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Product Management :: Product Marketing


17 May, 2021

The huge challenge of Consumption Pricing


Software Pricing Partners pen some excellent thoughts on the merits of consumption pricing as a charging model: It’s Wise to Question the Big Assumption about Consumption Pricing

The key fact is here: 
Perhaps the most important challenge when considering a consumption pricing model is to align the use metric to the value the customer derives from your solution, which can evolve over time.

This is really, REALLY hard to do: there are inevitable edge cases which destroy the cost of the service or value proposition. For example, number of users vs number of active users vs number of concurrent users when users churn frequently. What happens in cyclical businesses or when there are pulses of demand or inactivity and your pricing is based on transactions per month?

Yes, you can squeeze in acceptable use policies that prevent extreme abuse, but customers get (rightly) irritated at the lack of transparency. 

Alternative billing models (eg flat rate pricing / all you can eat) makes it easier to accommodate some of these challenges, but all models have their strengths and limitations. And that's the key conclusion to draw when building pricing models: it isn't easy and ignore fashion!

12 May, 2021

Alternative business models: open-source, crowd funding and tokenisation

At the Cambridge Product Management Network meet-up, Liam Crilly presented the fundamental business routes for open-source project. I talked about the various flavours of crowd-funding. 

From my experiences at Fetch.ai, I proposed that open source and crowd funding are prerequisite to tokenised business models. 


I left a question with the audience: If Tim Berners-Lee came to you with the idea of a web server + client browser, would you advise him to open-source or tokenise it?

What do you think?

The slide are available on slideshare

10 March, 2021

Product Management Tube Map

Product Focus have just published their Product Management Tube Map - SUPERB!



As well as being a lovely graphical interpretation of the role of Product Management, it shows the interconnected nature of product management and product marketing with many other business functions.

But Mind the Gap. In many companies, the focus is on Agile and Product Owners, and the strategic & leadership role of product management is missing

How true!

Possible extension to the infographic - 'Ticket to Ride'

The diagram made me think about the skills required to navigate the Tube Map - one's Ticket to Ride, as it were:
  • Business Savvy
  • Empathy
  • Communication skills: listening and clarity in written and vocal transmission
  • 'Spidey' sense of what's doing to happen next
  • Leadership (vision and direction) and Trust

02 March, 2021

Signs that your Product Pricing Strategy isn’t Working

My thoughts on Software Pricing's blog about the Signs your Pricing Strategy isn't working.

1. A customer base littered with bespoke deals.

The main problem usually encountered is that there isn't (much of) a discounting policy or it isn't adhered to. When I worked at NeuStar, there was a solid discounting policy AND a robust methodology to go beyond it.

"Special deals" had to be approved not by sales management, but by the product board. This mechanism really did account for the revenue / cost / profitability for the whole customer lifecycle.

2. Purchase options that include unlimited, or “all-you-can-eat” use.

Hmm, unlimited deals should be used when the value of the propositions is too complex for the customer and the vendor to justify, but everyone knows there's significant value. Within reason, as long as costs / burden don't torpedo profit margins, it is entirely valid.

Obviously, it is easier to make this decision when the variable cost of more consumption is tiny.

Fair use policies (whether formal or informal) need to be implemented so that costly abuse of unlimited can be contained. For example, 'burst usage' when greater utilisation is permitted but within reason (eg to a limit or within a period).

3. Prices that don’t account for customers’ varied budget cycles.

Simple statement, but the ripple back of this issue can be massive.

Let's say your customers get paid on a project-basis ie on completion of milestones. As a customer, you'd like to pay your suppliers when you get paid. As a vendor, if income can be guaranteed, this may be acceptable.

If however, the revenue is exposed to risk, this may not be acceptable to either party. For example, the construction industry is prone to delays or changes. As a concrete vendor, payment on project completion is unlikely to be acceptable.

In the software sector, does this change how your product is priced (yes!) or delivered (likely) or built (possibly)?

 

4. Enacting pricing changes without modeling the impact on legacy and net new revenues.

Oh, SO important!

A company releases a new product version that is supposed to cannibalise the existing product. They anticipate that all existing customers will diligently glide over to the new product without churn. 

Oh, how wrong! Any change in product or pricing can lead to re-evaluation of the proposition and the possibility of churn. Please see my work for CDK Global for exactly this problem/


5. Complex or confusing pricing

Value-based pricing is great in theory, but if your product has multiple and diverse use cases, then the complexity of pricing appropriately becomes far too difficult to support. As a result of the practical decision to simplify pricing models, your target market may be sliced to a smaller size – never a palatable proposition, but sometimes mandatory to simplify all sorts of problems, not just in sales, but in product development and delivery and branding.