high-quality and affordable stationery printing for all your business needs. Stand out with custom stationery designs and fast turnaround times. Contact us today for a quote!
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
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Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
Discover the innovative and creative projects that highlight my journey throu...dylandmeas
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Discover the innovative and creative projects that highlight my journey throughย Full Sail University. Below, youโll find a collection of my work showcasing my skills and expertise in digital marketing, event planning, and media production.
"๐ฉ๐ฌ๐ฎ๐ผ๐ต ๐พ๐ฐ๐ป๐ฏ ๐ป๐ฑ ๐ฐ๐บ ๐ฏ๐จ๐ณ๐ญ ๐ซ๐ถ๐ต๐ฌ"
๐๐ ๐๐จ๐ฆ๐ฌ (๐๐ ๐๐จ๐ฆ๐ฆ๐ฎ๐ง๐ข๐๐๐ญ๐ข๐จ๐ง๐ฌ) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
๐๐ ๐๐จ๐ฆ๐ฌ provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
โญ ๐ ๐๐๐ญ๐ฎ๐ซ๐๐ ๐ฉ๐ซ๐จ๐ฃ๐๐๐ญ๐ฌ:
โข 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
โข SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
โขFreenBecky 1st Fan Meeting in Vietnam
โขCHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
โข WOW K-Music Festival 2023
โข Winner [CROSS] Tour in HCM
โข Super Show 9 in HCM with Super Junior
โข HCMC - Gyeongsangbuk-do Culture and Tourism Festival
โข Korean Vietnam Partnership - Fair with LG
โข Korean President visits Samsung Electronics R&D Center
โข Vietnam Food Expo with Lotte Wellfood
"๐๐ฏ๐๐ซ๐ฒ ๐๐ฏ๐๐ง๐ญ ๐ข๐ฌ ๐ ๐ฌ๐ญ๐จ๐ซ๐ฒ, ๐ ๐ฌ๐ฉ๐๐๐ข๐๐ฅ ๐ฃ๐จ๐ฎ๐ซ๐ง๐๐ฒ. ๐๐ ๐๐ฅ๐ฐ๐๐ฒ๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐ ๐ญ๐ก๐๐ญ ๐ฌ๐ก๐จ๐ซ๐ญ๐ฅ๐ฒ ๐ฒ๐จ๐ฎ ๐ฐ๐ข๐ฅ๐ฅ ๐๐ ๐ ๐ฉ๐๐ซ๐ญ ๐จ๐ ๐จ๐ฎ๐ซ ๐ฌ๐ญ๐จ๐ซ๐ข๐๐ฌ."
1. Pricing Models and Considerations in B2B and B2C SaaS
Dave Litwiller, Executive in Residence, Communitech
Seminar Given on Tuesday April 23, 2013 at the CommunitechHub, Kitchener, Ontario
Overview: Pricing models for B2B and B2C SaaS, including cost of capital considerations for early- and
growth-stage vendors, profit engines, and working capital models
Three Main Factors which Influence Pricing: Profit Pools, Cost Structure, and Industry Stage of
Development
- Profit pools
o Industry
๏ง Market share
At scale, the top two players typically command 65% of the revenue and
85% of the profit. Very different situation at a smaller size, and during the
formative years for the business. Need to define your market in such a way
as to be a clear #1 or #2.
