How to Prevent Your Growth from Going Flat

You’ve come up with a great idea and built an awesome product or service. You’ve won customers, some who actually pay you in more than fandom and gratitude (read: money). Best of all, you’re getting customers excited in volumes you never expected.

Great job! So what’s next?

Don’t let growth go flat

Building a company is an interplay of both the short- and long-game. While the burst of speed may feels great, it’s vital to keep a critical eye on what is fueling this growth.

9 of 10 startups fail (vs. 6 in 10 restaurants) and it’s not because these companies don’t know how to get out of the gate quickly. According to some VCs, failure is built into to their investment assumptions by expecting approximately 1/3 of companies invested will effectively not create a material return. Put another way, a company’s backer is expecting failure.

Look a bit deeper into the causes of failure, and 3 of the top 5 cited reasons are core go-to-market capabilities: pricing, proper market assessment and research and preparedness for competition. These are all things companies can proactively improve on, but it requires focus and planning.

It’s in these moments entrepreneurs need to scrutinize their growth to assess and learn, fill gaps and iterate as quickly as possible. This means asking whether the right type of growth is beng achieved including:

  • Is the growth sustainable?
  • How much of our growth is due to my pricing?
  • Are customers buying into the value proposition?
  • What questions should we be asking customers for our commercial decisions?

Preparing the company strategically and tactically is a critical action companies can take to defend against stale growth and here are two areas company leaders can focus on immediately.

Be relentless about your value proposition  

In an interesting conversation with the chief of staff of a public figure here in LA, we began talking about the productivity tools his team used and the companies behind these tools. He began sharing his experience using a particular SaaS product for their digital marketing and CRM from a fast growing VC-backed startup.

What began as just a simple product overview became a indictment on the product (and company’s) value proposition. He simply didn’t see the value why his office was spending more than 3-times more per month versus comparable products. He did not see the value and was instructing this team to begin transitioning out of the product and cancel their subscription.

At minimum, this startup didn’t sufficiently communicate their value proposition relative to price. Bigger picture this raises the question of when their pricing was last reviewed, sales account management and how this will impact related customers. Now the startup is on the brink of not only losing a customer and the recurring revenue, but also the bad word of mouth review, which is equally bad.

As an entrepreneur, delivering value and benefits must be in the DNA of the product and a critical component to the company’s success. Do your customers understand the proposition to the point they open their wallets and not only pay, but will potentially pay MORE (versus alternatives)?  Can you help show customers the value if it isn’t clear already?

One simple exercise is to start is matching the benefits your company believes it delivers to customers and compare against the benefits customers (paying and not) believe they receive. More often than not there is a mismatch. But this is an important learning to reshape the marketing and sales pitch as well as the offer and pricing presented. It’s vital to understand if you’ve actually sold your value proposition – the ‘why’ you’re better than other products or services – or if what you actually sold is a one-time deal or promotion.

Identify capability gaps to monetization and pricing

I once had a entrepreneur who reach out to me for growth advise for her platform startup. When I asked her how I can help, she said simply ‘I need to know what I don’t know’.

It’s this type of gap analysis many entrepreneurs and startups don’t do especially when it comes to pricing and monetization. This is even more true when things appear to be going well, but I’d argue this is precisely the time to look at current processes, skills and tools.

For startups and SMBs, resources are limited so any given individual or team is often responsible for multiple functions. In the early days, rationing resources is critical, but much like how marketing or sales experience is vital to growth, so are developing skills to monetize and price.

If you’re not yet monetizing…figure it out. This doesn’t mean put a price tag on everything, but it does mean honestly determining whether you’ve created enough shared value where both the company and customers are able to benefit.

It also means identifying where value is created for customers (read: why they love your product) and ultimately assessing whether there is a price they are willing to pay.

There may be a friction point too high to monetize or may be inopportune to attempt to monetize now. That’s ok. The bigger concern for leaders should be not understanding that this fricition existed at all.

But beware, because waiting too long to monetize – if this is the what is ultimately what your company plans to do – can also create future challenges. As customers use your product and understand your company, they build ‘institutional memory’; a level of expectation of what your company will deliver.

Pivoting away from this institutional memory creates new expectations and interpretations of value. So companies need to figure out what process is needed to to execute – marketing, sales, PR/communication, customer service – and what capabilities need to be developed or acquired.

Pricing is one of those activities that requires all corners of the company so leaving this to ‘the person who does pricing’ leaves open risk of delays, incomplete rollouts and worse, unhappy and confused customers.

If you are monetizing… is this where you need to be and is it sustainable? Your customers now have a point of reference of what is the price for the benefits they get from your product. Is this develop and structure of pricing enough for your company strategically? Financially?

Pivoting from what was ‘good enough’ pricing or a monetization strategy sufficient to go-to-market must be thoughtful and planned. Doing otherwise can not only hurt growth, but also upset the crticial trust equity your company has built with customers.

Customers don’t like change if it mean it’ll cost them more and the value-added benefits aren’t clear. Larger companies can (but sometimes barely) weather the ‘pivot storm’, but for startups and SMBs, this can truly be costly.

The best market making companies like Amazon and Starbucks get ahead of the curve and not only build capability, but install it into their culture very early on. Postponing can create an opportunity cost to growth. Even the nimblest of companies move slower when they gain scale with more opinions and stakeholders to every decision.

