Navigating the FTC’s ‘Click to Cancel’ Rule: What Every Subscription Business Needs to Know

With rising concerns about subscription cancellation barriers, the Federal Trade Commission (FTC) has introduced a “Click to Cancel” rule, requiring companies with subscription models to simplify their cancellation processes. In this article, we’ll cover what the rule entails, its background, and practical steps for compliance.

The “Click to Cancel” rule requires companies to provide an easy, online option for canceling subscriptions—mirroring the simplicity of the sign-up process. Under the rule, consumers can opt out of subscriptions via an accessible, one-click option. Additionally, businesses must secure clear consent before charging for memberships or free-to-paid trial conversions.

Here, subscription services refer to recurring payment arrangements for goods or services, such as streaming platforms, gym memberships, and product subscriptions. These models rely on “negative option” features, where a customer’s inaction (e.g., not canceling) leads to continued charges.

More specifically, the FTC’s new rule enforces several key requirements:

  • Clear and Accessible Information: Companies must provide truthful, visible information about subscription terms, renewal conditions, and pricing so consumers know exactly what they’re agreeing to.
  • Consent Confirmation: Businesses must ensure that consumers fully understand their agreement before being charged and should maintain records of customer consent.
  • Symmetric Cancellation Process: Cancellation must be as easy as sign-up, with companies offering the same channels. If customers sign up online, they must be able to cancel online; if they sign up in person, cancellation can also be done over the phone or online.
  • Penalties for Non-Compliance: Companies that violate these terms risk penalties, including consumer redress and civil penalties for misleading or obstructing consumers.

The rule was introduced after numerous consumer complaints about the difficulty of unsubscribing. Many businesses have complex cancellation processes that make it easy to subscribe but challenging to leave. By establishing this rule, the FTC seeks to protect consumers from misleading practices that create obstacles to ending subscriptions.

The core issue is the accessibility and transparency of cancellation options. For years, companies have implemented barriers like hidden steps, live-agent requirements, and unresponsive online portals to retain customers. The “Click to Cancel” rule tackles these barriers by mandating streamlined processes.

So, this rule should help FTC get money back to people who are misled and address common problems that include: (1) Sellers who don’t tell the truth or leave out necessary information (2) People who get billed when they didn’t agree to pay (3) Sellers who make it hard (or impossible) to cancel.

This rule impacts both B2B and B2C companies that use subscriptions in their business model by demanding transparent subscription renewal terms and simplified cancellation options. B2B companies offering SaaS platforms and B2C companies running membership programs must now make their cancellation methods as user-friendly as their sign-up processes.

For companies to comply with the new rule, they should consider the following:

  1. Implement Simple Cancellation: Introduce a single-click cancellation option, ensuring customers can cancel as easily as they signed up.
  2. Clarify Subscription Terms: Make subscription terms and renewal conditions clear and accessible, especially on sign-up pages.
  3. Update Customer Support Protocols: Train customer service teams on the rule’s requirements, focusing on providing fast, compliant cancellation options.
  4. Audit Internal Systems: Ensure your billing and CRM systems support the new rule by instantly stopping charges upon cancellation.

To maintain compliance while retaining customers and gaining valuable insights, companies should consider:

  1. Loss Aversion Offers: Non-intrusive retention offers on cancellation pages allow customers to reconsider without impacting compliance.
  2. Feedback Surveys: Optional, brief surveys on cancellation pages provide insights into customer churn without creating roadblocks.
  3. Engagement Follow-Ups: After cancellation, send follow-up emails to gather more detailed feedback and encourage former customers to share their experiences.
  4. Data Analytics: Use analytics tools to monitor user behavior and identify patterns leading to cancellations, allowing for proactive adjustments to the service or communication strategy.
  5. Customer Education: Provide resources that explain subscription benefits and usage tips, which may reduce cancellations by enhancing customer value perception.

The FTC’s “Click to Cancel” rule, while adding compliance requirements, offers subscription businesses valuable opportunities to enhance their competitive edge, build stronger customer relationships, and refine pricing strategies. 