Contemporary example, Q4/โ12 smart phone sales:1
1
http://www.slideshare.net/bge20/2013-04-mobile-overview
ยฉDavid J. Litwiller, 2013
2. Only about 9% of companies in a market sector will sustain outsized growth,
and return above their cost of capital long term
2
๏ง Market chain
In a market chain, there is typically a strong disproportion of where the
profitability lay and is moving, which confers where the pricing flexibility is
Example of the PC Industry:
2
http://www.smi.ethz.ch/education/courses/corporatestrategy/Slides_AS2011/Bain_How_to_keep_on_growing_h
andout.pdf
ยฉDavid J. Litwiller, 2013
3. 3
๏ง Lanchester dynamics โ Competitive Dynamics
To compete against a monopoly or duopoly head on with success requires
marketing muscle 3* the leader
To compete in a defined but less consolidated market requires marketing
muscle 1.7* the leader
Either of the above levels of spending are far out of reach for most start-ups
in SaaS and mobile apps
Therefore, almost all SaaS start-ups are working to redefine their market
with a new niche in which the insurgent can be a leader
Pricing thus needs to be strongly rooted in recasting and reinforcing a new
segmentation where leadership is attainable
o Best is if the market is redefined in a way, and pricing with it, where
the existing strengths of the leaders become liabilities through
inhibition or inability to compete in new ways
The basis of redefining the market always comes down to one of three
primary bases to drive new usage models or capabilities: better
performance, lower cost, or better customer experience
Examples of how pricing reinforces cognitive coherence
However, never lose sight of the overriding priority of fast execution speed
and rapid learning. Pricing is only a supporting tactic
3
http://data.ciqol.com/upload/pdf/2011-01/110113042450_933316.pdf
ยฉDavid J. Litwiller, 2013
4. ๏ง Industry Stage of Development
Smile Curve, Stan Shih
4
Internal Pricing Factors
- Customer base
๏ง Whale Curve, Kaplan
Activity based costing
Most profitable 20% of customers typically generate between 150% and
300% of total profits
Middle 70% breakeven
Least profitable 10% of customers can cost the vendor 50% to 200%
Graphically:
4
http://www.google.ca/imgres?imgurl=http://linuxpundit.files.wordpress.com/2010/05/smile-
curve1.jpg&imgrefurl=http://linuxpundit.wordpress.com/2010/05/26/will-android-drive-mobile-
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ยฉDavid J. Litwiller, 2013
5. 5
Inferences:
o Segmentation, know the real operating cost of servicing customers
at the tail end, and know what the game plan is to move them up to
greater profitability through one form or another (premium) or
reduced service levels
o If youโre going after a proven market, figure out how to leave the
unprofitable customers with the incumbent vendors, and
disproportionately appeal to the most profitable segment
5
Time-driven Activity-based Costing: A Simpler and More Powerful Path to ...
By Robert Steven Kaplan, Steven R Anderson. Harvard Business Press, 2007
ยฉDavid J. Litwiller, 2013
6. - Cost-based
๏ง Pricing waterfall
๏ง Hard and soft costs
6
o Costs
o Direct vs indirect costs
o Warranty, repair, maintenance programming โ if too early to have predictive internal
metrics, rely on benchmarks
o Bad debt โ rely on benchmarks
o Be mindful of discounts and discounting authority, especially as the sales team and its
distance from the founders grows
- Cost of capital
o Equivalence example โ start with question
o Cost of capital at seed to series A is between 50% and 90%, meaning you need to provide an
annual return at that rate
๏ง Need roughly 6% of the up-front selling price as a monthly subscription for a two
year deal, 5% for a three year, and 4% for a four year
๏ง If you exchange an up-front payment for a monthly subscription at a lesser ratio,
you are substituting high cost capital (yours) for (generally) lower cost customer
capital
6
The Price Advantage, Baker et al., McKinsey
ยฉDavid J. Litwiller, 2013
7. o Source of Capital โ Financial model
๏ง Gross margin
๏ง Working capital
๏ง Investment capital
Pricing to Capture Value
Value - B2B โ Large ticket items
- Learn all the aspects of how your product creates value
- Structure early deals and instrument product to provide full business-level measures in the hands of
the end user for how value gets generated through lower costs and greater revenue in their context,
as well as the related purchasing and deployment issues they face
- Document significantly
- Aim to capture 50% of value add, be willing to settle for 30% of value add
o Further reference points:
๏ง Cost to (re)create (look back)
๏ง Future incremental income (look ahead)
๏ง Market benchmarks (look around)
- As pricing negotiations progress, prevent value justification from blending into pricing. If a customer
says he does not value something, if at all possible, take it off the table so that pricing is attached to
explicit value. Donโt let people have something for free, and if it needs to be thrown in, then get a
concession on something else.
