How One Company Used Price To Build A Cool Fashion Brand

Warby Parker, the eyeglass startup with the funny name, was founded in 2010 by 4 MBAs Neil Blumenthal, Andrew Hunt, David Gilboa, and Jeffrey Raider. While in business school, the co-founders created the idea for the company and spent the time while in school to build the foundation for what would become a fast-growing brand and company valued at over $1 billion.

One of the key success factors attributed by Co-CEO Neil Blumenthal was their approach to pricing and the early work they did to make sure their pricing was right.

 

Influence Of Pricing On Warby Parker

Warby Parker’s co-founders were originally going to sell their glasses for $45. This price was substantially lower than the average pair of eyeglasses where according to the National Association of Vision Care Plans, the average cost of a pair of eyeglasses in the US is $263 making Warby Parker glasses a fraction of the price.

The thinking was to make the price low to attract more customers and differentiate from the competition. But two early factors influenced their decision on the price: the desire to create a premium brand and the feedback from their business school marketing professor.

 

Building An Affordable Premium Brand

From the beginning, the co-founders knew they wanted to create a brand around Warby Parker, not just a low price commodity. They had a clear idea of who their customer was – young, tech-aware, cares about style but not looking to break the bank to achieve it.

To connect with this segment and gain credibility, Warby Parker ensured at launch they were going to be associated with this style group by having features in leading style magazines such as GQ and Vogue.

Another core element of their brand is the social mission. For every pair of glasses sold, the company gives a pair to a person in need. While not a social enterprise, Warby Parker made sure they created a brand that also connected with customers who are socially aware.

 

Finding Pricing Smarter

While building a brand was critical to the vision of Warby Parker, so was price accessibility. One of the early problems the company set out to address was tackling the high prices led by eyewear behemoth Luxottica.

The company reviewed their pricing with their marketing professor Jagmohan Raju, an internationally recognized expert in pricing, and the feedback was clear, the price point was going to be perceived as too cheap. Customer will question the quality of the product and weaken the brand positioning. The professor also pointed out that the revenue generated with cause issues for funding other functions – namely marketing – for the business.

The team went back to work and tested numerous price-points through customer research. The result was increasing the price by more than 100% to $95 in hopes of establishing a high-quality product and making enough profit for marketing costs.

Warby Parker also understood that they had to defend their price by reducing resistance to purchasing eyeglasses online. If the customer felt unsure or uncomfortable buying eyeglasses online, then they would find the price ‘not worth it’.

To address this friction point, Warby Parker introduced try at home, where customers can select up to 5 frames to try on at home. A customer can then see what looks and feels right, return the trial glasses and then order online. Not only does this make buying eyeglasses easier, but it injects value into the price customers were paying.

 

Closing Thoughts

Warby Parker’s early appreciation of the role pricing has on its brand, business model and customer satisfaction played an important role in setting up the company for growth. This early foundation has built up value with new and existing customers that enable the company to now not only increase prices of existing products but to introduce new lines at higher price points (now up to $145). The work the team put into research, test and manage pricing has created a unique competitive advantage for the company with the funny name, and an important lesson for entrepreneurs to learn from.

MoviePass (Or Fail?)

MoviePass, an online movie ticket subscription platform, has gained a lot of attention over the past few months – and rightfully so. In the two years, this company has gone from a behind the scenes company to headline news and market disruptor.

How MoviePass works

MoviePass was founded in 2011, offering movie-goers monthly subscriptions for access to a set of movie tickets. What originally started off as a voucher system eventually evolved to a pre-loaded, debit card-like product where customers were able to redeem their tickets at theaters.

The core value proposition of MoviePass is quite similar to other online platform businesses such as Classpass, which offers the same voucher system- but with fitness classes. MoviePass aimed to build a product that brought customers value through lower prices and the convenience of booking movie tickets online; Their mobile app was a way to connect to millennials who want immediate access to movie tickets.

Since their launch, MoviePass has faced strong resistance from major movie chains such as AMC Theatres. Many of the major movie theater operators saw MoviePass as commoditizing the ticketing and customer engagement process, eroding already diminished differentiation theater chains. This threat came on top of the challenge many online streaming services, such as Netflix and Hulu, posed to the share of customers’ entertainment wallets.

 

Accelerating Growth With Pricing

MoviePass currently has over 3 million subscribers- users have access to a set number of movie tickets per month. As of August 28, 2018, MoviePass offers only one monthly subscription package for $9.95 for 3 movies per month.

Since 2016, with the arrival of new CEO Mitch Lowe, MoviePass has been actively using price to test new strategies and models, tactically acquire new customers, and influence the market as a whole.

One way MoviePass has used price is with deep price cuts. The company took their original packages that cost as much as $50 per month to a flat $9.95 monthly subscription fee that allowed customers to watch one film per day. The single price cut won more than 150,000 new subscribers in just two days.

