How will you price your startup's product? Is pricing an art or a science? Business and revenue models. Triangulating pricing, A/B Testing, and Promotions

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DKParker, LLC
2018
WTIA Pricing Workshop
Dave Parker
@DaveParkerSEA
www.dkparker.com/blog
Dave@dkparker.com

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DKParker, LLC
2018
Overview
¤ Pricing is Art and Science
¤ Business & Revenue Model Framework
¤ Mechanics
¤ Triangulation
¤ Your Hypothesis
¤ A/B Testing & Promotions

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DKParker, LLC
2018
Art and Science
¤ Pricing is an informed decision based on data and
proven revenue models
¤ A hypothesis backed by testing – at launch and while
you grow

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DKParker, LLC
2018
Business Model Breakdown
Creating Value
Product or Service
Delivering
Value
Monetization,
Marketing &
Sales
Capturing
Value
Reasonable to
Acceptable
Profit Margin

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DKParker, LLC
2018
Ultimately pricing needs to cover
¤ Cost of Customer Acquisition
¤ Cost of Delivering
¤ Margin (Profits and Returns)
¤ Lifetime Value (LTV) is calculated at 12 or actual
¤ Pricing is not an afterthought
¤ 10, 100, 1000 customers

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DKParker, LLC
2018
16 Revenue Models – Pick ONE
1. Fee for Service
2. Commerce
3. Subscription
4. Productize a Service
5. Transaction Fee/Rental
6. Lead Generation
7. Gaming
8. Marketplace
9. Advertising/Search
10. New Media
11. Combinations
12. Coins Tokens
13. Multi-sided Marketplaces
14. Big Data
15. Panels
16. Licensing

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DKParker, LLC
2018
Revenue Models
¤ Full post here
¤ What you need to know
¤ Mark up
¤ Commerce, services,
¤ Subscriptions
¤ MRR, ARR
¤ Transaction Fees
¤ Rental, marketplace

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DKParker, LLC
2018
Sales Models
¤ Web Direct/Inbound – based on ability to drive traffic
and convert leads – must be known key words
¤ Self Service – MOZ
¤ Rep required – Hub Spot
¤ = lower price point
¤ Outbound selling – no traffic to purchase
¤ List acquisition
¤ Outbound sales
¤ = higher pricepoint

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DKParker, LLC
2018
Pricing Mechanics

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DKParker, LLC
2018
Cost Based
¤ Pay Rate
¤ Bill Rate
¤ Gross Margin

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2018
Value Based
¤ What the market will bear

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DKParker, LLC
2018
Value Based
¤ Range
¤ Product maturity
¤ Jobs to be done framework

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2018
Competitive Analysis
¤ Use the Wayback Machine – Internet Archive
¤ Know the Market
¤ Price changes over time
¤ Service/Product Offerings
¤ Terms – duration, contract length

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DKParker, LLC
2018
A/B Testing
¤ Have a hypothesis – what will you test?
¤ Hide current pricing on site
¤ Traffic to landing pages
¤ Unbounce or other
¤ Squeeze Page – only CTA is buy

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DKParker, LLC
2018
Promotions
¤ Freemium
¤ Time based
¤ Early Adopter based
¤ Percentage Discount
¤ Grandfather early users

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DKParker, LLC
2018
Common Errors
¤ Setting your pricing too low
¤ Freemium is a marketing method, not a price
¤ Too Opaque of a price will frustrate customers
¤ “Knowing the answer” vs testing
¤ Positioning as “me too” – just like my competitors but less
¤ Same price for all customers
¤ Free for Life!

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DKParker, LLC
2018
Where to start?
¤ Pick a model
¤ Do the competitive analysis
¤ Build a pricing hypothesis
¤ A/B Test
¤ Three tiers – max!
¤ Price high – promo code for discounts

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DKParker, LLC
2018
Questions?

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DKParker, LLC
2018
Resources
¤ Pricing Page Teardown – podcast and email
¤ Neil Patel – Pricing Strategies and examples
¤ Tomasz Tunguz – Redpoint Ventures
¤ Sequoia – pricing your product
¤ Startups.com -

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DKParker, LLC
2018

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DKParker, LLC
2018
dave@dkparker.com
www.dkparker.com
@DaveParkerSEA