Josh Bloom Partner Simon-Kucher - Flexera Software · 2016-11-15 · Simon-Kucher and Partners...

1

Josh Bloom

Partner

Simon-Kucher

www.simon-kucher.com

Simon-Kucher and Partners

Licensing Model Transitions

2016

Silicon Valley Office

100 View Street

Mountain View, CA 94041

Cell: (650) 691 3315

[email protected]

World leader in giving

advice to companies on how

to price their products

Pricing strategy

specialists

The world’s leading

pricing consultancy

In pricing you offer

something nobody else

does

Simon-Kucher & Partners at a glance

BusinessWeek The Economist

Professor Peter DruckerThe Wall Street Journal

1 Simon-Kucher & Partners

2 Boston Consulting Group

3 McKinsey & Company

AmsterdamBonn

BrusselsCologne

CopenhagenFrankfurtIstanbulLondon

Luxembourg

Madrid MilanMunichParisWarsawViennaZurich

TorontoBoston New York

San Francisco

São Paulo

Santiago de Chile

Dubai

Beijing

Tokyo

Singapore

Sydney

30 offices worldwide, >1,000 employees

>$250m in revenue

Strategy

> 500

Sales

> 500

Marketing

> 500

Pricing

> 1,500

Growth and competitive

strategies

Product portfolio

(re-)design

Pricing excellence

Customer relationship and

customer value management

Sales strategies and sales

channel optimization

World leader in pricing

Global presence >3,000 projects in the last 2 years

Best consultancies in marketing and sales

manager magazine

Source: Simon-Kucher

3

AtlantaMountain View

Simon-Kucher Global Pricing Study of >2k companies

report increasing price pressure83%

are in price war58%

Price increase achievement -lowest number ever measured37%

Source: Simon Kucher Global Pricing Study 2016; >2k companies across the world; 39% C-level executives

4

Global Pricing Study; >2k companies worldwide; 39% C-level executives

Source: Simon-Kucher & Partners

How do companies seek to achieve Pricing Power?

Top 5 options to escape oppressive market conditions*

12%

16%

19%

20%

26%

Share of respondents*

Introducing new, innovative, or differentiated

Changing the revenue model and the way

price and value

Strengthening sales & marketing functions

creation & communication

Reducing our variable or fixed costs

Changing mindset and confidence in our

higher prices

5

Questions for the audience

Now have many have actually

gone through with it?

How many of you work in a

company that has recently

considered changing their price

model on at least one product or

service?

6

Global Pricing Survey:

2/3 of the companies working on new price models

29%

37%

12%

22%

Do you think about

changing your price model

because of pricing pressure?

Yes –

actively

planned

Yes –

vague

initiative

No –

never

thought

about it

No –

thought

about it but

declined

7

To drive recurring revenue, your goals are to:

Awareness

Traffic / Leads

Conversion

Win-back

Advocacy

Acquire

more customers

Price

ARPU

Monetise

your customers

Lifetime

Churn

Loyalty

Retain

your customers

Revenue growth

Simon-Kucher & Partners_Monetisation strategies for subscription businesses 8

Awareness

Traffic / Leads

Conversion

Win-back

Advocacy

more customers

Price

ARPU

your customers

Lifetime

Churn

Loyalty

your customers

Revenue growth

The challenge: how can you acquire, monetize

and retain, all at once?

Acquire Monetise Retain

RetainMonetise

Acquire

The

recurring

revenue

trade-off

PackagingPrice

model

Price level

Low

commitment

High

commitment

More value

for less

More value

for more

Increase prices Hold prices



Differentiation = The only way to beat the trade-off

triangle

Price

‘One-size-fits-all’ offer Differentiated offer

Customers not

reached yet!

Willingness-

to-pay not exploited!

Price

Super eco

Super premium

Eco

Standard

Premium

You can have

differentiated:

Packaging

Price models

Price levels

One-size fits all pricing & packaging for subscription businesses is a losing strategy

Good pricing & packaging almost always involve multiple offerings to unlock both revenue & volume

Volume Volume


So concretely, what does differentiated pricing

and packaging look like?