Another pricing strategy MoviePass used was to offer unlimited movie tickets per month for a single flat price.

While subscribers only pay a flat fee for their subscription, MoviePass has to pay the theatre for each movie ticket purchased using a MoviePass card. At the current subscription fee, customers can begin saving money upon redemption of their second ticket. While this pricing model offers abundant benefits to MoviePass users, it is unclear how MoviePass can sustain this business model.

One way to help the business model are ‘ghost subscribers’ – customers who continue payments but neglect to go to see movies. Like a gym, MoviePass is trying to factor in non-use. It is unclear what percentage of users are inactive, but the risk to sustainability is a legitimate concern; The company temporarily went offline in July 2018 due to a lack of cash, resulting in many unhappy customers. ( ).

Along with sales stemming from subscriptions, MoviePass also gains revenue through deals with local restaurants. MoviePass’ CEO revealed controversial information stating the company tracks its users via location-based services on their app. The company uses mass surveillance to see where customers go before and after seeing a movie. MoviePass then analyzes this information and works with frequented restaurants to create deals for MoviePass users. MoviePass realizes a profit from the success of such promotions- although the exact percentage of their revenue gained from this strategy is uncertain.

 

The Good And Bad Of MoviePass’ Pricing Journey

The Good: MoviePass has been very active in experimenting with their pricing. They used their tests to adjust their product offering and customer willingness to pay. The company was also bold with their pricing; They were proactive in price changes – both increases and decreases – but also in package designs and fences (e.g. access to blockbuster films) in their offer.

The Bad: With proactive pricing, also comes customer confusion and dissatisfaction. As MoviePass accelerated growth, customers experienced the price experiments in virtual real-time. When prices were too low, MoviePass increased prices. When movie theaters pushed back on blockbusters, MoviePass adjusted their offer design and price. Making both incremental and material price and offer changes only become more difficult with growth. MoviePass has also had the added pressure of managing expectations and deliver on its core value proposition.

 

Final Thoughts

MoviePass’ ambition is bold – leveraging its pricing toolkit to accelerate growth and disrupt a huge market.

If imitation is the most sincere form of flattery, then the movie theatre industry has done just that as major movie theater chains like AMC and Cinemark are taking a play from MoviePass’ playbook by offering their own subscription service.

It is still uncertain as to how MoviePass will navigate its business model reality and how they’ll manage the consequences of their pricing strategy. One thing companies can learn from MoviePass is how testing different price-points can be used to better understand a business strategy and how it influences the market. Just not necessarily in real time; not everyone needs to see how the sausage is made.

 

Interested in learning more?
If you or your team is interested in having a hosted session on your pricing strategy and monetization model, please contact us at: contact@helloadvisr.com 

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Paradox Of The Market Share Strategy

Entrepreneurs want to bring their solutions to the greatest number of customers and people possible. Commercially they want this scale to grow, capture efficiencies of scale, and ultimately achieve economic profit.

To achieve the original vision, many entrepreneurs embrace a market share strategy to establish a foothold in the market and scale. This strategy is designed to quickly acquire new customers and users; usually winning customers away from incumbents within the market.

To execute this strategy, entrepreneurs use price early and often. With few other tools to leverage, companies use lower prices, discounts and promotions to entice customers to either switch or at least try the product or service. Once the company either captures enough scale or wins sufficient market share, then the company will attempt to move upmarket through its offering and pricing.

The paradox is that making that transition from a volume to a value play is extremely difficult. The reality is very few companies successfully make that leap, and only after significant investment and time.

One of the objectives of capturing market share or outright leadership in a market is to own their pricing destiny. As former PayPal co-founder Peter Thiel explains in his book “From Zero To One”:

“Whereas a competitive firm must sell at the market price, a monopoly owns its market, so it can set its own prices.”

None of this is to suggest that acquiring and growing market share should not be a strategic objective of a company. The purpose is to point out that companies pursuing market share give away the one thing they are trying to acquire via market share – greater influence on pricing.

If you do choose to implement this strategy, here are four considerations to help guide you and your company’s decision-making:

 

1. Market Share Strategy Is Common With Entrepreneurs and Startups. Differentiation is critical.

How does an entrepreneur inch closer to dominating market share? According to Thiel it is about dominating a small market rather than trying to penetrate a large established market. Put it another way, it is better for a company to be a big fish in a little pond, and make the pond bigger over time, rather than trying to eat up big fish in the ocean.

At the heart of this thinking, is that if you want to win market share, then do so where the pressures of competition are lower; where you can control you value proposition and pricing.

To make this assessment, entrepreneurs need to properly assess the market they are in and want to be in, and the customers they need to win. Unfortunately, many companies have not done this work.

For these companies, scale means competing in an out-sized market and capturing even a small percentage because in absolute terms it can be huge. So entrepreneurs will try to “buy” market share by selling at a low or lower price. While not exactly a price war, you’re one step closer.