- Alternatively: RoI B2C, B2B โ Two year payback for private enterprises for the product to be able to
substantially penetrate the mainstream, and 6 months to 9 months to get a really fast start. Longer
paybacks are the nearly exclusive domain of government and near-government projects. Moreover,
the relationship between payback and demand is non-linear.
ยฉDavid J. Litwiller, 2013
8. - On the question of further value and price increases, above the minimum, whatever the baseline
quantum of expenditure to get the targeted payback, larger increases in absolute cost have an
appreciable impact on adoption, and more so as the size of the investment doubles and beyond
ยฉDavid J. Litwiller, 2013
9. - One other thought: Whatever the business case says, the CFO is assuming the project will take 50%
longer and cost 50% more than the initially expected outcome. Empirically, the CFO is right.7
Value โ B2C
- For products used privately, with little or no social component, suggested reading: Inside Intuit
- For products used socially, or those with social signaling value, suggested reading: Spent, Geoffrey
Moore
- People are often much more influenced by anchoring, reference points, social proof and social
signaling than they are by more analytical factors
SaaS Financial Model Gearing
- SaaS: Know the CAC, churn, net CLTV (with impact of churn)
o Scale if CAC is paid back in gross margin from MRR in less than a year
o Lifetime:
๏ง 1-2 years for consumers
๏ง 3-4 years for SMEs, or for a 50K SLoC system (new or modified LoC)
๏ง 5-7 years for large enterprises, or for a 500K SLoC system
o If CAC is not paid back in a reasonable lifetime, the business is in slow motion suicide
- Services: 2* loaded labour cost (benefits, travel, vacation, overhead time)
SaaS โ To Freemium or not to Freemium, that is the question
- Distribution of SaaS w.r.t. Freemium
o About 40% of SaaS companies maintain a long-term freemium pricing model
o A much higher proportion of start-ups start out as freemum, but go on to realize that it
doesnโt work well for them.
- Implicit bet:
o B2C - That there are 1% to 2% of users in who are hypermotivated to pay vastly more than it
costs to deliver the service and embedded support to them.
o B2B โ 2% to 10%, in a few extreme cases as high as 20%
- A lot of orthodoxy about should one or shouldnโt one do freemium. There is no absolute right or
wrong. SaaS splits down the middle.
- Freemium has to be a paying customer acquisition strategy. It is not a business model
- Often, it is just wishful thinking: people use the product when it is free, but when you try to charge,
they resist or exit
7
http://www.zdnet.com/2013-erp-research-compelling-advice-for-the-cfo-7000011619/
ยฉDavid J. Litwiller, 2013
10. - Conditions to do Freemium:
o Very large market
o Incremental cost of service is very close to zero
o There is a compelling reason for users to refer others in to the service (drive up # of users)
o There is a clear segmentation of behaviour within the user base to drive an upgrade path to
paid tiers; engagement inexorably drives people toward conversion (add clients, add files or
pictures, then hit limits)
o The value of escalating to premium can be quickly and clearly explained
o There is sufficient funding to carry the business through substantial operating losses before
the onset of sufficient paying customers
o People need it free to be willing to give it a try in large numbers
o The system benefits greatly from network effects and big data inference possibilities
- Gold standard for engagement to know that freemium is appropriate: Cohort analysis which shows
that the proportion of users who upgrades increases with time, not dwindling after the first month
or two, and, users who abandon the service miss it so much that they come back after time away8
- Guideline: If there is any premium segment willing to pay at all, there are at least two more ultra-
premium segments willing to pay double and an order of magnitude more
o Heuristic: Extending the premium ladder from a single rung by one or two further rungs can
double ARPU
o To avoid irritating loyal current customers, consider grandfathering them for price increases
- Two flavours:
o Directly paid
o Indirect: access the user base (ads, subscriptions)
- Heuristic: It takes 2* more start-up capital to fund incubation of a freemium business vs. one that is
not, since extensive investment in integration and onboarding (fabulous early user experience),
delayed onset of revenue from premium tiers (often as much as two years for full premium upsell to
occur), underlying economies of scale, and network effects/big data
- Overall: Be flexible when offering freemium and sensitive to whether the predictive analytics are
really favourable. Some of the best moves start-ups have made have been to abandon freemium to
either ad-supported or paid base tier SaaS.
