To ‘happy new year” or not to? variants include healthy, prosperous, peaceful, good fortune,…
Every year I’m confused by this tradition. These wishes feel sometime meaningless. In business or personal relations, I have tried different approaches.
The ostrich: I don’t wish a happy new year to anyone. And only respond in some cases to avoid being perceived a weirdo.
The dolphin: showing kindness, do it very sincerely and write or say things that were tailored to every person (huge effort!)
The sheep: follow the tradition without questioning it.
The bee: be super active, organised and prepared and contact most people I know until exhaustion.
The chameleon: only reply to those who wished me first and reply in a similar fashion.
I came to the conclusion I like this tradition and its reassuring sameness year after year. Of course, I prefer spontaneity to social convention as it feels weird to wish lots of things to lots of people now. And why not the rest of the year?
But this tradition is a reminder to connect again with people. It is a way to say to people I’ve met that I think about them and still care about them. I might not have had the time to contact you during the last 12 months, but you are still with me. As a matter of fact, being connected to you is important to me.
It is a bizarre tradition but the world would feel strange without it. I would feel strange without it.
So I’ll perpetuate tradition: I wish you a happy and prosperous new year! But now you know what hides behind those words.
You’re wasting your money.
On a product development and launch…
That is void of checking your customers’ willingness to pay.
You might as well go to the casino.
Without checking customers’ willingness to pay before your launch, you’re just throwing out money
In thin air.
Except you’d have a higher chance of scoring at the casino.
Lesson: to increase your odds of winning at your new product to close to 100%, check your customers’ willingness to pay from the get-go.
The truth about Value Based Pricing:
It is not for everyone.
Value Based Pricing is for tigers who:
- want meaningful discussions with customers
- are not afraid of hearing their product sucks
- want to make a difference by helping better
- are willing to transform their organisation
- want more out of their lives
You have finally a product-market fit for your innovation?
Problem: it does not tell whether your customers will actually buy from you.
Why? During their purchase journey, as customers we evaluate value vs the price.
Product-market fit without price is meaningless.
What to do about it?
Do a product-market-PRICING fit.
Now you know if you customers find it worthwhile paying for the value you have created.
Now you know if your costs to create that value are lower than the sales price.
Now and only now, you know if your business is financially sustainable.
Include your customer’s willingness to pay from the first step of your product development. And check again at every step until launch.
You’ve decreased dramatically the failure rate of new products.
Want to be surprised next week?
Do the following and you’ll be surprised like 80% of other software companies who are doing this.
Call one customer each day and ask the following 3 questions:
- what are the top 5 benefits you enjoy while using our product?
- how big are these benefits?
- What is our product worth in comparison to the closest competitor?
Now you know why people buy your stuff and how much pain you take away.
Now you know the value your deliver.
Does your pricing measure and capture properly that value?
Celebrate your small wins
Just as much as you celebrate your giant leaps toward successes
You still have a few hours today to do so.
Nothing will work
Or truly thrive
Unless you price your products
What regrets will I have when I die?
For 20 years +, I’ve been busy with:
Get a job
Drive a nice car
Buy a big house
High social status
Accumulate nice job titles
Not seeing old friends anymore
No time to cry, I need to finish this job
I felt empty
but full regrets.
I’m back now from my time travel: reading “The top 5 regrets of the dying” by Bronnie Ware was listening to the old me on his death bed.
It gave me the courage to change.
and work less
and do what makes me vibrate
and stay more in touch with friends and family
and to be more open to and expressive of my feelings
and not to wait until some great achievement happens to feel happy.
Value based-pricing is a lot of work
But, it just so happens to be the best way
To optimize your products’ pricing
So you can get paid the true value you deliver.
Pricing people are like lawyers.
Talk to them early to avoid problems down the road.
The tale of the pricing black hole.
New product is out.
But quickly sales are disappointing.
Testosterone-management “take some decisive action and drop the price!”
They don’t know it yet: they’ve created a pricing black hole. And you can’t escape it.