The core assumptions and success factors are:

  • The company is aware of the actual willingness to pay of customers;
  • Customers understand and value the product on offer (and link to a monetary value;
  • The company can quickly achieve higher pricing benefits by executing on the unlocked value proposition via sales and marketing.

Truthfully these are large assumptions that even better companies struggle to achieve.

It is one way to gain traction without brand recognition and position the company for future growth. With the right execution of this strategy, but companies often find they’ve ignored the one thing that retains customers for the long-run: value.

 

2. Ruthlessly Manage Value

The market share strategy revolves around several objectives including establishing firm footing in a new market or pushing out existing competitors, gaining scale to drive efficiency, and establishing brand credibility for the future.

The hidden risk of this strategy is that firms create “anchor” prices, either through consistently low prices or frequent use of discounts or promotions.

Value can be diluted through aggressive, sometimes even blind, pricing strategies. Those initial low prices set customer expectations about what they should pay for your product, the value they receive, and how they perceive your brand.

The very best sales executives I have had an opportunity to work with shared the same advice when it comes to defending your value through price: “Never start a conversation with your customers about price. If you do, [customers] won’t hear anything else you have to say about your product’s value proposition.”

Defending value means understanding what that value is worth and patience. It is always easy to decrease price, but a long journey to win the value you deserve.

 

3. Effective Hedge: Customer Segmentation

Talk to a pricing consultant and you’ll find examples of companies embarking on this strategy and failing to translate any of the achieved scale into economic profit or value addition.

Customer segmentation can act as a vital hedge. Unfortunately few companies – particularly startups and entrepreneurs – apply it effectively.

One example is Blue Apron- a leading online meal kit provider. The company built a foothold in the meal kit market with aggressive prices, discounts and promotions. It is untold how much revenue ‘leakage’ Blue Apron is experiencing while implementing promotions and discounts to win customers to retain market share.

While Blue Apron did ultimately IPO, it continues to lose money and has since been displaced by incumbents (e.g. HelloFresh) as the market leader and is threaten by new competitors (e.g. Amazon) in its space.

Bed Bath and Beyond also tried to capture market share with low prices but has failed to convince consumers that the brand can provide more pricey luxury products. Many software as a service (SaaS) companies are using a “freemium” model and will likely face similar challenges. Even B2B companies offering products from workspaces to hardware start anchoring prices with discounts and other incentives. Companies who effectively segment their prospect customer base build corresponding packages and can create an effective “value blend” that drives sales.

 

4. Consequences Based Decision-Making

Seizing market share is only the first stage of this strategy. Figuring out what happens once you’ve established a foothold in the market is critical. Think in terms of consequences. What options are available after we make a certain decision? What options are available after that next step?

This approach is both resource intensive at the beginning and resource-intensive to maintain. This is particularly true in markets where customer switching costs are low.

Here are the questions you and your leadership team need to be asking:

  • How do we convert low-paying customers into high(er)-paying customers?
  • How can we defend price increases?
  • What about our value proposition justifies higher prices and how can we confirm that?
  • How will we respond if a competitor or new market entrant also adopts a market share strategy?
  • If we fail to convert customers to pay higher prices, how will that impact our growth prospects?

This approach should align with your company objectives and the value you offer.

 

Final Thoughts

The purpose of this discussion is not to dissuade you from using a market share strategy, but to encourage thoughtful, strategic objectives and planning to be prepared for what happens next.

There are opportunities with a market share strategy, but there is a very real risk of diluting hard-earned value before you have a chance to stake out your position in the market. As Blue Apron and other companies have seen, it’s more difficult and costly to move up the value chain than down. Taking the time to develop a thorough strategic plan for what happens after you seize market share can truly pay dividends in the future.

The market share strategy might be simple in theory but in practice, it can be very difficult to execute. The strategies that work in securing your market foothold (underselling your competitors, frequent discounts, etc.) actually make it more difficult to move up market. You may sell a lot of units as the low-cost option, but that perception may linger with customers long after you’ve decided to move up the value chain.

If you need help working through these issues, there are great pricing consulting and small business marketing consulting firms in Los Angeles that can help your company develop a foundation for future success.

 

Interested in learning more?
If you or your team is interested in having a hosted session on your pricing straetgy and monetization model, please contact us at:contact@helloadvisr.com 

Get our latest updates and insights by subscribing to our newsletter and following us on Facebook, Twitter and LinkedIn.

 

The Core Principle Good Companies Miss In Their Pricing Strategy

The most successful pricing strategies are rooted in the pursuit of understanding people.

This is the starting principle I always emphasize to companies, founders, and executives. If you treat pricing like a discovery process of people, not only will it open opportunities on how to design your prices, but how, when and to what groups of customers you should sell.

