Monetizing Subscription Services
welcomemeet today’s panel
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Mac KernVP Commercial
PlanningSurfAir
@mackenziekern
Kyle ChristensenVP Marketing
Invoca@kylechristense
n
Monika Saha
VP MarketingZuora
@monikasaha
Madhavan Ramanujam
Partner & Board Member
Simon-Kucher Partners
3 principles to follow when designing pricing (5 mins)Challenges, Observations and Suggestions (30 mins)
o Monika Saha (10 mins)o Kyle Christensen (10 mins)o Mac Kern (10 mins)
Advice, Commentary, Questions (15 mins)
o Madhavan Ramanujam
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing levers
Challenges, Observations, Suggestions
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: keeping up with a continuous innovation cycle
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The new release debatePricing/Packaging decisions have to be made at a faster, more frequent pace
observation: the pitfallsof not managing pricing against this cycle
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Overloaded add-ons
Eroded price-value differentiation
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suggestion: create a new release alignment framework
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PRIMARY PRICING GOALCapability
nameCompetitive
playReduce
sales frictionGenerate new ACV
Generate upsell ACV
Edition differentiatio
nCapability name 1 + + + +Capability name 2 + + + +Capability name 3 - + + +Capability name 4 - - + +
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: breadth of footprint and diversity of buyers
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Over time, your product will evolve You will grow your product footprint and you might serve a new set of different buyers and markets
observation: a single pricing lever is idealbut not every product innovation will map to this lever
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Leave money on the table
Buyers will have a hard time aligning price to value delivered
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suggestion: one lever/variable per persona
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# Of Sales Quote Users$100M
$10M $1
M
CFO : Transactions processed
VP Sales : Users Creating Sales Quotes
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: too much emphasis on maximizing the first transaction
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Your goal should be to maximize lifetime valuePackaging should take into account what a customers needs are at the beginning of their journey, and how those needs might grow and change as they adopt and use more of your product
observation: the lack of logical “tipping points” will hampers upsell growth
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High adoption, but zero/no upsell revenue
New innovation, but zero/no add-on revenue
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suggestion: design a growth journey that feels natural and logical
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Base Product
Capability driven add-on
Adoption driven upsell
A higher level
package
Pay for increasing
level of value
delivered
Base Product
Capability driven add-on
Adoption driven upsell
OR
Kyle ChristensenVP Marketing
Invoca@kylechristense
n
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge:
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observation: Your company is naturally inclined towards increasing pricing complexity.
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Product/Engineering:
“We spent 6 months on this, how are we going to make money on it?”
Sales:
“We need more stuff to sell!”
suggestion:
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Customer’s Value
Customer Usage
HIGH
LOW
HIGHLOW
Include in EditionPackage as Option
Table StakesDon’t Build this Stuff
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: How do you decide?
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Calls vs. Minutes vs. Numbers
observation: it’s easy to fall back on “cost plus” pricing
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“Anonymous Competitor”
suggestion: always align to value.
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Example: Phone Numbers
suggestion: always align to value.
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Example: Minutes 90% < 10 min
suggestion: always align to value.
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MinutesNumbers
Calls
suggestion: consider different buyer types
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Seats
MinutesNumbers
Calls
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge:
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How do we drive 1/3rd of bookings from existing customers?
observation: not every customer cohort grows in the same way.
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COHORT A: Call Volume COHORT B: Call Volume
suggestion: Identify multiple paths to growth
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CALL VOLUME
EDITION UPGRADES
ADD-ON OPTIONS
Mac KernVP Commercial
PlanningSurfAir
@mackenziekern
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: appeal to a wider target audience
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The pressure to diversifyWe all want to keep products simple and easy to convey to consumers. But what if your original product offering doesn’t fit the growing and increasingly varied target market your company is trying to address?
observation: product diversification can lead to a loss of focus and abandonment of core principles
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Too many products confuse the value proposition
Loss of understanding of core target market
Core product and pricing principles are neglected
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suggestion: understand the new target audience and address them while keeping core principles intact
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Know what makes you great, then expandBefore introducing new products or uprooting an existing pricing model, understand what is working well and identify ways to address a new audience by iterating off that solid foundation.
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: defining value for the consumer
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Pricing that doesn’t confuse the value propositionProducts and services often offer multiple benefits, but creating pricing pathways for each can be overwhelming for the consumer and difficult for a sales team to explain.
observation: primary mistakes in pricing variable selection
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Too many pricing variables
Focus on the wrong pricing variable
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suggestion: identify the primary relationship between value and price
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Directly relate consumer experience and pricing variablesPlace a high level of importance on understanding how consumers understand and utilize product. When pricing variables are directly related to the consumer experience, portraying value becomes much simpler and more effective.
3 principlesto follow when designing your pricing
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01
Keep things simple and intuitive
03
Create a “growth journey”
02
Single vs multiple pricing variables
challenge: creating a pathway to long-term membership
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Interested lead to loyal subscriberSubscriptions, more than one-time transactions, require a greater level of initial commitment from the consumer. How can product and pricing tactics encourage a prospective customer to become a life-long subscriber?
observation: weak product and pricing focused on subscriber acquisition and retention have consequences
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Slow subscriber growth
Increased dissatisfaction and subscriber churn
Limited continued engagement and upsell interest
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suggestion: offer unique introductory experiences with options for future growth
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Product and pricing builds a lasting subscriber relationship Create opportunities to introduce brand and service value, then provide enhancements once a subscriber is stablished.
Madhavan Ramanujam
Partner & Board Member
Simon-Kucher Partners
madhavan ramanujamPartner and board member @ simon-kucher partners
Advice, Commentary, Suggestions
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https://www.zuora.com/academy/
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