Marketing needs to rush some campaign. Cost go up.
The new product gets a bad image internally.
Sales people are not confident to advise it to their customers.
Sales still don’t pick up.
Product people are called incompetent.
You can’t escape the pricing black hole. The only way forward is to get crushed.
“The 20% price cut doesn’t work, add some special promotion”
Sales keep going down pulled down by gravitational collapse of the black hole.
Until you get crushed.
End of story.
Another happy-ending story exists and it is easy to write it: ask your customer for their willingness to pay.
At every stage: concept phase, prototype, development, testing.
They are not willing to pay for it?
Kill your innovation and start working on the next one.
You’ve saved your company millions, lots of stress and a negative company culture.
But, pricing isn’t hard nor a gamble
With the right person on your side.
Pricing without value
Is going to the gym
To stare at the t.v.
All the intention
No real profit
Work harder = sell more
Work smarter = implement Value Based Pricing
Value Based Pricing will show you how to increase your price based on your customers’ willingness to pay.
That is pure profit increase. Not additional work.
The business word for ‘new year resolution’ is ‘an objective’. It is considered ‘smart’ when coupled to KPIs.
As prices of raw materials, equipment and wages will continue to increase in 2022, companies will want to increase their sales price by 5-10%. Think it is smart? No, this is a win-lose game.
You increase your prices but deliver the same value.
You win more money, they lose more money.
Your objective is to protect your margin, not helping your customers.
Your customers will definitely not consider you being smart.
Be really smart this year, don’t join them: start implementing Value Based Pricing and adapt your product/services around your customer’s willingness to pay.
You’ll enjoy superior margins and higher customer satisfaction.
Higher prices, higher value.
Do you know why it is that New Year resolutions need to be transformative? I don’t …
But I know that implementing Value Based Pricing is an excellent New Year resolution: it will transform your business for the better with compounding benefits extending well over 2022.
They don’t need anything. They want to achieve something. Nothing else. So stop asking the wrong questions. It leads to wrong answers.
Do this instead:
Ask them what their objectives are. What does success looks like to them. What gets in their way?
The problem about asking customers about their needs? The vast majority of people know what they want to achieve. This is the WHY. They can explain this very easily.
But expressing a need is actually about the WHAT = what do they need to get what they want. Fact is: most people don’t know. Don’t blame them: usually there are many ways to reach the same result. And comparing those ways can be very tricky.
So when asking customers what their needs are, you’ll get an answer. Because they do not want to look stupid. They do not want to make you look stupid by asking stupid questions. So they’ll give an opinion about a particular way to reach their objective.
So stop asking the wrong questions. Help them to clarify their objectives, success and problems. Then, provide a solution. You’ll create value.
- By implementing Value Based Pricing I’ll increase my profit.
- Correct, but not the way you think
Value Based Pricing = focus on customers value
Customer value = help them be more successful
Help them be more successful = you’re a partner
Being a partner = loyalty
Loyalty = less pressure on price
Less pressure on price = higher long term profits
What will your New Year resolutions be?
I’ve got only one for 2022: not to make any.
Why? To stop that devilish voice inside me.
New Year resolutions don’t work. They never have. And never will.
Year after year, I’ve heard that devilish voice inside me telling me “you see, again it is too difficult to do. You never manage to finish things you started off.”
- Enough! I want to hear the other voice, the cheering one.
If I don’t get to achieve anything in 2022, I’ll have at least silenced that voice.
And that will be my first great achievement towards a better me.
And if I do get something done, I’m sure to hear my cheering voice many times.
A price increase is unavoidable in 2022 due to all-round costs increase.
Are you planning a good, a bad or a beautiful price raise in 2022?
Which one do you chose to be?
All companies will have to raise prices to maintain their margin/profits in the face of higher costs due to high inflation.
The BAD = most companies
“Our costs have increased. We have to increase our prices in turn. We have no choice, Mrs/Mr Customer.”
What you don’t say but think very loudly: “and you have not much choice: either you stay with us or go to a competitor who is also increasing prices. So you’re stuck.”