Here’s how your business can turn these new rules into strategic advantages:

  1. Enhance Your Competitive Positioning: In the past, a cumbersome cancellation process may have masked a lower willingness-to-pay or revealed gaps in pricing power. With the new FTC rules requiring more straightforward cancellation, subscription businesses can no longer rely on friction-filled processes to retain customers. Instead, this shift enables you to improve your competitive positioning by providing a transparent, customer-first experience.
  2. Build Stronger Relationships with Your Customers: With easier cancellation options, your customer retention will now depend even more on the actual value your service delivers. Use this as an opportunity to better understand what drives value for your customers—what keeps them satisfied, what increases their willingness-to-pay, and what boosts long-term retention. A proactive approach here allows you to adapt more effectively, creating offerings that align more closely with customer expectations and needs.
  3. Re-evaluate Your Pricing and Packaging: What worked in the past may no longer meet the evolving demands of subscription customers, who now know more and demand more. The new rule changes provide an ideal moment to revisit your pricing and packaging to ensure they reflect the value your product provides. Consider whether your current subscription tiers, pricing, or feature sets still align with customer expectations or whether adjustments could better highlight your value. 

As the FTC enforces its “Click to Cancel” rule, B2B and B2C subscription companies must align with its standards to maintain compliance and customer trust. By updating processes, simplifying cancellations, and clearly communicating subscription terms, companies can adapt to this shift towards consumer-friendly practices.

For further details, refer to the FTC release here.

Did you know? 

We shared this article with our email newsletter community first. If you want to get access to our articles and insights before anyone else, you can sign up here (plus, it’s free!)


Found this article helpful?

Sharing is caring. ❤️

Share this on social – super easy 1-click share buttons below 👇 – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

Case Study: Operations Strategy for Leading Influencer and PR Agency in Beauty and Wellness

About the Company

Marketing agency specializing in helping brands grow through creative digital strategies and personalized content. The agency offers services like branding, social media management, and influencer marketing to build strong connections between businesses and their audiences while driving engagement and growth.

The Challenge

  • The company faced challenges with their people management systems and inconsistent performance reviews. 
  • Their biggest needs were creating an organized system for standardizing review processes and fostering continuous feedback. 
  • Additionally, they needed better alignment between employee goals and organizational objectives, alongside tools for promoting growth and development. Improved communication, data-driven insights into performance, and transparency in evaluations were also priorities, as they sought to boost overall employee engagement and productivity. Streamlining these processes was crucial for long-term success and scaling.

What We Did

  • Designed a new performance review process that fostered consistent evaluations and transparency. 
  • Conducted in-depth interviews with individual team members to identify underlying issues in people operations and areas for improvement. This allowed us to propose tailored solutions, including structured feedback mechanisms, clear goal-setting, and continuous performance tracking, ensuring alignment between employee development and company objectives. 
  • These changes helped streamline operations, improve engagement, and enhance overall team performance.

Outcome

Through the engagement, our client experienced positive outcomes including: 

  • Greater transparency and communication between team members and senior leadership.
  • New insights that improved decision-making, enhanced employee engagement, and streamlined performance reviews across the organization.

Does our work align with the challenges or needs you currently face? Get in touch with the HelloAdvisr team

When Your Strategy Is Not A Strategy

I have seen a lot of startups over the years. I often get asked to look over their pricing strategy, and nine out of ten times it is rarely a strategy. Usually it is a single price or something similar to the market leader in the industry. 

And that’s ok! Having an idea of how others in the market price is a good start. 

The problem is, it’s not a strategy. 

Startups often focus on getting to the “magic number” rather than on the key questions they should be asking or the context the pricing strategy should operate in for the startup. 

In the startup world, the goal is focus. Startups that have grown successfully, did so because they quickly removed ambiguity of where they are going early and often. They had a strategy or at least the makings of one. 

If you can put in the effort to understand the problem at hand, then why are you “failing fast” by trying to do 200 things with your startup? It’s ok not to know what will work. Learning is part of the process. That starts by creating a plan that generate hypotheses you can test and iterate on. This is the food feeding your strategy blueprint.

