Business Strategy Step-by-Step: Monetization and Pricing

The first step in any monetization strategy is to determine what your business will stand for and be famous for.  In this lecture I talk about how Business Principles factor into a monetization strategy, and provide several examples of companies whose principles successfully shape their monetization strategy.

It's important to be conscious of where you are in the pricing lifecycle so you know when you are best positioned to price higher to harvest margins, price lower to drive growth, price to fend off likely competitors, and price to accommodate inflation and satisfy investors.  In this lecture I talk about the pricing lifecycle and a few questions that should be top of mind as you shape your pricing strategy and forecast financials.

As you form your monetization strategy, think about the different types of customers that you are targeting.  Can you form a few different offers, by adding or removing features, in order to attract different customer types or customers who have different budgets?  In this lecture, I talk about Segmentation, and provide some examples of how to vary an offer to attract different customer types and thereby increase your opportunity to sell more products.

Price discrimination is the practice of giving specific customer types special prices for the exact same product for which mainstream customers pay more.  In this lecture, I explain why price discrimination can be an important part of your monetization strategy.

Determining the price model that you will use is one of the most impactful decisions you will make.  But fortunately, it can be broken down into a few simple choice points.  In this lecture, I describe those choice points and provide examples of a variety of different price models, including plenty that stand out by deviating from the norm.

To bundle or not to bundle?  In this lecture we talk about some general rules of thumb for deciding whether to sell your product standalone or package it in a bundle.

The first step in determining the price at which to sell a product is to understand what potential customers think of the product and what alternatives they might choose instead.  That requires research:  Internal and External, Primary and Secondary.  In this lecture I talk about the research techniques that I have found to be most worthwhile, and how to approach them.

To identify the approximate price that we should charge, we need to value our product against each of the alternatives that we identified in our research.  In this lecture, I discuss the points that we need to consider and describe what is meant by the terms "Willingness to Pay" and "Share of Wallet".

It always helps to see an example.  In this lecture, we walk through the valuation of Tax Prep software.  What are the alternatives, how much do they cost, and how do we determine the relative value that our Tax Prep software offers compared to each of the alternatives?

Before putting a price on your product, think about the overall portfolio.  Instead of pricing the product in line with its value, might it be better for the overall business if you priced unprofitably or gave the product for free?  In this lecture, we talk about "freemium" and "loss leaders" and cases where they make sense.

Before you settle on the price that you will charge, you should analyze the profitability implications of a few neighboring price points.  In this lecture, I show an example of how a slight change to price can have significant impact to profits.

The last step before settling on a price is to consider the psychological implications of various price points.  In this lecture, we talk about the implications of pricing at $0.99 vs $1.00, and when to price at $99 vs $100.

After you've valued your product, thought about how it can best benefit the broader portfolio, and weighed the profitability implications of a few neighboring price points, and considered psychology, you're in good shape to price a single unit.  But there are a few more things to think about before you price multiple units.  In this lecture, we talk about some considerations to think about when pricing tiers.

After pricing your product, you can start running tests and analyzing results to make sure your price remains optimal.  That requires an understanding of Price Elasticity.  In this lecture we define Price Elasticity, talk about how to calculate it, and talk about what the results of the calculation imply about profitability.

A/B testing is the practice of selecting two groups (usually a control and a treatment group), called A and B, for purposes of measuring how a new price or offer performs.  In this lecture I talk about how to select the A and B groups, including which dimensions should be comparable and which need not be comparable.

From time to time, you will want to run a promotion.  In this lecture I talk about different types of promotions and best practices for running promos.

In this lecture we talk through an example of a promotion.  I show how to consider the impact of pull-forward, how to compare performance to a control group, and how to determine whether the promotion was profitable or not.

Large customers have procurement teams with employees called "buyers" who are paid to negotiate special deals.  If you want to sell to large companies, you should be prepared to offer custom deals.  In this lecture, I talk about best practices for custom deals, and how to come up with custom prices that are a win for you and those large customers.

Huge thank you to everyone who stayed with me and completed this course.  I hope you found it to be time well spent.  A summary of the Value-based Pricing methodology is in the resources section of this lecture.