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Monetizing Innovation by Madhavan Ramanujam and George Tacke - Coggle…

- - - - customer needs, value, willingness to pay, and pricing is important
    - - Willingness to pay is the core of every product design
      - First Market and Price, then design and build
    - - Features Shock
        
        Cramming too many features
      - Minivation
        
        Despite being the right product for the right market, it is priced too low to achieve its full revenue potential
      - Hidden Gem
        
        Potential Blockbuster Product never properly brought to market, because it falls outside the core business
      - Undead
        
        An Innovation that customers don't want but has nevertheless been brought to market, either it was the wrong answer to the right question, or an answer to a question no one was asking
    - - Nine rules of innovation success
        
        Have the "willingness to pay" talk with customers early in the product development process.
        
        If you don't do it early, you won't be able to prioritize the product features you develop
        
        You wont know whether you are building something customers will pay for until it's in the marketplace
        
        Dont force a one-size-fits-all solution.
        
        Whether you like it or not, your customers are different, so customer segmentation is crucial.
        
        Not based on demographics
        
        Based on the willingness to pay for your product
        
        Product configuration and bundling is more art
        
        Build carefully and match them with your most meaningful segments
        
        Choose the right pricing and revenue models
        
        How you charge is often more important than how much you charge :fire:
        
        Develop your pricing strategy
        
        Create a plan that looks a few steps ahead, allowing you to maximize gains in the short and long term
        
        Draft your business case using customer willingness-to-pay data, and establish links between, price, value, volume and cost
        
        Without this, your business case will tell you only what you want to hear, which may be far afield from market realities
        
        Communicate the value of your offering clearly and compellingly;
        
        otherwise you will not get customers to pay full measure
        
        Understand your customers' irrational sides, because whether you sell to other businesses or to consumers, your cutsomers are people
        
        You should take into account their psyches, including their emotions, in making purchase decisions
        
        Maintain your pricing integrity
        
        Control discounting tightly.
        
        If demand for your product is below expectations, only use price cuts as a last resort, after all other measures have been exhausted
- - - - Will tell you if you have an opportunity to monetise your product or not
      - Will help you prioritize features and design the product with the right set of features
      - It will enable to avoid the four types of failures
    - - You want to understand your customers' overall WTP for your product
        
        The price range they would consider reasonable
        
        If they are willing to pay
        
        Ask yourself whether that price would work for your company
        
        It may not if you can't deliver a market-acceptable product at a price that makes you a profit
      - Understand how much value customers place on each feature and what they'd be willing to pay for that value
        
        Dig deeper to understand exactly which features customers value most and would thus be most willing to pay for
        
        This will help create a roadmap - what features to develop first, next and so on.
        
        Helps focus and avoids feature shocks
    - - How to get the price range?
        
        Simplest way is to ask direct questions about the value of your product and its features, for example
        
        What do you think could be an acceptable price?
        
        What do you think would be an expensive price?
        
        What do you think would be a prohibitively expensive price?
        
        Would you buy this product at XYZ?
    - - Price is what customers value and a measure of how much they are willing to pay for that value
      - Gillette mach 3 (Rs 100) to guard (Rs 15 with Rs 5 replacement blades)
  - - - A “want price only” segment.
      - A “want it now” segment.
      - A “want product only” segment.
      - A “want the best” segment.
    - - Segmenting too late.
      - Segmenting only by observable characteristics.
        
        Instead segment on
        
        customers' needs
        
        value
        
        WTP
      - Having too many segmentation schemes
        
        Ideally one, not more than 3
    - - Garmin GPS
    - - Begin with customer WTP data.
      - Let common sense be your guide in using statistics.
      - Fewer is more.
      - Don't try to serve every segment.
      - Describe the segments so you can address them.
  - - - Pizza and Breadsticks Puzzle
    - - Principle #1: Leaders, Fillers, and Killers
      - Principle #2: Creating Good, Better, and Best Options
    - - Align with segments
      - Don't make it too big
      - Make sure you and your customers both benefit
      - Don't give too much away in your entry-level product
      - Hard bundling will not always work
      - Individual prices need to be higher with mixed bundling
      - Don't forget bundle price communication
      - Bundle with integration value so that 1 + 1 = 3
      - Don't bundle for the sake of bundling
      - Exploit inverse correlations
      - Your Bundle Checklist
        
        Goals
        
        Positioning
        
        Cross-selling
        
        Psychological thresholds
        
        Killers
        
        Synergies
        
        Convenience
        
        Convenience
        
        Competitive reaction
        
        Selling
    - - Ryanair Airlines
  - - - Michelin: From Selling Tires to Monetizing Miles
    - - The Subscription Model
      - Dynamic Pricing
      - Market-Based Pricing: Auctions
      - Alternative Metric Pricing/Pay As You Go
      - Freemium Pricing :red_cross:
    - - How Likely Are Your Customers to Accept the Model?
      - How Will Future Developments Impact the Model?
      - What Stage Is Your Company In and Does Your Model Choice Fit That?
      - What Are Your Competitors Doing?
      - How Difficult Is the Monetization Model to Implement?
    - - Tier based pricing
  - - - Building Block #1: Set Clear Goals
        
        Goal Allocation Exercise
      - Building Block #2: Pick the Right Type of Pricing Strategy
        
        Maximization
        
        Penetration
        
        Skimming
      - Building Block #3: Develop Price-Setting Principles
        
        Top five operational parts to consider
        
        Monetization models
        
        Price differentiation
        
        Price floors
        
        Price endings
        
        Price increases
      - Building Block #4: Develop Principles for Reaction
        
        Promotional Reactions
        
        Competitive Reactions
  - - - Price (WTP)
      - Value (to customers)
      - Volume (the expected demand at those price points)
      - Costs in delivering the service (including the risks based on probability of car failure within the warranty period)
    - - Include price elasticity
      - Apply data-verified facts
      - Add risk assumptions
      - Assemble the basic ingredients
      - Be realistic about goal tradeoffs
      - Forget the way you do business cases today
      - Consider competitive reactions
      - Don't focus the business case on just the new product
      - Keep checking in
  - - - Step 1: Develop Crystal-Clear Benefit Statements—Not Feature Descriptions
        
        Matrix of Competitive Advantages
      - Step 2: Make Your Benefit Statements Segment-Specific
      - Step 3: Measure the Impact and Refine Your Value Messages
  - - - Anchor
    - - Compromise effect
      - Anchoring
      - Price to signal quality
      - Razor/razor blades
      - Pennies-a-day pricing
      - Psychological price thresholds
    - - Focus groups
      - Controlled A/B tests
      - Large-scale experiments
  - - - Don't assume first that you put the wrong price on your product.
    - - Be patient addressing post-launch problems.
      - Go beyond financial KPIs and track monthly outcomes
      - Do deal “deconstructions” regularly
      - Advocate pricing patience: Make your team come up with three nonpricing actions before you approve a price decrease
      - Before reacting on price, war-game your competition's counterreactions
      - Unusually high sales could be a high-class problem