Pricing continues to get visibility in the market, most recently with the Netflix situation, but price is always in play for most Product folks. Pricing is a really interesting thing for most Product Managers and Marketers. Whether you are launching a new product, doing an iteration or creating an add-on? Surely the mechanics of updating the Price Book alone is a task for many, but how do you determine the price?
As I look at the statistics for Spatially Relevant, pricing is a top inbound search term as well. Whether it’s people looking to understand how to price, calculate margin, understand the general pricing options or just to brush up on fundamentals of pricing.
I’m always looking around for interesting pricing stories, whether it’s Zen Desk’s pricing issue in 2009 or more recently The Netflix Scenario, where a jump in price drove the user community crazy, but not as crazy as the splitting up the company into two entities which drove over 27,500 comments to a single blog post – that has to be a record. So we can all find examples of bad things, but how about a company that gets it right?
Get’s it right may not be right words, but at least we should find a company which identifies unique opportunities to charge and do so. In general I think the whole mobile and tablet markets are a good place to start, It doesn’t take long for me to find interesting pricing scenarios on my iPhone and iPad for interesting examples – buying credits in app, buying additional gear and alike to make the game play richer. Make an initial transaction or download and continue to pay throughout the use of the app.
I’ve literally used 100’s of apps, freemium websites and have only converted to pay a very few times relative to the items I’ve downloaded – but there is one developer who has gotten me to pay for everything they made – the Angry Birds team at Rovio.
A Pricing Path: Angry Birds
Steve Johnson brought up Angry Birds a while back as an example is a creative pricing example from the market. Steve is always looking at products in the marketplace and happenings in tech which can change how the industry works and Angry Birds does provide for a great example of monetization. BTW – If you aren’t reading Steve’s blog you should, since he is continuously on top of current events for product managers and marketing folks in technology. Oh yeah, there is a good deal of pricing info over there too, some of which I linked below.
So why is Angry Birds an interesting pricing and packaging approach? Well it’s the path Rovio takes us down – first – You get the free version which has introductory levels so you can see whether you like it. Providing you get Angry Bird addiction, you move forward into a pay to play model.
Clearly some risk, but many of you know, once you try it – you have to have more. It’s not that complex a game, but the experience – graphics, sounds, challenge keep you playing. It’s not a new game, this game in principle has been around since catapult/tank in the early 80’s on Atari, Intellivsion, Odyssey – find the right arc/trajectory, select the velocity and destroy stuff on the other side of the screen.
Free to Pay – Multiple Times
So most of us started out with a free version and once you are firmly in place as a customer and enjoy the application right to the last free level it’s like give us some money! An pretty common approach to apps – the paid version has the rest of the levels which addresses the fact that you’re totally addicted to the game and the price is only $0.99
That’s not where the creative packaging and pricing ends. If you’re really addicted, they also offer Angry Birds Seasons, same stuff basically but new levels with holiday themes. The same engine only different graphics and if you blow through that there is Angry Bird’s RIO , again essentially the same game, but with different birds and not pigs, but birds.
For those of you with an iPad you also can buy the “HD” format. So the Angry Birds team has platform specific purchases/free to pay path as well. These folks understand their market and have monetized as much as possible – holiday/season versions, iPad versions and even movie derivatives.
These are all interesting pricing paths and are a clear demonstration that you can get your customers to pay you several times for effectively the same thing, but the most interesting package they have brought to the market is Mighty Eagle.
What’s mighty eagle? Oh an in app purchase that once purchased Angry Birds you can cheat. That’s right – for $.99 you can throw integrity to the wind. Pay $.99 and you can forever destroy levels which just get in your way.
While I understand the solution Mighty Eagle solves, since I’m stuck at a level for every purchase I have from them, but did they miss an opportunity? What if Mighty Eagle had been packaged per transaction/level you want to destroy or a monthly subscription model? Did the Angry Birds team missed a recurring revenue opportunity?
Find the Transaction
According to Steve, “It seems to me that the trick to successful product pricing is to get the money immediately after the customer has received the value. And that’s probably the best time to upsell them too.”
