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?
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