Our Recur 2019 conference is wrapped, but the journey toward uncovering subscription truth doesn't have to end. We kicked off this year's event with a Pricing & Monetization Workshop. This article will break down some key workshop takeaways.
We dove deep on what companies are trying to accomplish with monetization. Your pricing is essential for your business because it's the exchange rate on the value you provide.
Many companies devote ample time to developing a great product and then strategize pricing as an afterthought. But, if you have a great product with careless pricing, you're literally leaving money on the table.
It takes on average, three years for a subscription company to adjust pricing. This means you may have your work cut out for you; however, the results are invaluable.
Why should you devote time and resources to pricing?
- Competition is rampant.
- Sales and marketing channels are drying up.
- Businesses have lost their power.
- CAC is steadily increasing over time.
- The relative value of features is declining.
And the list goes on.
Here's a quick summary of what was covered:
1. Qualification and Segmentation
Unfortunately, companies are not talking to their customers in a research capacity. Just check out the numbers in the graph below—they’re staggering.
Companies need to measure customer sentiment to what they're building.
You need to know your customer. If you do anything at all, talk to and get to know your customer. How do you do that? Conduct surveys. However, not aligning your surveys properly will result in poor data. You need to be strategic about your qualification questions and have a specific target audience.
2. Building Your Buyer Personas
Once you have customer data, you can build your buyer personas. Buyer personas are a fictionalized representation of your customers. Understanding buyer personas help marketing, sales, and product internalize the customers they aim to attract.
3. Relative Preference
When it comes to surveys, asking someone to make a choice between "most" and "least preferred” will give you more actionable data rather than rating on a scale.
You need to determine what you're asking. Focus on the positioning statements that make sense for your business. Relative preference questions can be structured to answer numerous strategic business decisions and seek to determine what people value.
4. Price Sensitivity
If we were to ask someone "at what price would you pay for X product," we would be forcing someone to pinpoint one price as their value associated with the product. Reality is, there's a wider range in which someone would actually purchase a product.
When dealing with price sensitivity, ask a range of questions.
Changing Your Pricing Overtime:
Once you conduct a pricing audit and maximize your pricing, it's not set for the rest of your company's life. Don't "Grandfather,” or keep your customers on legacy pricing.
Additionally, don't raise prices more than once a year to avoid aggravating loyal customers. And people paying a 50%, or more, increase deserve a phone call or personalized message.
- You need to corral a pricing committee tasked with making pricing decisions for your company.
- Your pricing committee can potentially be the most powerful, high-action group in your company.
- Your pricing team should include someone from product, sales, marketing, corporate development, a coordinator, and a main decision maker.
There’s many facets you need to consider when re-evaluating pricing. ProfitWell offers a free pricing audit to determine where you need to improve pricing while you focus on building your company.