This isn’t easy. As anyone who’s built a successful relationship with another human being –personal or professional – can attest, this takes time, dedication and focus. Many leaders are hesitant and often not excited to invest time and resources to customer discovery. But the results, when done right, can be material and high-impact.

 

Know The Unknowns Of Your Customer

I met with a fast-growing social analytic platform with millions of users globally who wanted guidance on their pricing strategy for their newest product. Early in the assessment one of the first questions I had for the CEO/co-founder is to tell me who is their customer and why.

This question seemed to surprise the CEO, especially as his focus was about pricing. We continued along this line of questioning to discover that his customer was loosely enterprise customers, but what was still unknown is why these customers were right for his product, what value these customers would gain, and what pricing, sales and marketing is needed to win these customers. It was a difficult discussion, but necessary to identify the known unknowns and how much of the surface has been scratched.

Lack of specificity, like this social analytics company faced, is problematic for several reasons. Let’s look at three.

 

  1. Pricing: Without a clear idea of who the customer is, any pricing decision becomes increasing generalized. The best pricing is designed for willingness to pay, which varies from customer-to-customer or at least at sub-segment levels. The closer you move to generalized pricing, the more generalized the offering will become; losing opportunities to capture and defend your value.
  2. Product development: It is unclear what customer problem the company is looking to solve. Lack of understanding of the customer makes prioritizing certain development difficult; requiring the company to guess what features or functions their customers value most.
  3. Use of resources: Because this company didn’t know who they are making their product for—at least initially, building a sales process and the marketing assets needed to sell to the customer is challenging. Consequently the company will expend time and resources building untargeted assets and campaigns for vaguely defined customers.

 

Pricing is a supercharged force that drives revenue, profitability and customer acquisition when it resonates with the values of the right customers. With this in mind, before asking “should the price be lower or higher”, the question entrepreneurs and business leaders should start by asking “who is my customer?” and “what do they value most in my product or service and why?”

Industry-defining companies like Apple and Amazon are able to thrive because they are focused on building a customer-centric pricing process. To get to this level, you have to value understanding your customer with as much precision as you value getting to a price point.

So what steps can you and your company take to kick off the customer discovery process? Here’s some things to get started today:

 

1. Build: Compile key hypotheses around your customer

Go beyond demographics and dig deep. If you walked past a group of people on the street (or companies at a trade show), can you identify your customers?

Customer discovery is BOTH an internal and external activity for your team. At this stage, your team is compiling hypotheses about the customer and identifying which hypotheses your team must test and validate. Leave nothing on the table.

Make this stage an inclusive exercise. Collect input from any team or individual that must engage with customers – customer success to finance, sales to marketing. Each will have a unique perspective on what makes a customer, your customer.

What type of information should you collect from your team? To start, you want to understand the descriptives – who are they? Where are they located? What do they use?

You then what to compile assumptions your team is making on behavior, specifically around how customers assess and decide on what products and features to try, use and recommend. So this can include questions like: What parts of your product will customers value most? Why? What is the benefit derived? How do they assess the benefit? Is there a monetary value to that benefit?

The goal at this stage is to build a list of ‘operating knowns’ teams and individuals have been using to make decisions about and for customers. This means the answers to the questions your team builds is actionable.

One side result of this exercise is the identifying where misalignment within the company exists and to what extent. This is not the time to make corrections (yet) or to make judgments on any team. The goal is the bring the company into alignment to make pricing, sales and marketing decisions based on proof points, not assumptions, to defend those things matter most for your company.

Here are 10 questions your team can use to kick off the discovery process. You’ll not only create an initial description of who your customers are, but you’ll also find different perceptions – subtle and direct – within your own team.

  • What brands do your customer most associate with?
  • How would your customer use your product or service?
  • How would your customer assess and decide on whether or not to use your product (or something similar)?
  • What problem(s) would your product solve for your customer? What are the benefits?
  • Would your customer pay $1 to have the problem solved with your product? Why?
  • What would prevent your customers from adopting your product?
  • If they didn’t use your product, what else would they use?
  • How do your customers connect and communicate with new brands and companies?
  • What are your customers top three favorite existing companies? Why do they love them?
  • What companies do they not support? Why not?

 

2. Test: Validate what you believe is true about your customer

 After your team begins to fill in the blanks of what describes and drives your customer, now comes the fun part – test! It’s time for you and your team to validate which elements of the customer profile are true, what is missing, and what doesn’t align with your company’s objectives.

Here are 3 low-burn ways to start testing your hypotheses about your customer:

Go wide: Online surveys

Online surveys generally attract a broader audience than a focus group would, but is extremely useful in understanding a broader group of respondents

Online surveys are easier to design and launch, but because respondents will have a shorter attention span the questions asked must be precise and relevant to your test. Asking nice-to-know questions or launching surveys or 30+ questions will not only affect response rates, but also the quality of answer you receive.

