Pricing Innovations: Value Innovation for Successful Monetization

(R) www.pricinginnovations.com
PRICING INNOVATIONS
Pricing Solutions | Monetization-as-a-Service
Value
Gap
Value
Stack
Value
Innovation
Value
Metrics
Monetization
as a Service

2
Today, more than 80% of the companies innovate and launch their new products using a “product-focused” innovation
process that fails to align the four key structures of a solution. Most new solutions fail to
• Solve for the gap in customer needs and expectations
• Capture different types of buyers’ willingness to pay
• Align their revenue structures with the benefits received by the different types of buyers
• Execute a market play with a competitive and profitable cost structure.
Product Cost Price Value Customer
Product-Focused Innovation

3
”Value-focused” innovation and
monetization process not only helps you
develop the products that people will
actually buy but also align your product,
offer, pricing, and cost structures with the
true dynamics of your buyers, users, and
market.
Go-to-Market
Test & Plan
Cost & Product
Structure
Value Metric
& Pricing
Value
Stack
Value
Gap
Analytics
& Metrics
Value-Focused Innovation

A gap exists between what customers need or
expect, and what they are likely to get.
Companies can gain additional pricing power
and increase the perceived value of their
offerings by systematically reducing their
customers’ value gap.
Value Gap

Successful
monetization
requires closing
the value gap.
Customers' willingness to pay increase as
their value gap shrinks. You can drive
adoption and market share by focusing
on just the features, attributes, and
offers that enhance your customers'
perceived value. In order for you to
unlock this kind of pricing power, you
must identify and quantify the value gap,
by conducting willingness-to-pay
research.

How are your customers
different from each other?
What’s your accessible
business opportunity?
Can you solve for the gap,
viably and profitably?
Who are your customers &
non-customers?
What do your
customers value?
For what will your customers
pay and not pay?
Value Gap Questions

Value Gap
When you’re working on your next
innovation, if you’re not building to
solve for your customer’s value gap,
don’t build at all.

Metrics,
Revenue &
Profit Analysis
Market Sizing
& Market
Mapping
Competitive
Research &
Analysis
Customer &
Non-Customer
Interviews
Pricing & WTP
Research
Value Gap Methods & Solutions
Market &
opportunity
size & market
maps
Competitive
features &
pricing
windows
User, customer,
& non-customer
personas
Willingness to
pay (WTP) of
customers &
value drivers
New biz
opportunity by
pricing &
monetization
What You Get(R) www.pricinginnovations.com

Value StackGreat, you’ve identified your customers’
value gap; you even quantified the
business opportunity to be created by the
different alternatives of solving for value
gap. But not all your customers are the
same; different customers have different
value stacks. Let’s look at that next.

Value Stack
We call the quantified perceived
value of a particular customer
type a value stack.

Value Stack
1.Identify different customers’ needs for which
they are actually willing to pay.
2.Measure the relative perceived value of each of
the attributes and determine what’s more
valuable and most valuable.
3.Quantify customers’ overall willingness to pay
for an offering that has their particular
attributes of value.

Segmenting by
value stacks is the
most scientific
method for
customer
segmentation.
Customers differ in their value stacks
more than how they differ in anything
else, such as demographics, industries
and sectors. You have alternative value
stacks for which you can develop your
product. You can better choose the
features and attributes you’ll develop
informed by how the value stacks of
different customers look like, what you
can price, and how you can take your
solution to market profitably.

You must align your offer structure with the value
stacks of your different customers.

What’s the good/better/best set
for each customer type?
What’s your customers’
overall WTP for each stack?
Which stack(s) can you address
viably and competitively?
Who is your customer? What are
their pains & gains?
Which customer type is
willing to pay & for what?
How do your customers buy &
use your offering differently?
Value Stack Questions

Pricing
Latent Class &
Cluster
Analysis
Market
Simulations
Adaptive
Conjoint
Analysis
Unaided & Aided
Product
Configuration
Value Stack Methods & Solutions
Value-based
segmentation
& value stacks
Pricing & purchase
probability
distribution
Quantified value
of each product
attribute
Segmented
product
configuration
Pricing structure
& pricing
windows
What You Get

Now that you know what your
customers actually need, what they are
willing to pay for, and the business
opportunity by serving each segment
let’s see if your innovation passes the
value innovation test.
Value Innovation

Value Innovation
We call the notion of innovating for the
gap ‘value innovation.’ The process for
creating value innovation is significantly
different than the process of product-
focused innovation. Value-focused
innovation is means developing products
which you can monetize.

