Key trends in monetisation: 5 things to think about for 2022
There's been a massive increase in attention that pricing is getting in terms of its potential for value creation. Maria Orlowski, Inflexion Director leading the commercial strategy team, was recently invited to participate in a webinar hosted by consultancy Simon Kucher & Partners to discuss the trends in pricing strategies for growing companies. Here are her main takeaways.
1. Low-hanging fruit – price alignment: If your product or service delivers high value, you haven’t changed prices much in the past and you have high customer loyalty – then there is often an opportunity to align price with value. I see this frequently, and the earlier in the investment period you address it, the better. If you get uplift early on, it has a disproportionate impact and gives more time and space to undertake more complex strategic changes, be that new products, new price models or new markets for example. Just because it is lower hanging fruit, doesn’t mean it’s a one-size-fits-all blanket change. You still need to approach it in a smart data-driven and customer-centric way.
2. The shift towards usage-based pricing: There is definitely hype around usage-based pricing. Really what it is saying is to re-assess your price metric and think about what aligns with the value you deliver, and how customers use your product/service. It is extremely useful in sparking a conversation about what the best pricing model is. People tend to default to a simple all-you-can-eat or seat-based model, when really they need to consider all the options. User-based pricing may be the best metric in certain circumstances, but there’s not just one type of user and just one price for them. You need to differentiate to align that pricing with value.
One business in the Inflexion portfolio company has been pivoting how they position their solution – from a send/storage tool to a workflow solution. This has also sparked a debate around what usage is and where the value comes from – so maybe it’s not about sending content but about what and how much content you are managing in the workflow.
3. Product-led growth continues: Companies that have adopted a product-led growth strategy have really flourished since the pandemic – but it’s a massive change if you’re trying to shift to get there and aren’t a native product-led growth business. Product-led growth is where the main sales motion comes from the users of the product, rather than through a traditional sales team.
One business I’ve been working with had been sending physical products in the post as their product a few years ago. Now it’s all shifted online, and they are looking at the next generation of complementary products – a truly product-driven growth strategy.
Shifting from a traditional sales motion and layering on a more product-led growth mentality requires a huge shift in mind shift that not only has implications on the product and sales teams, but also the wider operating model. Keep in mind that you don’t have to be product- or sales-led in your growth. You can have a hybrid approach, and most do. Of course you can shift the other way too – lots of companies scaling up now start as product-led and may eventually look to an enterprise model.
4. Overcoming internal resistance: Shifting the commercial strategy often entails at least some resistance as it’s often a critical and potentially risky move, but if done right, the rewards are high. As with any change you have to take people on a journey internally, and you have to take an evidence-based approach. You can also test and iterate to minimise risk and prove the benefits. For example, if you are introducing a new sales team or product, you could explore this on the side without affecting the core of the business.
5. Be data driven and systematic: When you do decide to do something, do it in a robust way. Acting out whims and not thinking it through can backfire; getting to the right answer with high conviction requires number crunching and research into your customers and what they need and value. But be sure to avoid paralysis through analysis! There is some pragmatic best practice that you can follow to maximise impact and minimise risk.