So how do you find these opportunities? Look at your applications differently, not as s sum total of capabilities that deliver value, but a set of capabilities which may uniquely deliver value.
So where is it that your product has an event, interaction, point of value delivery which you currently do monetize which you could? While most of us don’t have a Mighty Eagle cheat transaction available to us, I would offer if we look at our capabilities – how they are used by our customers, how they are not used by customers and alike that we can find new approaches to packaging and pricing which can drive more value for our markets and our business.
As product managers we need to continuously look at our roadmaps and delivery plans and always ask – Would your markets pay more for this?
- Pricing Strategies
- SaaS and Cloud Pricing
- Pricing and Reputation
- Where does your value occur?
- Freemium Business Models
Pricing for your market is always a challenge. Wouldn’t it be helpful if you could market data about the platforms, segments and competitors before you determined your price? Here is a presentation which appears to do just that for the mobile application market.
Other Pricing Resources:
- Pricing Basics – Models and Concepts
- Pricing as Innovation
- How can you business model impact pricing?
- 5 Insights on Succeeding with Freemium Pricing
Thought I would provide a recap of the series which appears to be some of the most popular content here according to Google analytics… So in case you didn’t catch it the first time, here’s the replay:
Sales Interface – Vikram Singha: The successful organization aligns the Sales leader and the CMO tightly and creates structures that allow these teams to interact both formally AND informally. The trick is to make sure there isn’t an echo chamber and that creative differences can be brought out and thought through. My sense is that short term focused organizations (typically the tech industry which tend to be more quarter-driven) tend to have more differences. Managing this is always a challenge, as well as part of the fun of marketing.
Culture – Chris Brogan: listening. I think that listening and customer service are the new marketing. Screw your stupid tag lines and contests. If I listen to prospective customers’ needs, and I can improve the way a customer works with my company, then I’m doing what marketing really wants to do: acquire new customers and keep the existing ones happy.
Awareness – Steve Johnson: …it’s just the concept of being in marketing. The word marketing means different things to different folks. 1/3 thinks it is advertising, 1/3 hear MARCOM and the remaining 1/3 think it is strategy and products. The confusion of what marketing is challenging for a lot of people in marketing roles.
Roles – Chris Cummings: The most interesting and challenging has been defining and explaining what it is, exactly, that I do. Over the years, more than one person (including multiple CEOs) have noted that: a) they’re not entirely sure how I do what I do but b) I always get the job done, and bring real value to the business. On the one hand, that’s a big compliment. On the other, it made me a little nervous
Engagement – Jay Baer: ..stop (at least for this year) talking about the hot new thing, and instead turn our attention to doing the current things better. Social media optimization and integration would be a good start.
Customer Intimacy – Josh Duncan: I would say that now, more than ever, successful organizations are finding a way to align their marketing, sales, and support teams to best server their customers. There is a greater understanding that all of these touch points are important when it comes to the customer experience.
Metrics – Elizabeth Quintanilla: ..finding all the analytics based on the customer metrics and presenting them in a digestible format for the small business owner so they can see the impact of their marketing activities
Teams Matter – Jennifer Doctor: I believe what is hard is understanding and adapting to the different cultures I have entered and left. Each environment brings its own set of expectations and rules, mostly unwritten and tribal driven. This can make it challenging to drive to what is right and make a difference.
Evolving Expectations – John Peltier: Product management is evolving and maturing as a discipline, which is helping illustrate to companies the clarity of vision that should exist for products brought to market. Product managers should strive to establish a minimum set of deliverables that can clearly convey the essence of a product, and should strive to ensure they can complete it convincingly before delivering a product to market.
Field Success Matters – Marty Thompson: One of the most valuable things any marketer can do is spend time with their sales team. Go out in the field with them. Walk a mile in their moccasins. Believe it or not, they really want you to help them be more successful. And they spend more time talking with customers and prospects, more than most marketers do now. Spend time with your customers, even the ones who are unhappy. Get out there.
All about the Product – Mukund Mohan: Great products appeal to the customer in a uniquely satisfying way, making marketing’s job to only create awareness. Satisfied customer’s allow for faster product adoption and provides quicker time to revenue.