And you’ll just wait until your customer is tired of gesticulating and reluctantly accepts.
The GOOD = some companies
“Our costs have increased. It is due to raw material price increase, salary increases, shortages, etc… As you are a valued and loyal customer, we give you 6 months protection again this price increase.”
The BEAUTIFUL = very few companies who have implemented Value Based Pricing
“We are launching the new version our products/services with even more benefits for you. Yes, it is more expensive but so are competitors who did not improve their products/services. We’re so confident you’ll like it, we give you 3 months at the old price.”
What you don’t say: Our costs have increased. We have managed to offset them partially by trimming features/services customers did not value much. The rest we compensated with greater customer benefits.”
Value without willingness to pay is worthless. Nothing, nada, rien.
You’ve got a product market-fit: tests with customers are positive.
But after launch, sales do not take-off. Reason : customers are not willing to pay. What the f***! , why???
Here is what happened and how to fix it.
What happened: you’ve left pricing for the end, worked on it just “to be ready for invoicing” and have discovered the hard way customers are not willing to pay for you product/service.
Fact is: your pricing model and your customers’ willingness to pay are not an afterthought.
They are the other side of the coin: value on one side. Pricing on the other side.
How to fix it: have a product-market-price fit.
1 Find the target audience, understand what makes them successful and their problems
2 Find a way to solve their problem or make them more successful.
3 Test the concept, and the price immediately, including their willingness to pay and your pricing model. They are not willing to pay (enough)? Iterate until success. No success? Drop the idea and focus on something else.
4 Build proto, validate again pricing and willingness to pay
5 Develop final product, validate again pricing and willingness to pay
Are your customers still willing to pay for the final product? OK, you’re ready for a successful launch.
Do your product managers spend most of their time working on features?
Their job is to understand and solve customer’s problems at a price point they are willing to pay for.
And then, only then, to use technology to deliver value and create features.
Every activity in your company adds value to your customers.
Value Based Pricing shows you what your customers do effectively value. And what they don’t. What they don’t value but you keep doing is waste. Waste means higher costs; means higher price.
Make sure all efforts are dedicated to creating value.
The alternative? Being less relevant.
👍🏻Like what I write? -> tell the LinkedIn algorithms by liking my posts. 💪
If you don’t tell them, they won’t know.
And I won’t know either 😱 …
Don’t like what I write? -> click the … on top right corner of this post to unfollow me. I won’t take it personally.
I just unsubscribed from LinkedIn Sales Navigator.
Interesting thing: the folks at LinkedIn seem to understand customer value. And loss aversion.
They use them to improve revenue. Explanation ⬇️
1) customer value: after clicking on the unsubscribe button, I got the message showing (see screenshot) what benefits I’ll be losing.
2) Loss aversion, as Mark Stiving says ‘I hate loss aversion’ so did I at that moment as it made me pause my cancellation. “Maybe I could still do something with all those InMails?” I had to make an effort to remember why I was cancelling. And finally I went on with it.
Customer value + a hint of behavioural pricing = better revenue.
My personal story about cash-flow and financial freedom.
I used to work hard
to be able to borrow money
to buy things I didn’t need
to impress people I didn’t care about …
And these things would end up depreciating …
… helping offload my wallet quickly. So I had to work harder to replenish it.
I now work hard (* see comment)
to be able to borrow money
to invest in real estate.
These generate positive cash-flow from day one,
and appreciate over time,
adding to my net worth,
helping me buy more assets,
to buy back my freedom and time.
Work towards your financial freedom, not to impress people.
- ADD something in comments.
the truth about working hard nowadays: I’m actually working a bit less hard now than before and so do my wife.
Have you tried implementing Value Based Pricing. Was it like climbing a mountain?
Yes. It is tough and you need to train regularly.
But the rewards both at individual level and profit level are big.
So here is how to get started with it.
Perfection discourages progress. When the mountain is too high to climb, you don’t even start training to climb it.