Go deep: Focus groups

Focus groups provide a great opportunity to actualize who you imagine your customers are while collecting feedback. You’ll have an opportunity to not only ask pointed and detailed questions, but also observe reactions to questions and collect nuanced feedback.

The key to success with focus groups, is inviting the right cohort of participants through the screening process. Because the focus group will include a small number of participants – usually between 5- 10 people – you need to be talking to the right people, otherwise the results will not be actionable; wasting precious time and resources. Rely on the customer definition that you and your team decided on in the “define who your customers are” exercise.

Get out there: In-field testing

In-field testing provides the opportunity to learn about your customer based on location driven research such as in front of certain retail store, events or neighborhoods..

It’s important to note that the consumer data collected from this research strategy is time intensive and actionable insight is dependent on the quality of questions asked. This research strategy is advised when you’re looking for immediate results and directional insight that informs what to test next.

 

3. Assess and Actionable Decision making

Now that your team has tested core hypotheses about your customer, it is now time to translate the insight into action.

There is, unfortunately, no set formula on what items to prioritize first, but a good place to start is to focus on high impact items that move the needle on your company’s objectives.

Remember, the purpose of this customer research is not only to better understand who is your customer, but to better serve them by building products they value, design pricing – structure and level – that align to their willingness to pay, and go to market with sales and marketing activities that defend and excite the right customers about your product.

 

Final Thoughts

The steps outlined here allow for identifying and testing one of your single most important hypothesis: Does your product have the market fit with the customers you believe it does? And if so, what is driving value for your customer?

It is never too early to start this process, whether your company is just starting out or your company has reached a level of maturity. Customer discovery and the insights that come from the process, are critical inputs to make better decisions on how you’re going to market with your pricing, sales and marketing, but also how you’re allocating and using resources for product development.

Treat the process of learning and understanding your customer as an evolutionary process, because it will continually change. Your competitive advantage will come from the systematic process you build to proactively identify shifts and make high-impact decisions for your product and company.

 

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If you or your team is interested in having a hosted session on your pricing strategy and monetization model, please contact us at:contact@helloadvisr.com 

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How To Use Pricing As A Growth Strategy

You’ve got a great product that your customers love, a growing reputation, and team members who are passionate about what they do — yet you’re struggling to grow. Why?

Most businesses in this position would knuckle down and work harder, confident that a breakthrough is just around the corner. And it might be. But what many of these businesses don’t realize is that that breakthrough could be made today (and with potentially a lot less effort).

So, what’s the secret?

It’s your pricing strategy.

Most businesses start by setting a price that they think is about right and then leaving it to see what happens. Normally, customers are happy to buy (because it’s a good product), and so the business assumes that the price is right. Once they’ve found something that “works,” businesses tend to stick with that price, only altering it as manufacturing costs go up.

This set-it-and-forget-it mentality leaves value on the table and restricts growth. Most businesses guilty of this strategy are setting their prices too low; they receive enough to continue running but not enough to grow.

Marc Andreesen Pricing Quote

The time to focus on your pricing is now: let’s get started.

 

Pricing As A Growth Strategy

Designing and executing a pricing driven growth strategy requires an “inside-out” approach. By starting with your company and your growth objectives, you can set out a sustainable strategy that delivers value to your customers without compromising your growth.

Step 1: Establish Your Goals

It appears obvious, but the first step is to look at your growth goals for your company. Where do you want your business to be in one year’s time? How about in five years?

Many companies forget what it means to build goals – stretch and attainable – that reflect the ambition and new reality for your company and market. Your pricing is a vital part of this growth story because it starts to identify the levers available, how hard you want to push these levers, and the impact these decisions will have in your company’s future state (e.g. can you become profitable?).

Step 2: What Do Your Customers Value?

Your customers purchase your products or services because they provide value. Perhaps your service saves them time or provides them with access to something they can’t get anywhere else. Whatever it is, you need to figure it out — because it’s this value (and its relationship to price) that decides whether they make a purchase decision or not.

Not sure why customers value your product? Ask them!

Step 3: Determining Worth

To price correctly, you need to put a number on the value you provide your customers. This value might change depending on which customers you look at — and this might have important implications for your sales and marketing strategy.

For example, say you provide an online service that saves users an average of four hours per month on a boring and monotonous task. How much is that worth? Executives might value that time at $250 per hour. Students, on the other hand, might value their time at a fraction of that. Understanding what customer value and what drives that value is critical to determining worth — while not giving up on potential monetary opportunities.

Step 4: Evaluate Your Market

The value your competitors offer (and the prices they offer it at) may shed light on which pricing strategy will work best for you. Some industries are very “flat” with little difference in pricing between firms, while in others there is a huge difference (like the motor industry).

Your task is to consider how your value measures up against your competitors and decide what that means for how much your customers are willing to pay.