Take Slack as an example. Founded in 2009, Slack took a focused 7 year journey to achieving product-market-fit. While the platform had use cases that went far beyond technology-based companies including large enterprises and SMBs, the leadership focused squarely on tech startups. The early Slack team was incredible focused. They focused squarely on their core customer rings that included tech startups in key startup ecosystems where team sizes were small. They wanted to grow with their customers who were not only willing to adopt the new platform but were also willing-to-pay because they connected with the value offered and delivered. 

One exercise we do early-on with our clients is an evaluation of the existing strategy.

Look at your own current strategy, and ask yourself:  

  1. Does it help us transform our startup?
  2. Can we do it well? 
  3. Will it enhance our acquisition strategy (and the unit economics)?
  4. Does it scale?
  5. Is it defendable with the resources and talent we have?
  6. Do customers question whether it is “worth it”? 
  7. Longer term, if we stay on this path, does the strategy create value debt for our startup? 

This should give you a starting point of your strategy’s strengths, weaknesses and gaps. This should also create a long-list of questions that require further research and fact/information-finding. As we often say to our clients, the discovery process never ends, just the simplicity of the approach. 

This also gives you a chance to build creative ideas – or strategic choices – and build around this to quickly test and eliminate options. It is important to not only get outcomes, but understand why it didn’t work. If learning is not part of the process, you will blame the pricing. It’s not the pricing, it’s your approach.  

If you’d like help thinking through your pricing strategy, contact us. If you have a pricing strategy that works – fantastic! Keep it going and look for ways to enhance it and evolve it as your startup continues to grow.

Note: This article was originally shared to our email newsletter subscribers. If you want to get early access to articles, tools and updates signup for our free bi-monthly newsletter clicking here


Found this article helpful?

Sharing is caring. ❤️

Share this on social – super easy 1-click share buttons below 👇 – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

Thoughts On The New Business Reality For Entrepreneurs

business uncertainty

What the future holds is more uncertain than ever before. 

On a global scale, coronavirus (COVID-19) is challenging our institutions to contain and communicate, let alone manage and cure. Coronavirus is changing how we live our lives. 

Understandably, the new reality has raised fear and uncertainty. And its showing. 

The public markets have seen massive stock market selloffs. Large-scale events (e.g. SXSW, Google IO) are canceled or rescheduled. Universities and schools are shutting down public events and moving to online learning. Whole countries are shutting down. Investors are issuing caution and warnings to portfolio companies and the general markets alike. Then there’s toilet paper hoarding

All indications point to the situation getting worse, before it gets better. 

Having seen some of the biggest downturns of the last two decades – the tech bubble of the naughts, 9/11, and the global financial crash – and recent events creates a necessary moment of pause and reflection. 

Where do we go from here? What does this mean from a business perspective? 

Our forecasts never include a global virus pandemic. Most forecasts are more often than not, up and towards the right. As we navigate the new reality, we want to reflect on some thoughts, as we take stock of the current business climate and plans forward.  

 

1. Entrepreneurs are resilient

What makes entrepreneurs special is that entrepreneurs are built to overcome adversity. It’s in their DNA. The genesis of any company starts from a position of doubt. Doubt that the product can work. Doubt the company can be a viable business. Doubt from everyone not on the team (or your mother). The desire to build a solution to a problem, is not timed to the markets. Entrepreneurs did not start their companies by timing the market and market conditions. They started their companies because they saw a need for what they are building, and was driven by passion and grit to make that a reality. 

 

2. Strong business fundamentals are key

Weathering the storm – any storm – requires a strong business foundation to stand on. In better times, “you can put lipstick on a pig”, but when uncertainty increases, it is hard to hide a business standing behind weak fundamentals. This includes everything from the company’s capital position, business model, pricing power, and team and culture. It’s not the good times that test what the company is made of, but the rough(er) times that see what the company can do and will go. 

 

3. Proactive planning creates new ideas for growth

If planning was an admin exercise in the past, planning will be more critical as the macro environment rapily evolvates. “Fail fast” can be a very unwelcomed premonition in times of uncertainty for company leadership, and the employees that depend on them. As a leader, this is where level of preparation and strategy is key. The paradigm is shifting. In the short term, the greatest impact is to make the most out of every new deal and customer, and position the company to weather the current storm. Longer-term planning is to capitalize on missteps of competitors and build a value creation machine that will help the company grow faster and deeper. 

