Monetizing innovation
"Surprising rules for successful monetization Innovation is the most important driver of growth. Today, more than ever, companies need to innovate to survive. But successful innovation-- measured in dollars and cents-- is a very hard target to hit.€ Companies obsess over being creative and innovative and spend significant time and expense in designing and building products, yet struggle to monetize them: 72% of innovations fail to meet their financial targets-- or fail entirely. Many companies have come to accept that a high failure rate, and the billions of dollars lost annually, is just the cost of doing business. Monetizing Innovations argues that this is tragic, wasteful, and wrong. Radically improving the odds that your innovation will succeed is just a matter of removing the guesswork. That happens when you put customer demand and willingness to pay in the driver seat-- when you design the product around the price. It's a new paradigm, and that opens the door to true game change: You can stop hoping to monetize, and start knowing that you will. The authors at Simon Kucher know what they're talking about. As the world's premier pricing and monetization consulting services company, with 800 professionals in 30 cities around the globe, they have helped clients ranging from massive pharmaceuticals to fast-growing startups find success. In Monetizing Innovation, they distill the lessons of thirty years and over 10,000 projects into a practical, nine-step approach.
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- The book Monetizing Innovation, to me, has been the smartest approach to pricing I've encountered: https://www.amazon.com/Monetizing-Innovation-Companies-Desig...
Basic idea is that you should design the product around the price. Do price discovery before you do anything else.
Podcast ep here: https://www.youtube.com/watch?v=A6veeCbKIzw
- Ignore the people saying "don't do this" and instead read "Monetizing Innovation" (https://www.amazon.co.uk/Monetizing-Innovation-Companies-Des...) to get some guidance.
It's difficult to summarise the key lessons but you need to consider things like:
* What does having an API allow your customers to do?
* How valuable is that?
* Are they willing to pay for it?
* How do you align payment to the value?
* Is an API considered "table stakes?"
The book I linked goes into more detail so I really encourage you to read it. You can skip over the organisational changes it recommends, just the principles of pricing are good enough for your use case.
- Are you Product Marketing or Content Marketing/Demand Gen?
First - recognize that there is a significant difference between the two.
Second - chat with peer PMMs, Field Marketers, Growth PMs, etc to get good tips and advice.
Finally, I recommend reading Monetizing Innovation [0] in order to understand the Packaging and Pricing portion of Product Marketing. For Content Marketing/Demand Gen, I found Hacking Growth to be useful, but honestly there are a number of YC and adjacent podcasts that are fairly useful for that.
Finally - if you feel you don't like the role or the space, make sure to let you CEO know ASAP and make a transition plan with them. In my younger days I burnt a bridge with a good friend when I became an inexperienced VP Marketing/Demand Gen at their startup.
[0] - https://www.simon-kucher.com/en/insights/monetizing-innovati...
- > Is there academic research on this by any chance
Read "Secrets of Sand Hill Road".
It's written by Scott Kupor - one of the Managing Partner at A16Z - and explains in depth how the VC model works.
It's also required reading if you want to interview at a VC fund, and highly recommended by other founders to learn how to better strategize when raising funds.
Secrets of Sand Hill Road, Monetizing Innovation, and Working Backwards are the only books you need to successfully understand how to raise and build a VC funded startup. The pricing strategy guide by I think Sequoia is also useful.
- I've been diving into SaaS pricing strategies lately and recently came across the book "Monetizing Innovation" by Madhavan Ramanujam. It is probably the best content I have come across on the topic to date. I wanted to share a few key takeaways I got from it but I'm eager to hear your thoughts and experiences, especially if you're actively considering your SaaS pricing or have experience with regular testing.
Top takeaways
Price early in the product development process: Emphasizes the importance of integrating pricing into the early stages of product development. This ensures that the product is built around the value it provides to customers, leading to a more effective pricing strategy.
Focus on customer value: Understand what aspects of your product provide the most value to your customers and use that as a basis for your pricing. This aligns your pricing with the perceived value, helping to maximize revenue. Your pricing should be about 20-30% of the value you create for the users.
Willingness to pay (WTP): Determine your customers' WTP by conducting research, surveys, and interviews. This helps you identify the price points at which customers are most likely to make a purchase, ensuring you're not leaving money on the table or overpricing your product. Van Westerndorp's approach is called and I have personally found this to be effective.
Tiered pricing: Offering multiple pricing tiers can help cater to a wider range of customers with varying needs and budgets. It's essential to carefully design the tiers, so each level is appealing and encourages users to upgrade as their needs grow.
Regularly test pricing: Actively testing and iterating on your pricing strategy can help optimize your revenue. Consider running A/B tests or conducting customer surveys to find the sweet spot.
Monitor competitors: Keep an eye on your competitors' pricing models and changes to understand how the market is evolving and ensure your pricing remains competitive.
I'm looking to connect with anyone who is actively considering their SaaS pricing strategies or has experience with regular testing. What have been the most effective approaches or tools you have used?
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