Step 5: Align Pricing and Goals

Your aim is to hit the sweet spot — a price that reflects the value your customers receive and that they’re willing to pay, and that allows your company to hit its growth goals.

Sometimes this isn’t possible, in which case you either need to revise your growth goals, improve the value you provide (and potentially increase the amount customers are willing to pay) or both. What is important is not to put pricing or growth into silos, but see where pricing can enhance goal achievement.

Step 6: Test Your Price Design

Remember when we mentioned the “set-it-and-forget-it” mentality? You’re not going to make that mistake again.

Test your pricing strategy by running trials or conduct pricing research. This can be easily achieved online by driving traffic to a sales page and then splitting the traffic so that viewers receive the same sales message but different prices. Often, the most profitable price will result from fewer sales at a higher value — but you won’t know unless you test.

Step 7: Launch, Measure, Refine, Repeat

Once you’ve completed testing, launch your pricing strategy and measure its progress. Conduct regular reviews of your pricing strategy, taking into account customer opinion, sales progress and your growth goals. This is not the responsibility of a single team member, but a core leadership topic — pricing is a reflection of the value created for customers. In addition to refining your price design, you will enable your sales and marketing teams to better design ways to defend the pricing with stronger communication, messaging and processes.

 

Final Thoughts

Used correctly, your pricing strategy is an incredible tool for supporting and enabling the growth of your company — but you have to have a plan. By being clear about your goals and values, evaluating your market, and implementing thorough trials and testing, you can find the ideal price, keep your customers happy and grow your business.

 

Interested in learning more?
If you or your team is interested in having a hosted session on your pricing strategy and monetization model, please contact us at:contact@helloadvisr.com 

Get our latest updates and insights by subscribing to our newsletter and following us on Facebook, Twitter and LinkedIn.

Accelerating LA’s Next Gen Of Startups: Bixel Exchange EIR Program

The Los Angeles startup community has been on a boom with the launch of many home-grown startups in a wide range of industries from consumer products (The Honest Company, Dollar Shave Club) to social media (Snap) to software and platform companies (Cornerstone OnDemand, TrueCar). The growth of the LA startup community and now LA as a strategic growth market for leading accelerators such as Techstars LA (HelloAdvisr CEO is a startup adviser) and 500 Startups as well as the rise of investment in local entrepreneurs, seeing a rise of more than 60% in VC investment in 2017. In addition to homegrown entrepreneur and startups, there has also been a rise of organizations helping to build and support the startup ecosystem, and one of the key organizations leading the charge is the Bixel Exchange.

Bixel Exchange is Los Angeles’ Center for Innovation and Technology and host at the Los Angeles Area Chamber of Commerce. Bixel Exchange’s mission is not only to empower entrepreneurs but to help translate entrepreneurial activities to a more prosperous and inclusive Los Angeles.

Through their Startup LAunch program, Bixel Exchange launched an Executive-In-Residence (EIR) pilot program. The startup accelerator program selected six high potential startups with seven tech executives in a 10-week intensive program for hands-on, customized mentoring covering a range of topics including investment and pitch preparation, go-to-market strategy, and customer acquisition and sales.

Bixel Demo Day 2017 Group Pic 1

The pilot program culminated with a demo day showcasing the program startups and bringing together investors, community-builders, and entrepreneurs to share the incredible progress made by each startup.

As part of this program launch, HelloAdvisr Founder and CEO, Ed Lee was honored to be invited to be an inaugural EIR advisor. Ed shared his expertise in pricing, monetization, go-to-market to the teams and program.

We are excited to continue to be on the growth journey of the current startups in the current cohort as well as the growth of the program and mission of Bixel Exchange!

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More About Bixel Exchange

Bixel Exchange focuses on the rapidly evolving segments of the high-tech ecosystem, including adtech, clean tech, digital media, gaming, mobile and social media. Bixel Exchange serves entrepreneurs by working with accelerators, incubators co-working spaces, venture capitalists, angel investors and private equity firms, universities, research institutions, innovation labs and government. To get to know Bixel Exchange better, check out its programs, events and partners.

Our Latest Guest Article on Gust Launch Community Blog

Gust launch community blog_article pic

HelloAdvisr, a Los Angeles based growth consultancy, and pricing and monetization specialist, was excited to be asked to share our pricing expertise with the Gust community of founders, entrepreneurs and angel investors. Our guest article introduced five key concepts founders and entrepreneurs need to know to start building a high-impact pricing strategy.

To read the full article on the Gust Launch Community Blog, click here.

To read more growth insights from HelloAdvisr, visit www.helloadvisr.com/blog or click here.

About Gust Launch:

Gust Launch is a cloud-based platform to help entrepreneurs and founders easily incorporate, run, and grow their company like a seasoned entrepreneur—designed by experienced startup founders, investors, and lawyers to help you from launch to exit.