 

4. Don’t be a toilet paper hoarder

There is caution and conservative decision-making, then there’s panic and paranoia. Knowing where to conserve, and where to spend will be one of the hardest decisions companies will have to make. Making panic decisions and following the herd must be avoided. It is behavior we are seeing today, but as Oxford University researcher Zhibo Qui points out in the current crisis, rising anxiety makes more people likely to conform and fail to address the real issues. 

For those who started their first company (or first job) in the last ten years, this will be the first time exposed to this level of macro-uncertainty. It’s vital to form pragmatic decisions based on known information, and scenario plan to navigate the months ahead. One suggestion made by Sequoia Capital to its founders and companies in their “Black Swan” memo, to to rethink and reassess how their companies run. When it comes to marketing it’s not only about reining in spending but to “consider raising the bar on ROI for marketing spend”.  This is not only about stopping or cutting spending – EVERYONE will do that in a market downturn – but how to maximize what is achieved

 

5. Easiest way to lose money is not to make any 

The other side of market uncertainty – apart from cost management – are opportunities to grow. If it was hard enough to gain and grow revenue traction in good times, a global health crisis will not make it any easier. Optimization, efficiency, and effectiveness are terms that we will be hearing more of in the coming months especially when it comes to sales and growth. It is vital that proactive steps are made not to manage loss, but to discover opportunities to continue building revenue traction. There is plenty out of your control, but how you plan and execute – and with what speed – is entirely in your court.  

 

6. Be Safe

It goes without saying that the threat of coronavirus (COVID-19) is real.  Take all necessary precautions to keep yourself, your family, and your team safe. There is no business priority greater than the safey of you and those around you. Be prudent and pragmatic. 

 

Final Thoughts 

Last year we wrote about navigating uncertainty and capturing more value. As we start to watch what unfolds in the current crisis, it is inevitable there will be company failures. Some will be due to the company’s business fundamentals, some because of just rotten luck. An investment that you expected to close stalls, drying up remaining runway. A new customer who delays purchasing because of fear of the current market environment. 

There are no answers to the depth and length of what is to come, except to plan and prepare, and execute. Take constructive steps to navigate uncertainity is one way to positively influence what happens next. It is up to company leaders to begin preparations to not only weather the storm, but to seize opportunities where there seems like none exist, capitalize on competitor missteps, and ultimately get the ship to the ultimate destination. 

Be safe. Be smart. Be kind. We’re in it together. 🧑‍🤝‍🧑

 

How is your company navigating the current market uncertainty? Let us know what you think. 

 


Found this article helpful?

Sharing is caring.

Share this on social – super easy 1-click share buttons on the 👈 left side of this page – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

The Theme We Will Talk About In The New Decade (Part 1)

theme financial indepedence

TL:DR

  • Growth without pathways to financial sustainability are no longer tenable (and tolerated).
  • Startups need to work towards designing achievable business models that support greater financial independence.
  • Greater financial independence will give entrepreneurs longer horizons and maneuverability to build stronger companies.

 

Earlier this year, Prince Harry and Princess Meghan announced they were “stepping back” from the royal family. One of their reasons is because they wanted to secure their own financial independence. Across the covers of pop culture publications and UK news outlets, the decision (and the subsequent happenings) shook the world. 

They were not only distancing themselves from public money subsidized roles they had as royals, but wanted to create flexibility and dictate their own path forward which includes where they live, what they work on, who they are accountable for, and how they spend their time. 

For the prince and princess, they wanted to decide their destiny and they knew the pathway to achieving this was securing financial independence

 

Shifting Tides

Increasing uncertainty and scrutiny was a theme we highlighted at the start of last year, and throughout the year, we saw increasingly greater scrutiny of startups, their business models, and the rationale justifying their financial viability. 

We had “untouchables” like WeWork get to the brink of an IPO only to find itself withdraw its bid to go public, get devalued, and layout staff. Less extreme events include companies such as Postmates pull back from IPO plans, and a slew of other startups who delayed potential scrutiny of their businesses.