1 Start with a small step today. Do not commit to climbing the summit. Commit only to do it 30 min per week.
-> Speak to one customer this week and ask what value means to them and what doesn’t. No more.
2 Next week call another customer. And the week after next. etc…
3 After a few weeks, you’ll notice progress. You don’t know where the summit is but you’re progressing.
-> You start knowing what value means to them. And what does not.
4 Progress leads to small success. One day you’ll see the summit through the clouds and walk towards it.
-> You’ll discover what your product/service misses. And you’ll discover what features they don’t care about.
5 Small successes lead to mastery. The summit is now within reach.
-> You’ll adjust your product/service by adding and deleting features.
6 Mastery is the step just before perfection. You’re sitting on the summit with stunning views!
-> Now, you understand features do not matter. Value does matter. And you’ll price you product/service based on your customers’ willingness to pay.
Conclusion in comment:
You go back home tired but energised by your accomplishment.
-> Now you know you deliver superior value to your customers and you earn superior margins.
Get started with your Value Based Pricing today. Make a small step today. Call one customer.
From price -> pricing -> profit -> perpetuity
Move away from sticking a price and go to implementing Value Based Pricing.
Your business will be eternal.
Perpetually relevant to your customers.
Read below to know why
A price is your exchange rate for your goods/services.
Every business puts a price on its products/services.
Most businesses have some sort of pricing system in place.
The minority of businesses try to manage profit.
But only a few are able to deliver value to stakeholders year after year, consistently.
Value Based Pricing forces you to know and to deliver what your customers value. At the price level to what they are willing to pay for.
It forces you to ditch what they don’t value. It forces you to be sharp. And relevant. Day after day.
By having a continuous discussion about value with customers and their willingness to pay, you effectively buy your company an insurance again obsolescence, year after year.
Value Based Pricing is your insurance for perpetual relevance.
Can you use pricing in the subscription economy to influence customer loyalty?
Below, the story of my lose-lose experience. Many of you will recognise it.
And how to turn it around.
A few years ago I was with mobile phone subscription company A. I’m with them now. Again.
After my first year promotional contract, I called them:
“I’m paying full price no. I’ve seen this promotion from your competitor B. Can you give me a similar deal?
- Sorry sir, now that your promotional offer has ended we can’t do it anymore.
- OK, I’m going to cancel my subscription.
- I’m sorry sir, I can’t give you any more promotion. “
So I left and went to the competitor B.
I’m back to company A now. You guessed why.
The thinking is: “My loyal customers won’t go away. They are my cash machine that fund promotions for new customer acquisition.”
But what a bad customer experience this is! What do you think my level of loyalty to be like now?
Telcos are sometimes considered “almost commodities” with little customer loyalty.
A better way: reward me as a loyal customer immediately so I don’t have to go through all that hassle. And you gain a happier and more loyal customer.
Pricing and loyalty, part 2.
The good, the bad, the beautiful.
The bad. Attract new customers with discount. Then have loyal customers pay full price.
The good. Attract new customers with discount. Retain loyal customers with same discount.
The beautiful. Attract new customers with discount. Retain loyal customers with something exclusive they value. Something you can deliver at a lower cost than a regular discount.
Benefits of the beautiful:
For the customer: same benefit in € terms; higher value and satisfaction.
For you: increased retention (customers have a sense of belonging to a special group);
But biggest benefit of all: see comment below 👇
Comment: although not visible in your top line, your profit will improve substantially. Through 1° higher price (no discount),2° longer customer life time
What is a good price?
Seller: it is a high price !
Buyer: it is a lower price!
The inevitable in-between compromise?
- The seller’s perspective:
A low price will not motivate the supplier to deliver good work.
Work will be rushed to move to the next work.
Quality might be compromised.
Mid to long term supplier viability weakened.
- The buyer’s perspective:
A high price will give the perception to the buyer that value for money is poor.
Satisfaction and recommendation will be low.
So will loyalty be.
The in-between compromise? On paper, yes. But neither might be happy with it.
