3 min read ⌚
How Smart Companies Design the Product Around the Price
“Monetizing Innovation” is an easy-going and absorbable book that further examines the stigma of price-sensitivity and ways to handle it.
About Madhavan Ramanujam and Georg Tacke
“Monetizing Innovation Summary”
Experts estimated that approximately 75% of new products fail to exceed expectations, regarding sales. These goods or commodities including both tangible and intangible products mainly fail due to bad design that is not suitable to the customers’ wishes.
The “Nine-Rule Approach”
The authors advise the companies and start-ups to implement the steps below if they intend to keep high-intensity in the struggle for better market positioning. Analyze everything, from top to bottom, and you’ll soon get the big picture and all other features that go with it.
As an illustration of this theory, Ramanujam and Tackle explain how Gillette managed to increase its profits in India by designing a cheaper blade. Conversing with the customers and understanding their “ideal price” is vital for reaching success.
Examine and underline the perfect ratio of price to assets/features. Some customers are more price-oriented while others prefer an all-encompassing product. The price sensitivity varies on a case-to-case basis; your job is to test each possibility and then based on these results develop a strategy.
- “Configuration- and Bundling”
Apply a design that fits the customer’s possibilities. “Who will pay for your product and how much” is the key question. First, present the core product that has only the most basic features at a lower price. Afterward, add some extra features and segments to see whether your customers are still interested in purchasing your product,
- “Go Beyond the Price Point”
What are your plans for generating income? Do you think that a monthly subscription is better than sharing free information? Internet or regular companies must adjust their financial strategy to fit the business objectives.
The pricing model must be compatible with the product or service you are offering, otherwise, your company will face a quick downfall.
- “Pick a Winning Price Strategy”
Making trade-offs between risk and benefits is unavoidable. Adjust your strategy to fit your goals – for instance: do you prefer to have a larger base of customer or higher profits? Maximize your influence and chose the best method that is either aggressive and penetrating or it’s based on replication.
- “Build an Outside-In Business Case”
Foresee every possible behavioral change with the help of product segmentation, market positioning, and a wide variety of choices. Revise your plans and see whether you’re dealing with an overly price-sensitive group of customers – all insights are welcome.
- “Communicate the Value”
Don’t be shy about launching on a full-scale word-of-mouth marketing campaign. Tell the whole story and pay special attention to the benefits that product will bring to the users.
- “Use Behavioral Pricing Tactics”
Customers can behave in an entirely unpredicted way. A sudden shift from rational to irrational and vice versa is possible. Behavioral science explains the mood swing phenomenon and advises the companies to advocate for multiple choices. For instance, setting up a “basic and premium possibility” is a great method for making the more expensive offer look more affordable.
- “Avoid Knee-Jerk Repricing”
You did your very best to convince the audience, and yet you failed. What’s next? – Resist the temptation to reduce the price of your latest invention. Such endeavor will convey negative signals that will further damage the quality and popularity of the product.
Like this summary? We’d Like to invite you to download our free 12 min app, for more amazing summaries and audiobooks.
“Monetizing Innovation” QuotesNearly three out of four new products or services miss their revenue and profit goals. Many of those crash and burn entirely, and some take their companies with them. Click To Tweet A pricing strategy is your short- and long-term monetization plan. The best companies document their pricing strategies and make it a living and breathing document. Click To Tweet Products lose integrity when a company’s knee-jerk response to a lukewarm early market reaction is to reduce their product’s price in the first few months. Click To Tweet Your pricing strategy should be to land a customer by showcasing the lower up-front costs and then expanding on a higher variable amount. Click To Tweet Your business case must model the linkages among the four elements of price, value, volume and cost. When you do that, your monetary forecast will be far more precise. Click To Tweet