 

Pressure from public markets

Companies such as Casper – which was losing $342 per mattress sold – went public but at third of their private market valuation

Other unicorns from Peloton and Slack, have not fared much better as public companies. Part of the reason is new pressure about their financial performance, and defensibility of their business model they otherwise did not face as private companies. 

Yet the challenge to even get to this stage (IPO) these days is unicorn status ($1 billion private market valuation or more). This creates an odd paradigm. To reach the level needed to go public, requires the capital and growth of a unicorn, but the type of business needed to reach that status may not be able to sustain the scrutiny of non-private investors and stakeholders. 

This creates a direct challenge to the defensibility of the business from the value proposition to its business model.

 

Stress on business models

The pressure is not only on companies on the brink of an IPO. The start of this new year has seen even more companies finding themselves re-evaluating themselves as a business, and starting with cost-cutting to ease some of the financial burden of their business model and go-to-market strategy. 

Unicorns such as Bird began reorganizing themselves. They laid off staff and pulled out of markets to rationalize their business operations. Bird competitor Lime also did their own round of cost cutting by laying off 14% of staff and pulling out of 12 markets.

But this business rationalization is not limited to scooter companies. 23andMe, Playful Studio, Oyo and countless more unicorns are also going down this path.

Simply put, many companies have been defending the capital they currently have because of uncertainty to access more capital in the private markets, but fundamentally their businesses are not built to make enough money to sustain itself. So these companies need to make the capital they do have go further than originally planned, and find ways for their business economics to work better for them in the short and long term. 

Marketing expenses are increasingly getting unsustainable. Take Unicorn a scooter startup founded by Tile founder Nick Evans, who had to close down his company due to unsustainable acquisition costs. Evans states,  “Unfortunately, the cost of the ads were just too expensive to build a sustainable business.” They not only closed the company, but did not have the capital to fulfill the 350 orders they did receive from customers for their scooters. 

Popularity shouldn’t be confused for viability. And a core component of viability is, at minimum, a reason to believe there is pathway to financial independence and build a company that is building a business, not just a product. 

 

Positioning For The Future: Financial Independence

With ever increasing visibility and scrutiny on startups, a growing theme we will hear is the need for, and decisions-made to help companies achieve financial independence. 

Does this mean financial independence means profitability? Eventually. 

Financial independence is a process and mindset, as much as an outcome. Being on a pathway to achieve financial independence is a function of the systems and processes created and put in place, led by a disciplined leadership team. 

There is an intentional-ness to financial independence, because it is a goal for leadership teams to work towards. Pursuing financial independence also has significant implications on how the business operates including: 

  • How the business will make money;
  • Expectations on growth (trajectory and speed); and 
  • Resource requirements to scale. 

Ultimately, financial independence means companies have created a business model and path where it can still materially grow and create markets, but also achieve its own profits. 

Financial independence enables companies to have a wider array of strategic and tactical options today and into the future. This includes the resources available to invest in the team, new business and product opportunities, and partnerships. This also involves the capital and investment that must be raised and secured. 

In the end, when a company pursues financial independence they are looking to create scalable revenue and profitability engines that decrease the need to seek outside capital, and the expectations that come from external stakeholders. 

It is important to note that financial independence and seeking external capital or investment can coexist. One example where both can be achieved is 1Password, a cloud-based password management platform. 

1Password pursued financial independence since the very beginning. They built a self-sustaining business that was profitable, and remained profit for more than a decade. 1Password had 1 million users, and 50,000 customers paying for their enterprise solution (Enterprise Password Manager) including 25% of the Fortune 100. 

They built an impressive track record, and after 14 years since its founding, 1Password decided to take outside investment ($200M). The decision was strategic and intentional – to help pursue specific growth programs and objectives.

Financial independence is not going to be top of mind for everyone. As stated earlier, this strategy is created and led from the top. This is true for young companies and mature growth companies alike. 

 

What’s Next?

Achieving financial independence will be a core competency of startups in the new decade. Startups will be expected to demonstrate their business acumen more than they have in the last decade. For external stakeholders such as investors, startups building financial independence capabilities today will not only help increase growth efficiency, but will create a stronger portfolio of companies. 