To learn more about Gust Launch visit www.gust.com/launch

HelloAdvisr Share Pricing Insights in Guest Article for TechDay

TechDay_Pricing_Guest post_2017

HelloAdvisr, a Los Angeles based growth consultancy, and pricing and monetization specialist, was excited to guest write an article TechDay’s community of more than 10,000 startup and entrepreneurial members globally. The article shared three core insights on why the best companies in the world prioritize pricing and how this impacts growth for startups and entrepreneurs.

To read the full article on the TechDay HQ Community Blog, click here.

 

About TechDay: TechDay HQ Logo_Main

Each year TechDay hosts more than 50,000 people from 6 continents at events to connect and build the startup community. In 2017, TechDay hosted startup events in New York, Los Angeles and London (UK).

To learn more about TechDay visit www.techdayhq.com

 

Supporting Los Angeles’ Green Economy Development

LACI La Kretz Innovation Center

The Los Angeles region is already the largest green economy in the nation. There is an unprecedented economic opportunity as the country rebuilds its energy and transportation infrastructure, shifting energy dependence away from fossil fuels and toward sustainable energy sources.

On this vision, we are excited that HelloAdvisr Founder and CEO, Ed Lee, will be supporting the Los Angeles Cleantech Incubator (LACI) and its portfolio companies through the advisor and mentor community.

We are excited to share our expertise and experience helping LACI companies grow through effective pricing and monetization strategies to help realize the city’s primary economic growth strategy is to drive innovation in clean technologies.

 

About Los Angeles Cleantech Incubator (LACI)

Los Angeles Cleantech Incubator (LACI) is the City of Los Angeles’ official cleantech business incubator established to accelerate the commercialization of clean technology and job creation in the Los Angeles region.

The organization is run “by entrepreneurs, for entrepreneurs” and pursues public objectives by harnessing private methods and resources.

In 2014, LACI was ranked by UBI Global as the Number 6 university-affiliated business incubator in the world out of 800+ incubators in 67 countries.

To learn more about LACI, the LACI portfolio companies and how the incubator is helping Los Angeles accelerate the green economy visit the website or read more here.

Stop Wasting This Powerful Growth Tool: It’s Hurting Your Company

trash waste

Entrepreneurs and startups are innovators. They operate outside of the box because they believe the status quo isn’t good enough.

When it comes to building a growth strategy, many entrepreneurs and companies look to ‘de-risk’ by choosing the path most traveled. In the startup world, this can mean adopting strategies that fail 80% or more of the time.

By comparison, you have approximately a 46% chance of winning (or 54% chance of losing if you’re a glass half-empty type) by selecting at random red or black at a Vegas roulette table.

No, taking the road most traveled isn’t the only path.

Look deeper into your growth toolkit and you’ll find one of the most under-utilized – yet powerful – growth tools: pricing.

 

“Voluntarily conceding powerful growth tools shouldn’t be a option.”

 

For entrepreneurs and business leaders there are a lot of things that are out of their control. Pricing shouldn’t be one of them.

I’ve seen too many companies concede pricing to the forces of ‘that’s how it is’ or ‘it’s good enough’.

That’ is NOT good enough.

Leveraging your pricing now empowers you to monetize, market and sell your products better, and take a smarter approach to capture the value you’ve created. Here’s my advice on where to start.

 

Why Pricing is a Powerful Growth Tool 

The path to successful growth and success is varied. For every Snapchat there is Kickstarter who took more than 8 years to just launch let alone succeed.

One prominent VC, whom I highly respect, shared his view on assessing the potential of startups and fast-growing companies. He focuses on revenue growth drivers to gauge the financial and commercial health including units sold, the trend of units sold,….

Makes sense, right?

Except there is something missing in this revenue growth assessment: price.

 

  • Is the price right for the product or service?
  • Is the company capturing the value customers find in the product?
  • What future pricing opportunities does this company have?
  • How does the company know?

 

The list of questions go on and on.

Ironically, one of the things new ventures are able to control – pricing – is cited as one of the top reason why most startups fail. Yet receives surprisingly little attention relative to other factors whether it is price setting or management.

So let’s get back to basics: revenue is a function of volume (users/units) and price.

 

 

By this definition, to grow revenue, entrepreneurs have two drivers at their disposal.

Let’s take for example two growing companies A and B. They’re both growing revenue at about 50% per period, but company B is priced 50% higher.

 

 

The example is simplified but begins to illustrate the various paths to growth. The question you should be asking is which pathway is best for your company.

 

“All businesses should be asking: ‘does our growth 

reflect the value created by the company?’”

 

Pricing is a powerful growth driver and when used properly, materially impact your results.