Elasticity
- Price Elasticity, a.k.a. price-resistance or price-volume
-
- Maximum ratios as a starting point
o B2B, -1.8
o B2C, -2.5 (discretionary)
- Typical is about one half those levels
8
http://discussion.evernote.com/topic/22864-would-go-premium-if-these-features-were-offered/
ยฉDavid J. Litwiller, 2013
11. - Depends to a large extent on the size of the purchase and the extent of related purchase and
deployment obligations
- Track over time
- Early days issue: If in trouble getting sales in and youโre wondering if pricing is the issue: call up five
leading prospects and ask them if theyโd deploy immediately if you dropped the price to zero. More
often than not, price is not the issue.
Pricing Strategies
- Demand-based:
o Maximize exposure/penetration
o Skim
- Competition-based:
o Conform for recognizability, or establish price leadership, or establish premium
- Cost-based:
o Mark-up based
- Differentiate, often based on simplicity or fast configurability
- Time-based:
o Opportunities for intentionally rapid time variability of pricing, to stimulate loss aversion
behaviours such as panic buying or even hording
o Caution: getting customers used to waiting until ends of financial reporting periods, since
they know that salespeople are anxious to make quotas and can extract large concessions
on pricing and terms
- To Have a Bit of Fun: Temporarily withhold cost information from your marketing department, and
ask them to establish what the selling price should be
- Pricing should be subject to A/B testing and rapid iteration, especially in the early days, just like any
other significant aspect of competitive differentiation and durability
Two Sided Markets
- Know which side is the product (virality, network effects, big data, and supply or demand), and
which is the payer
- Provide the subsidy to the more price sensitive or quality/convenience side of the marketplace
- Processing fees generally range from 2% to 10%, with the higher end of the range belonging to
systems which get at previously landlocked supply
- Considerably lower pricing prevails in financial instrument exchanges
- Focus initially on a landmark deal, even if it is in a narrow niche (ex: Square-Starbucks); and
relatedly, donโt alienate marquee providers
- Make sure the marginal cost of delivery is very low (no FreePC)
ยฉDavid J. Litwiller, 2013
12. - Network effects are acutely strong in two sided markets: market shares of the top players tend
toward 90%, 9% and 0.9%, vs. the weaker network effect norm of 40%, 25%, 15%
- Discount for high volume players in the market, because they provide the liquidity, social proof and
draw players in
- Generally, charge low for basic listing, in order to maximize visible supply or demand. Charge more
for completing a transaction or for premium services
- Advice: http://www.forbes.com/sites/ciocentral/2013/02/07/5-tips-for-building-a-two-sided-online-
marketplace/
- http://pandodaily.com/2012/11/20/liquidity-hacking-how-to-build-a-two-sided-marketplace/
- Ebay: 4% to 10%9, AirBnB 10%, Amazon 12%, oDesk 10%
- Other: Adobe, Q: what about PayPal?
Pioneer Customer Pricing
- Establish terms and framework for others to follow
- Fast start
- Target entity significant enough to influence others favourably in the competitive landscape
- Design influence
- Rapid, iterative deployment
- Mutual disclosure of issues and opportunities, organizational access
- Rights of publication and publicity
- Generally: Steep discounts on up-front pricing (perpetual license, professional services) , but retain a
resemblance to armโs length pricing for running fees (annual maintenance, subscription)
- Most favoured nation clauses: Exclude pioneer customer pricing
OEM
- Discounts, service, delayed onset of cash flow, but, recurring and sizeable follow-on volume
- Practical limits in software in most cases:
9
http://business.financialpost.com/2013/03/19/ebay-to-overhaul-fees-in-bid-to-lure-merchants-from-amazon/
ยฉDavid J. Litwiller, 2013
13. o 25% of EBIT or 5% of revenue
- Going higher usually requires more significant sharing of risk than a straightforward transactional
supplier-customer relationship
- In embedded systems and consumer electronics, rates are generally lower, and sometimes much
lower (0.1% to 1% of revenue)
- For technologies which are not yet commercially proven, discounts of half or more are common vs.