Where do we go from here? 

To help companies evaluate what financial independence means for them, our next article will outline the core components to build a financial independence strategy map and how to navigate the process. 

Is your company on the road to financial independence? How does your company think about financial independence? Let us know what you think! 

 


Found this article helpful?

Sharing is caring.

Share this on social – super easy 1-click share buttons on the 👈 left side of this page – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

Create A New Competitive Moat

Peter Thiel famously said, “Competition is for losers”. 

He may be right, but that doesn’t mean competition does not exist. 

If your business is going after a market with many new and existing competitors – and chances are you are – then you can not easily ignore competition. 

At the heart of any competition strategy, is the goal to create or acquire advantages – ideally substantial – over your competitors. These are yours moats – the protective layer that keeps competitors out of your home and away from your customers. 

For many companies, there are a number of ways to create a competitive advantage. We look at three common and often pursued forms of competitive advantage – technological, operational, and supplier. 

 

The Technology Moat

Businesses that has a technological advantage, creates technology innovation (e.g. proprietary technology, patents) that is either difficult for competitors to acquire or re-create. 

It can include technology such as the recommendation engines of Netflix or Spotify, or the formula for a new drug of a pharmaceutical company. Not disconnected to the innovation, is also the product quality. This advantage requires resources (e.g. capital) to acquire, but can have a long-lasting payoff and competitor moat. 

The Operations Moat

A second competitor advantage companies try to acquire is an operational advantage. That operational advantage is focused on decreasing the cost of producing and delivering goods or services, by increasing the effectiveness of elements in their operations. 

This can include how the supply chain is managed to the manufacturing/production process used to create and distribute product. This competitor advantage has helped companies such as clothing giant Zara, retail leader Wal-Mart, and even startups such as Warby Parker and Casper well. Acquiring this advantage also requires resources (e.g. capital) as well as expertise to design and execute. Done well, this advantage can improve a company’s cost positioning, reduce waste and increase pathways to profitability. 

The Branding Moat

A third competitor advantage some companies try to acquire is a branding advantage. This is commonly seen in consumer-facing companies, including clothing brands and retailers. The goal of the branding advantage is to extend beyond a transactional relationship with customers, but create an emotional connection and loyalty. This advantage can decrease costs of customer acquisition – for SaaS companies negative churn – increase the number and frequency of repeat purchases, increase total spend (revenue), and increase customer satisfaction and advocacy. Unlike other competitive advantages, creating a brand advantage is an earned advantage and can take more time to acquire and retain. Once achieved, brands can experience longer term benefit as seen by companies such as retailer Nordstrom, fashion brands such as AllBirds and Patagonia, and video game maker Nintendo. 

But these are not the only moat-creating advantages you can build for your business. Entrepreneurs also have pricing  

 

Make Pricing A True Competitive Advantage

Using price to create a competitive advantage is not a new. For many companies trying to make a dent in a new market, price is often deployed to shake up the market and put pressure on incumbent pricing. What this typically has meants lower – sometimes free – pricing. 

This pricing tactic can be highly disruptive and lucrative as companies such as Ikea, Walmart, and tech companies such as Zoom and Google have used low prices as a competitive advantage against legacy brands and companies. 

When looking at what made the pricing strategies of these companies successful is not just in going low, but how they defended their value even at lower prices and found pathways to new sustainable revenue channels and profitability. 

This is important, because for too many companies creating market disruption using low prices is used as a blunt instrument that leave them scrambling to find ways to monetize and defend their worth in the eyes of customers. Not only can this be a costly reality to maintain, but can also result in a pivot that is hard to recover. 

Pricing is multi-dimensional and can be deployed in many different ways. The key is in the rigor in planning and execution. 

From the years of working with companies at all stages of growth across the world, there are five core questions to consider when deciding how best to use pricing to create a competitive moat.  

 

#1: Do you know your monetizable value today?

This is obvious, but if you are using your pricing strategically, particularly through lower prices and discounts, then it is all the more important to know what the baseline willingness to pay for your product is. 