 

Define Company Goals Needed Now (and Later)

In the chaos of growing a company, too often the goal is simply to ‘do better’ or ‘grow more’. While the spirit is in the right place, articulating clear goals and targets is crucial to designing the pricing strategy appropriate for your company’s stage.

If it’s not clear how your pricing is helping you achieve that, you run the risk of losing value – customer perceived and monetary – as you grow.

Here are some useful questions to help get you started to define your goals:

  • What strategy will get me to the next level (e.g. new markets, new round of funding)?
  • What strategy will get me to 100% revenue growth?
  • What strategy will get me ‘influential’ growth?
  • What strategy will get me to profitability?
  • …

One common question for growing companies setting goals is the question of profitability – how, when and how much.

It is neither unusual nor necessarily undesirable to sacrifice profitability – especially in the early days – for reinvestment. The poster child often cited for high growth, low profitability is Amazon. This reinvestment can be critical to product development, staffing, and marketing and sales.

What is critical to setting a goal of low or no profitability is what happens after the shorter-term reinvestments and goals are achieved. Some questions include:

  • How has your company defended your price position?
  • What can be done to regain any lost pricing power?
  • How can monetization of your products or services change to improve profitability?

My company recently worked with a national consumer products brand building a fast-growing range of healthy foods and snacks. Working with the company’s CEO, we were identifying opportunities through the company’s price and consumer strategy for the next stages of growth.

The company’s mission is simple but powerful: increase health and wellness in the daily lives of consumers by making healthy foods fun and accessible for all ages.

In 24 months, the company has increased its retail distribution and footprint across the U.S., partnering with some of the largest supermarkets and developed a strong and growing fan base.

For this company, the founder set out from the very beginning the company will grow, but grow profitably. Every growth decision took into account the short- and long-term profitability impact. This was the crucial executive direction that fed into the pricing strategy and defined early on a key measure of success.

This strategy is the right business model and strategy for this particular company. It doesn’t mean it’s right for every company. What’s valuable is setting specific goals early on and starting to anticipate the long-term impact of those goals later on.

 

Focus the Team to Start Work on Pricing Today

Acquiring and maximizing resources is the challenge companies of all sizes face, so it makes little sense to give up resources before having the chance to properly use it. Unfortunately, pricing is often used in this way.

I often talk about the critical role leadership has on pricing and high-impact companies. This includes the vision leaders have about their product and service pricing, competitive positioning and the communication with customers.

This leadership also includes rallying the troops to work on pricing now, because pricing only gets harder with growth.

Spotify, founded in 2006, has become the world’s leading music streaming service with over 140 million users. In the early days, Spotify needed to accelerate adoption, so in addition to positive word-of-mouth, also introduced a freemium price model to decrease sign-up barriers.

In the early days, Spotify needed to accelerate adoption, so in addition to positive word-of-mouth, the company also introduced a freemium price model to decrease sign-up barriers. Adoption was rapid and investors jumped on board.

Fast-forward 11 years and Spotify has been able to increase their paid user base to 40% or about 56 million users. After a decade – and millions of dollars invested on pricing tactics such as incentives and discounts – a majority of Spotify users still does not pay for the service.

The paying customer base is not immaterial, though. As of June 2017, Spotify’s paid user base is 100% greater than their nearest competitor, Apple Music. Yet to reach this level has taken considerable resources – and will continue to do so – to convert and retain paid users. It was a decision to take this volume-driven path, but one they continued down with few alternatives.

Most companies don’t have a decade (or the runway) to figure out what works. Most companies are lucky if they have half that time. Which is all the more reason why pricing and monetization must play an earlier role in the development and launch of the product or service.

For entrepreneurs looking to a “pivot later” pricing strategy, can reference companies like Spotify and assess the scale and conditions required to reach a similar position.

 

Final thoughts: Don’t Make the Mistake of Overlooking Your Pricing 

Pricing is a strategic and tactical tool to achieve a range of outcomes from profitability to growth. What is vital is not to overlook or concede pricing as a tool to achieve desired end goals.

As entrepreneurs examine the next steps for growth, some important areas to examine:

  • Think about pricing early and often. If you don’t, your competitors will.
  • Pricing helps to position the product. It’s always easier to go down than up.
  • Pricing influences the direction of growth. There is more than one way to drive growth, but achieving value-driven growth is harder at later stages.
  • Pricing capture customer insight and helps identify value. Knowing your customer better your competitors is a competitive advantage, and better pricing methods help better capture this insight.

 

“Victorious warriors win first and then go to war.”

– Sun Tze

The power of pricing starts with the practice of being proactive. I’ve seen too many companies concede this power too early on, making recovery difficult at best and company crippling at worst. Don’t let this happen to you. Better pricing is a powerful tool that can help your company thrive and sets you apart from the crowd, but it starts with now.

Interested in learning more?
If you or your team is interested in having a hosted session on your pricing and monetization model, please contact us at:contact@helloadvisr.com 

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