the benchmarks above because of the risk transfer to the OEM
- For an exhaustive list of factors to consider when contemplating OEM pricing, there is a landmark IP-
valuation case in the US, Georgia-Pacific, which gives a comprehensive list of factors to consider
Conjoint and Cohort Analysis
- Over time, analyze pricing by time period, by features/options selected, and by discount w.r.t
volume
- Conjoint analysis assists in identifying features for which pricing can be raised, as well as ones for
which customers are not willing to pay in sufficient amounts
- Time and volume discount analyses show which segments, territories and applications are being
priced with better yield, and where there is likely leakage
Revenue Recognition
- Invoicing and collecting money is one thing, being able to claim it as revenue is another
- Accounting rules are complex, particularly for software with embedded service, or for multi-part
delivery
Human Biases and Motivations in Pricing
- Be cautious about pricing for free, even if you discount to free โ people see more value in things
when there is a nominal price
- People are more motivated by getting something additional for โfreeโ than discounting on the base
item for an equivalent total exchange
ยฉDavid J. Litwiller, 2013
14. - Double or compounding discounts drive greater purchase behaviour than a single large discount
- Always have a higher price option than the target option. This makes the target seem more
economical and sensible, even if the high price option is a positioning, PR or otherwise outlandish
suggestion
- Generally want to frame the target option with a higher and lower offering โ the magnetic middle
- Never price based on future considerations, rather than current payments or commitment to
payment. Over time, there is a strong predisposition that the giver and the getter will come to see
the value diverge over time, making it harder to reach subsequent agreement.
- Premium pricing needs to be matched with discussion about uses of the additional margin: future
roadmap, brand building
Price Negotiating Suggestions โ Large Ticket Items, especially in B2B SaaS
- Be ready for a buyer of a large item to squeeze you on price several times. The squeezing will only
stop when concessions get scarce. Plan your concessions at the outset of negotiations.
- Negotiate with a preference toward concessions on professional service hours which will give you
insight and usage impact knowledge, rather than discounting the core product
- Counter profit objections with the need to build a strong support organization as well as future
roadmap
- Triangulate with at least five people in the customer organization to know if you are likely winning
or losing a major deal, as well as to increase the likelihood of understanding all leverage points for
value and pricing strength
- If you are responding to a RFI/RFP and you were not engaged early with the decision makers in the
purchasing organization to shape the elements and form of the RFI/RFP, you have a very low
likelihood of winning the deal, and a price negotiation is likely proxy for being column fodder
Auction Pricing Models
- English Auction
o Raise prices as the auction proceeds
ยฉDavid J. Litwiller, 2013
15. o Taps into human bias for social proof, loss aversion, consistency bias, low starting point
draws in more bidders and energy, all which fuels competition
o Best for one seller, many buyers
- Dutch Auction
o Lower prices as the auction proceeds,
o works for one seller many buyers, as well as many sellers, one buyer โ
o If buyer traffic is constrained, social proof behaviours are much weaker, and starting high
typically works best
- Sealed Bid Auction, forces people to guess without benefit of knowing what others are bidding โ
best in situations of extremely wide and subjective price variability
A Few General Thoughts to Close the Talk
- Asymmetry of resistance to price movement over time: Easier to lower than raise prices
- Simplicity: closer to consumer, the simpler pricing should be, and similarly in single person decision
business purchases; however, in large enterprises and committee-based purchasing, there are
situations still where one intentionally wants complex pricing or tiered pricing in order to find the
optimal mix of features to capture full value and still strike a deal
- Entitlement pricing, purchasing agents โ never let people see a lower price on a price list or online
than what you want them to pay, since the lowest written price often forms the entitlement price
from which purchasing agent bonuses paid for achieving further discounts are calculated
- Youโll never know what people want to pay until you ask them for money. Hypothetical discussions
with users and surveys have comparatively little predictive value when it comes to pricing and
willingness to pay
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ยฉDavid J. Litwiller, 2013