Many companies go low on price without considering what their true willingness to pay is and for what customer segments. This is giving away the farm without realizing perhaps all you really own is the chicken coop. Alterantively, if we want to be more strategic and tactical, we may not have to give away 50% of our customer’s willingness to pay, if we know 30% will due. Anyone who’s had to convince a customer to buy their product will know, each dollar is hard earned so if you don’t have to, don’t leave it on the table. 

 

#2: What is our value defense?

Whether you’re going high or going low, it is important to know how the pricing strategy will be defended. Too many times we have seen companies where the first and last line of defense is (low) pricing. 

As any sales professional will atest, you never start the discussion on price; the prospective customers will struggle to hear anything else. 

So what price drivers can and must you defend? Who are the value drivers meaningful for?

Pricing is a core inter-connected component of the value proposition and buyer decision, so it is vital to identify and defend those price drivers that shape a customer’s perception of your product. 

Consider a new car a customer is looking to buy. What does she consider?

  • Price? 
  • Performance? 
  • Safetey?
  • Financing?
  • Trust in the dealership?
  • Brand?
  • Asthetics such as car color?
  • Features such as the sound system?

What factors matter and the relative importance is important to understand what is defendable and what is given away. It is rarely all or nothing. 

That said, value is a lot like trust. It is very difficult to gain, but extremely easy to lose. 

 

#3: What are the success factors for our pricing strategy?

It is important not only to execute new pricing, but to understand what are the success factor of the strategy. This requires prepararation ahead of the pricing launch to understand what will be needed to manage successful execution. 

In the case of Walmart, their “Everyday low prices” strategy is more than a marketing slogan. The pricing strategy is enabled by a company that knows world-class supply chain and operational excellence is how that strategy will be delivered and sustained. 

When thinking about how you will use pricing to create a competitive advantage, consider what factors are required to make the strategy successful. 

 

#4: What alternative strategies can be deployed in the future? 

There are two parts to this – (1) as a result of today’s decisions, what opportunities or limitations are creaed; and (2) what other pricing models and approaches are potentially available. 

Pricing will evolve as fast as your company and it’s products. So it’s important to consider given the current state, what else can you do with your pricing in the future. 

This can be using more complex pricing methods such as dynamic pricing, but will also require the technical backend development and investment to successfully execute. 

It can be the development of a mix of pricing models, that will capture revenue and growth opportunities across different buyer groups and use cases. Rarely is the pricing decision an at the moment decision, and will require planning and more importantly research and analysis to support the decision with your team. 

 

#5: What organizational competencies are created?

We often think of pricing from an output perspective (e.g. a price, revenue, profit), but pricing – when done well – is a core competency that is hard to replicate, maintain and execute well. 

For all the technical and marketing prowess of companies such as Amazon and Apple, pricing remains a straetgic advantage. The advantage is not only for the price they execute and achieve, but the organizational capability to maintain discipline, and continuously maintain and evolve the pricing. It is hard, which is what sets the best companies apart. 

 

Final Thoughts

Pricing is an effective way businesses can create a competitive moat, but is too often designed and executed like a promotion rather than a strategic decision. 

The tradeoff for short-term customer acquisition, are the potential longer term consequences to the business including the dilution of price/willingness to pay, increasingly expensive customer acquisition costs,  and limited future pricing options. 

Thoughtful planning and design, early and often can mitigate future pricing and proposition challenges. This starts with establishing a willingness to pay baseline for targeted customer segments to craft how the competitive moat will be executed and sustained. 

Like any good strategy, maintenance and defense is required. This means we need to measure and modify regularly. If immediate value is given away (e.g. lower prices), then we need to ensure core value drivers are defended and we understand what tactical pricing options are available as the market and business changes.

Like a good cajun roux, if you stop stirring and take your eye off the pot, it will burn making the roux unusable. Avoid the pitfalls to make pricing a true competitive advantage and moat that will position your business strategically for the long-term. 

 


Found this article helpful?

Sharing is caring. Share this on social – super easy 1-click share buttons on the 👈 left side of this page – or send this article to a colleague or friend who can learn something new to empower their company or hustle.

 

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 FacebookTwitter and LinkedIn.

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

 

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 

Get our latest updates and insights by subscribing to our newsletter and following us on FacebookTwitter and LinkedIn.