Value-focused innovation begins with the
buyer and their willingness to pay, and
therefore it controls the limits of your cost
structure. Only after determining to what
cost structure to build, you can make the
feature and functionality trade-offs, decide
which features will provide value, and
prioritize just those features that align with
your customers’ willingness to acquire your
solution.
Go-to-Market
Test & Plan
Cost &
Product
Structure
Value Metric
& Pricing
Value
Stack
Value
Gap
& WTP
Analytics
& Metrics

Value-focused
innovation gets
you to MVB
before getting to
MVP.
While you have valuable products you
also must have a viable business. And you
simply cannot agile your way into
profitability. While agile can get you to
minimally viable product and beyond
very effectively, it doesn’t actually get
you to minimally viable business.

Value innovation
enables your
process to fail
faster and to not
fail at all.
Value-focused innovation process prevents
you from making technology the focus of
innovation. It replaces the internally driven
cost structure and informs your teams with
just the product choices that will help you to
meet your revenue, segment growth and
profit targets – before you write a single line
of code. Value-focused innovation takes you
from wishing to monetize to knowing that
you will monetize.

Value Innovation Questions
How will you manage customer acquisition,
monetization, & mobilization?
What’s the right pricing structure that
drives both adoption & profits?
Which offer structure is best aligned
with you revenue & profit goals?
What should you develop
next & for whom?
What are the pricing & monetization
metrics should you test & track?
What’s most competitive &
profitable product structure?

Value
Innovation Road
Map
Value Metrics
Analysis
Pricing Design
of
Experiments
Value Stack
Analysis
Value Gap Analysis
Value Innovation Methods & Solutions
Pricing &
monetization
metrics
Pricing
experiments &
analysis
Value-based
segmentation &
value stacks
Willingness to
pay & value
drivers
Minimally
viable
business plan

By now, you know what to build,
who will acquire it for how much,
and how you’ll price it. Finally,
let’s look at how you’ll monetize
your innovation.
Value Metrics

Value Metrics
The innovations that meet or exceed
their revenue targets are those that align
their pricing and monetization metrics
with the value metrics of their buyers. A
value metric can be defined as the
dimension along which your customers
benefit from your offering.

A monetization model that is aligned with your
customers’ value metric allows you to grow as your
customers’ businesses grow. Sometimes innovating
your monetization model with a new value metric can
be the source of innovation itself.
1. Customers who benefit more should pay more.
2. A good value metric benefits both you and the
customer.
The right value
metric drives
monetization
faster than
acquisition.

Five key steps of successful monetization:
1. ALIGN your offer structure with
your value stacks.
2. IDENTIFY the right value metric .
3. [RE]CONFIGURE your product.
4. BUILD in the caps, triggers, and fences.
5. HAVE a mobilization plan.
What’s the one
value metric that
would allow your
revenues to grow if
you acquired no
new customers?

Value Metric Questions
Which metric is the simplest to
communicate your value &
estimate your customers’ cost?
What are the norms &
purchasing units of your
particular space?
How do your different types
of customers benefit from
your offering differently?
Which pricing metric drives
your customer adoption &
profitability goals best?

Pricing
Implementation
Plan
Monetization &
Mobilization Plan
Scenario Testing
& Revenue
Modelling
Price vs.
Adoption
Modeling
Pricing Tiers, Caps,
Triggers, & Fences
Value Metric Methods & Solutions
Monetization &
mobilization
plan
Testing &
financial
modelling
Pricing options
& scenarios
Product
structure &
fencing
Pricing
implementation
plan

Monetization-as-a- Service
People, their needs, and markets
change; so should your pricing.

Tactical
Pricing
Promotional
Pricing
Follow
Technology
Outlook
Track
Competition
Monitor
Pricing
Monetization-as-a-Service
Promotional
strategy &
tactics
Future feature
roadmap
Competitive
pricing
dynamics
Performance
monitoring &
intervention
Pricing &
discounting
tactics

Pricing &
Launching New
Products
Pricing Multi-
Tiered Offers &
SaaS
Value
Innovation &
Monetization
Changing Prices
& Pricing
Structures
Monetizing
Product
Lifecycle
Pricing Innovations Solutions

Schedule a Rapid Pricing Assessment today
✉ info@pricinginnovations.com 📞 +1-(612) 351-2503 @pricingpros
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innovations create for you?
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Pricing Innovations: Value Innovation for Successful Monetization

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