Rich Mironov gave a talk at MIT’s Sloan School of Management on “Strategic Pricing for Start-ups, New Products and Innovations.” This was for Sloan/MIT students and community members only, hosted by the MoMIT, MIT Mobile Media and Internet Technology Club. What: “Strategic Pricing for Start-ups, New Products and Innovations” When: Feb 25th, 2009 Where: Sloan School/MIT, 50 Memorial Drive, Cambridge, MA The talk was on basics of pricing strategy for start-ups and companies with truly new offerings – that don’t have existing competitors or market assumptions about prices, pricing units, or business models. It includes a real-life case study from a successful (IPO) start-up where Rich led product management/product marketing/pricing. PDF of slides
During a miserable week of domestic air travel during June, I noticed new fees suddenly appearing for checked baggage and in-flight soft drinks. That caused an announcement about a new airline to catch my eye – an airline offering a radically different approach to pricing. It re-raised a topic that we explore with many clients: shifting the basis of competition by changing pricing units. On June 6th, 2008, a new airline called Derrie-Air started advertising fares based on total passenger weight, with the slogan “Pack Less. Weigh Less. Pay Less.” A flight from Philadelphia to Los Angeles was priced at $2.25 per pound – with each passenger paying based on body weight plus luggage. Thus a supermodel carrying only a…
This article captured an April 2007 talk I did at SVPMA. The original slide deck is here. I’m talking with more and more with companies considering a shift from traditional licensing models to hosted software-as-a-service (SaaS). It’s important to recognize the radical changes such a move may force within your entire company. This column serves up a metaphor for the mental and organizational adjustments needed to move from a “product” model to a service business.
Much of my consulting lately involves on-demand services (aka software-as-a-service, or “SaaS”). I’m seeing ever-growing interest from business customers in subscription pricing and online services, especially since they pay much less “up front” versus software licensing. This necessarily slows down early revenue to the vendor and intensifies the need to upsell your installed base.
Price lists are never quite current enough, sufficiently detailed, or cover enough of the awkward special situations that customers raise. So, there’s a tendency for HQ product and pricing folks to do a lot of tinkering on the margins with their price lists. We may be forgetting the “consumers” of price lists, though: sales reps who pay our salaries and customers wondering what to buy. Complicated pricing models may be self-defeating.
Established companies in established markets generally have some standard ways to package and price their new offerings. Product extensions are benchmarked against the existing product line or the other guy’s features and prices. This leaves product managers focusing on “faster, cheaper, better, more.” In a brand-new market, though, there are fewer guideposts. Close competitors may not exist. Even before final products are ready, you need to define initial packaging and pricing for your fledgling sales force and prospects. Otherwise, the sales team will invent it haphazardly, one visit at a time. Here’s a starter approach that I’ve called “Goldilocks” packaging.