When it comes to pricing, start-ups and scale-ups face a wild ride. Enterprise pricing tactics flop, complexity turns into a maze, and making decisions without solid data is like playing pin-the-tail on the donkey (spoiler: your data does hold the answers). To demystify this topic, Isabelle and Ruben from the world's leading pricing and growth specialist Simon-Kucher hosted an inspiring session on pricing for our portfolio company blackbear and the No Such Ventures team.
From a VC's point of view, we often see mind-boggling pricing models and over-the-top customizations that mess with forecasting. On the flip side, we've got plain-vanilla packages that leave scale-ups cash-strapped. In today's cutthroat market, pricing can make or break your growth. So, how do you find the secret sauce to the right pricing strategy?
Tip 1) Segmentation: unleash your inner Sherlock Holmes
Most scale-ups try their hand at segmentation, but they usually stop at basic demographics. Time to level up! Dive into usage patterns and customer needs to create customer segments. Your trusty tool or platform often already holds the key to usage data (that’s gold!), so you can figure out which features float their boat and which are only used by a handful of customers. If data isn’t sufficient, engage in conversations. Not only with customers but also with leads that didn’t convert for pricing reasons. Understanding their different needs is crucial in creating sensible tiered packages.
Tip 2) Packaging: Mix & match those features
Before diving into the pricing itself, your packages need a makeover. Keep it simple, yet dazzling. Start by offering a wide spectrum of features to learn from your customers and figure out what they dig the most. Then, get fancy with your packaging. Try the "good/better/best" approach for a gradual unveiling of features. Or go all-out with functional packages tailored to different needs (like LinkedIn does for different use cases). Let customers choose and don’t forget to ask for feedback.
Tip 3) The role of features and services: Leaders, Fillers, and Killers
Features and services play different roles in your pricing strategy. Identify the “leaders” (high adoption and high value) that are the backbone of your business. “Fillers” are the crowd-pleasers that customers crave but don't carry much weight on their own. Don't forget the “killers”, though. These features aren't essential for most customers, so don't go shouting about them. Customers often do not want to pay for those. It's all about striking a balance between leaders, fillers, and killers and daring to make some features add-ons to create an upsell strategy and maximize monetization potential.
Tip 4) Pricing: Hunting for the golden goose
Setting prices is like going on a treasure hunt. You gotta consider all the angles. Look inside your business and crunch the numbers: costs, margins, and revenue goals. Then venture outside and peek at what your rivals are up to. Pro tip: let data be your guide. Dig into market insights and discover the true value your customers crave by talking to them (also to your long-standing customers and biggest fans!). It's not just about the euro signs; it's about finding that sweet spot where customers happily (further) open their wallets.
Tip 5) Future Growth: Dance with the winds of change
To thrive in the long run, you got to adapt to the ever-changing market landscape. When you introduce new packages or revamp existing ones, show off how your product has evolved over time. And your long-standing customers deserve some extra love! Each package should have a unique value proposition that caters to different customer cravings. Stay nimble, gather feedback, and track usage patterns to keep refining your offerings time and time again.
Crafting killer packaging and nailing the right pricing strategy is like a magic potion for growth. Go beyond basic demographics, re-evaluate your packages, use your wealth of data, become creative, define leaders, fillers, and killers and continuously adapt to change. By embracing these power-ups, you'll be unstoppable, building lasting customer relationships and setting your business on a rocket ship to success! About Simon-Kucher: Simon-Kucher is a global consultancy firm with over 2,000 employees in 30+ countries focused on unlocking better growth that drives measurable revenue and profit for our clients. With over 37 years of experience in monetization topics of all kinds – we are regarded as the world’s leading pricing and growth specialist. Our sole focus is on unlocking better growth for our clients, and increasing their long-term sales, value, and profit. We achieve this by optimizing every lever of their commercial strategy – product, price, innovation, marketing, and sales. All information and insights were provided by Simon-Kucher. This blog post is an interpretation by No Such Ventures. Interested to learn more about what Simon-Kucher can do for you? Please contact firstname.lastname@example.org or visit https://www.simon-kucher.com/en
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