A good price 🤝 is a price that enables the buyer to derive more value than he paid for and he feels good about it day after day.
For the seller, it is to earn enough for a good living and feel motivated to delivering the promised value.
To achieve that both sides need to talk and be willing to understand the others perspective. Empathy is the key here.
Conclusion in comment below:
That’s what I love about pricing: it is about business, value and negotiation. But that alone does not cut it. Pricing is also about people. And people communicate and express feelings.
Don’t like change?
How about things remain unchanged for ever?
… you keep doing the same job all your life
… you don’t meet new people
… you always go to the same place on holidays
… you live at the same place for ever
… you drive the same car, use the same phone, wear the same clothes
without change we would all still be living as hunter-gatherers.
My colleague: “You’re already leaving the office? It is only 3 pm…”
- No I’m looking for solutions. They’re waiting for me outside.”
Solutions to my problems never came while sitting in front of my screen. And never will.
They come either when I walk or jog.
Or when I interact with someone else and share my thoughts.
They come in that space and time that is between me and the world.
Where thoughts are free to flow, test different connections between them to finally find their way to the light bulb.
How do you find solutions?
Shoot for the moon Even if you miss, you’ll land among the stars. ✨
Shoot for value based pricing 🚀. Even if you miss higher profit, you’ll land more customer loyalty 😍 💪🏻
I’ve been a bad product manager.
Here is my story and what I’ve learned.
When working on the first European introduction of the brand new Auris Hybrid car, together with the team in 2009, I insisted the car should have LED daytime running lights. Several new competitors were introducing these. It was a way to show we were amongst the first on the market. “I want the same lights as on Audis” I said showing pictures.
Follows months of discussion with Engineering, Finance and Production-side to negotiate for something that adds costs, was not originally planned (read new parts need to be developed, tested, supplied, etc…) and for which we could not increase the price to the end customer.
Finally, one day we got the news that we obtained what we wanted.
But the victory quickly turned bitter.
Yes, the car would be equipped with LED day time running lights and we were amongst the first on the market !! But these lights completely missed the point.
The point was to make the car stand out vs competitors. The LED lights had to be integrated into the design to enhance the stance of the car. Give it a technological look to show outside the amazing hybrid engine technology that was sitting inside.
But it all failed.
Reflection followed. I came to the conclusion it was due to my inability to explain why I wanted to those LED lights. The why, the objective, the expected result and how it should be executed to match the objective. It was so obvious to me that I was not able to articulate these elements. See the picture.
As a product manager, I should not have said what I need. That is not enough.
Here is what I should have done: I should have expressed why I need it, the problem I’m trying to solve, what is it that I’m trying to achieve and what does success means in this case. I would have discussed with engineers the best way to get to what I wanted.
And maybe it could even have been something different from LED lights.
Your price is the exchange rate
that a customer is willing to give 😍
for your products / services.
You can improve it. All it takes is 5 phone calls.
Here is how 👇
By finding out how much they are willing to pay.
- pick up your phone and call 5 customers in the same segment
- ask them to list the benefits they derive from using your products
- do verbally a quick price sensitivity analysis (ex: ask them how they feel about the current price and to quote you what would be a cheap, acceptable, expensive, too expensive price).
Is their ‘expensive price’ quote above your current price?
That is your potential for improvement. 😁
Success doesn’t mean…
Anything, really .
Because it’s not:
The flashy car .
The white picket fence.
The degrees on the wall.
The never ending bank account.
Which might break down.
Cost you a fortune.
Not get you hired.
Cost you trouble.
Success is the moments of freedom you enjoy today.
A riddle? What I am?
- I impact every level of your company
- Everybody has an opinion on me, but few understand me
- I’m communication
- I’m highly visible
- I’m behavioural
- I’m positioning
- I’m analytical
- I’m empathy
- I’m technical
- I’m strategic
- I’m technical
- I’m difficult.
- I’m fun
- I’m the biggest driver of the only figure that matters: profit.
What I am?????? Guessed it?
I’m talking about … Pricing, of course ! .