Differentiated

packaging to drive

acquisition and

monetization

Differentiated price

models to drive

acquisition and

retention

Differentiated prices

levels to drive

monetization and

retention

1

2

3

RetainMonetise

Acquire

The

subscription

trade-off

triangle

PackagingPrice

model

Price level

Low

commitment

High

commitment

More value

for less

More value

for more


12

3



Packaging is a spectrum of flexibility, with the most

common permutations listed here

Degree of customer flexibility

All-you-

can-eat

Functional

Packages

Good/

Better/

Best

Platform +

Functional

Packages

Build-your-own

Least flexible,

but simple

Most flexible,

but complex

Base Platform

Simon-Kucher_Ellucian_Phase 1_Strategy Design Workshop 12

1


Packaging is a spectrum of flexibility, with the most

common permutations listed here

Degree of customer flexibility

All-you-

can-eat

Functional

Packages

Good/

Better/

Best

Platform +

Functional

Packages

Build-your-own

Least flexible,

but simple

Most flexible,

but complex

Simon-Kucher_Ellucian_Phase 1_Strategy Design Workshop 13

1

Ben

efi

ts

Simplicity

Drives

engagement

Relatively simple

Avoid cherry-

features

Forces tradeoffs on

price

Offerings can grow

customer needs

Combines clarity of

decision makers

hooks for cross-

purchasing

Maximizes choice

Self selection by

& WTP

Wh

en

it

wo

rks

Want to drive widespread engagement & on maximum simplicity

Separate decision Vendor strength

multiple functional

Leader in both depth of

Realistic to using products &

Separate decision Significant cross-

workflows decision

Customers have ranging needs and maximum flexibility

Customers can informed decisions on needs/WTP

Part 2: price model

Differentiated

packaging to drive

acquisition and

monetization


models to drive

acquisition and

retention


levels to drive

monetization and

retention

1

2

3

RetainMonetise

Acquire

The

subscription

trade-off

triangle

Price level

Low

commitment

High

commitment

More value

for less

More value

for more


3

2

PackagingPrice

model

12



There are a range of structures that can be

applied set recurring fees

Fixed Variable

Price

Usage

Flat rate (for year)

Price

Time

Adaptive flat

rate (for successive years)

Price

Usage

Hockey Stick

(Package plus pay/use)

Price

Usage

Two

dimensional

Price

Usage

Pay as you

go

Price

Usage

Package plus

capped pay /

usePrice

Usage

Capped

PAYG

Price

Usage

Regressive

Common when on-

boarding required

Common with Big Data

applications

FinancialForce_Project Summary & Documentation.pptx 15

More common in B2CMost common in ELA

settings

Used in long-term

contracts Risk-sharing models

2

Source: SImon-Kucher

In the software world, deployment models add on

additional stepping-stone variable for recurring spend

Traditional

on-prem

maintenance

On-prem

vendor-

managed

Hosted on

public cloud

Hosted by

vendor

(multi-tenant)

Hosted by

vendor

(single

tenant)

“You have full

control over your

environment, we

are available for

support as

needed”

“You own

equipment, we

manage

software”

“We will

manage your

deployment on

AWS/Azure/Goo

gle Cloud”

“Certainty of

dealing with one

throat to choke

for reliability”

“We manage

everything,

including

custom

modifications”

Potential

permutations:

Tiers of support

availability/SLAs

Potential

permutations:

Remote or

Badged on-site

Part 3: price level

Differentiated

packaging to drive

acquisition and

monetization


models to drive

acquisition and

retention


levels to drive

monetization and

retention

1

2

3

RetainMonetise

Acquire

The

subscription

trade-off

triangle

Price level

Low

commitment

High

commitment

More value

for less

More value

for more


3

3

PackagingPrice

model

12


Source: Brad Feld

If we assume the healthy SaaS “Rule of 40%”* is split evenly between profit & growth (20%/20%)…

Why “price increase” is an important topic

for subscription businesses

Achieved with

increasing

prices by…

Achieved with

increasing sales

volumes by…

20% profit increase:

3

Price increases on the existing customer base are a far more powerful profit driver than

acquisition


Source: Source: http://www.socialmediatoday.com/content/80-twitter-accounts-inactive-core-users-more-committed, SaaS customer engagement benchmark study by Totango, statisticbrain.com, Digital media strategy eye

article “”Groupon looks to tap 11m inactive subscribers”., http://www.billboard.com/biz/articles/news/digital-and-mobile/1554924/business-matters-spotify-deezer-inactive-accounts-are

But you want to be careful not to prompt churn3

Let sleeping dogs lie

Some customers are more

at risk than others


http://www.socialmediatoday.com/content/80-twitter-accounts-inactive-core-users-more-committed

http://www.billboard.com/biz/articles/news/digital-and-mobile/1554924/business-matters-spotify-deezer-inactive-accounts-are

Price increase approach: From flat price increases

across the board to targeted price changes 3

Price increase: Target setting

External Client Communication

Target

increase

Arguments

Content Usage

growthSupport

Customer A +10%

Customer B +20%

Price increase rationale (long list)

6080

5% 5% 5% 5%

Customer's current priceUpsell driver 1Upsell driver 2Upsell driver 3…Calculated target price

Truly targeted price increases involve:

Identifying WHO should receive an increase based on willingness to pay / customer risk

Setting different levels of price increases for every customer / segment

Make use of various media channels and arguments for communication to target groups

Project Example


Summary: moving towards more differentiated

pricing & packaging for subscription businesses

The

approach

Packaging

Transition from point

products to packaged

offerings

(e.g. good-better-best,

functional, role-based or

other packages)

Price model

Consider introducing more

“risk share models” along-

side flat fees

(e.g. usage based

component)

Price level

Upgrade from flat price

increases across the

board to targeted price

changes

1 2 3


So is revenue growth for subscription businesses easy?

No!

RetainMonetise

Acquire

The

subscription

trade-off

triangle

PackagingPrice

model

Price level

Low

commitment

High

commitment

More value

for less

More value

for more



www.simon-kucher.com

London office

1 Plough Place

London EC4A 1DE, UK

Tel. +44 20 7832 6700

Thank you

Josh Bloom Partner Simon-Kucher - Flexera Software · 2016-11-15 · Simon-Kucher and Partners...

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Transcript of Josh Bloom Partner Simon-Kucher - Flexera Software · 2016-11-15 · Simon-Kucher and Partners...