Your monetization model should always be evolving, but how well it evolves will depend on your company’s ability to develop the required capabilities to execute.

 

Final thoughts

All the effort to get your company and product to where it is now must be applauded, but this is the beginning.

There are no short-cuts to thrilling customers and winning your market.  You will have to constantly strengthen all facets of your business.  What you’re working towards is a strong(er) FUTURE position and focusing on what’s driving your growth is critical to ensuring the growth you’ve achieve doesn’t go flat.

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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3 Pricing Misconceptions Entrepreneurs Need to Avoid

As consumers we’re constantly surrounded by pricing. Pricing when grocery shopping. Promotional signs in the store window. The latest email offer. With all the prices we see, it’s natural to build a comfort level with pricing and the purchase decision process. After all, we’re asked to compare offers, make tradeoffs and assess whether the price is ‘worth it’. Then why do entrepreneurs struggle with pricing?

We attribute this disconnect to misconceptions of how prices are set and managed. What we see time and again, is this perception that pricing from the entrepreneur’s consumer experience can be translated over to the commercial side of their business. The unintended consequence is the product’s value is under-marketed and -sold, and ultimately monetization and growth opportunities are missed.

Here are 3 common pricing misconceptions we come across working with entrepreneurs and companies.

 

Pricing is a benchmarking exercise

This is one of the most common misconceptions of pricing. There is a perception that prices are set and managed by benchmarking; if you know what others are charging then you know what to charge.

The problem is the thinking is counterintuitive. If your company is selling something – a product or service – that is ‘disruptive’ or better than the rest, then why do you allow the competitors you’re ‘better’ than to set how much you monetize?

In a conversation with one startup founder building a consumer service platform who explained they ‘mastered’ pricing because their company was ab/le to automate the benchmarking exercise with his primary competitors. There were three questions raised by this method:

  • Are the benchmarks ‘correct’? It was assumed the competitors he was benchmarking actually had the ‘right’ price compared his service. What he collected was what he believed were ‘market’ prices, but customers were still unfamiliar with the product, so much about the customer, offer and lifetime value is unknown.
  • Are the company goals the same as benchmarks? The goals he was trying to achieve differed from what the other, more established, competitors were aiming to do. He wanted to be premium versus competition and wasn’t interested in capturing a disproportionate segment of the market. This contrasted greatly with his market share-minded competitors.
  • Are the company’s products the same as benchmarks? He listed no fewer than 8 reasons why he believed, and states his customers agree, his service was superior to competition. Why then would he price his service or base his entire monetization model exactly the same as these ‘competitors’?

It would be a shame for so much value created in such a cool product be lost this early on, simply because the founder was going to follow what his competitors.

 

Pricing is just a number

Entrepreneurs often view pricing through their consumer experience and perception. The number paid for a cup of coffee, streaming video service or gym membership. Many companies and brands have been very good at giving a sense of price stability and predictability, so when a price change goes wrong, customers let the company hear it.

The problem, and where the misconception lies, is the belief that the objective of pricing is to solely get to a number and then ‘set it, and forget it’. The reality is pricing is more fluid than most entrepreneurs (and consumers) believe. The very best companies are actively managing prices as the value of the product changes.

One example is how Apple prices older generations of its iPhone or iPad. When they launch a new model, they recognize the value for their older generations are lower (also lowering demand) therefore lowers the price. In addition to older products, Apple is also differentiating newer models from a price perception perspective. They are ensuring the value gap with their newer products is sufficient and understandable for consumers.

What is key is matching consumer value to the prices set. This goes beyond just identifying a static number, but understanding both prospective and current customers on what drives their willingness to pay for your product (or not).

 

Pricing is easy

There is a beautiful imperfection to pricing that’s both rational and irrational. This doesn’t mean its ok to get pricing wrong. It certainly doesn’t mean pricing is easy.

One of the reasons why some companies are world-class, industry-defining or [insert your own description of awesomeness] is because these companies understand, among other things, pricing is not easy, but it’s important and to do it well it comes with work.

To be fair, for growing companies, nothing is easy. So much is learn as you go, including pricing. What is vital is recognize how much more complicated pricing becomes as the company grows. Not just the more technical components of setting prices, but also the execution and maintenance elements:

  • Is the Marketing team clear about how they will communicate the product and changes in price? Benefits and value?
  • Is Sales equipped to have difficult conversations to argue for higher/lower prices when speaking with prospective (and current customers)?
  • Is a consistent message in place if customer service receive inquiries about pricing?
  • Who on the team will monitoring pricing?
  • …

Like all things important to the company, pricing is not easy with many moving parts. The larger the company grows the bigger the challenge. Building not only the infrastructure to set prices, but components needed to monitor and maintain prices is not easy, but essential to win.

 

Final thoughts

Pricing carries with it many misconceptions that start from our lives as consumers. Yet continuing on this path can be harmful to the value entrepreneurs are building each day in their company and product.

Short-term, monetization opportunities can be lost, revenue growth not fully realized and development of necessary management processes are slowed. Longer-term, coming back from pricing mistakes and corrections carries both a financial and growth liability as well as a reputational and brand cost with customers and the market.

Being proactive is key and starts with the business leaders of the company to recognize gaps, and develop not only the technical component, but the processes and culture to actively manage pricing as a key competitive tool.

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 Facebook, Twitter and LinkedIn.