Posted on

Pricing your SaaS Product and how we did it at Sosio

In case you aren’t updated on the current affairs, 2014 is shaping up to be a controversial year; and we’re not referring to Justin Bieber’s antics, Mr. Kejriwal’s dharnas or Mr. Modi’s development stories. Instead, a new contention is brewing in the annals for us which is every entrepreneur’s one of the worst nightmare: deciding how much to charge for your product 😉

Pricing is one of the most difficult things to get right. There are several questions that come to us, and its good if we can get an answer for each of them. Should my MVP be free? When should I start charging? How much should I charge? Will I lose my first customer, if I start charging higher? Will the freemium model work?

We get into these FUDs(fears, uncertainties, doubts) because whenever you ask for money, there is friction, which cannot be removed, it can only be minimized. The best way to overcome these objections is to prevent them from happening. Well, I tried to study, how other people, were addressing the same problem, and tried to come up with one for my own product. Its taken more than 6 months, and hours of brainstorming with few of the amazing folks for me to reach here. I will try and summarize few of them.

The trouble with software pricing

Pricing is a basic economics thing. Unlike traditional manufacturing products, where there is a fixed cost of raw material, labour, transportation etc. a cost price for each unit is pretty clear. On this objective value for each of the unit, the sales team, tries to create a perceived value of the product, based on reference points of competing products, and after a basic survey of the demand curve, a price point is generally arrived.

For softwares, the case is slightly different. After break even, the price of a new unit, tends to be negligible. So defining an objective value for each unit becomes tough. Chances may be, the product you are creating may not have a direct competitor, or if there is an alternative it might be free. In that case, extrapolating from a reference point becomes tough.

The price tag you put on your software, is one of the most challenging thing to get right. Not only, it keeps you in business, it also signals your branding and positioning. Iterating on the product, is far more easier than on the price. Lowering the price is generally easy and appreciated but it takes to be an Amazon to demonstrate it profitably. Increasing the price, is tough, because it adds to the churn. So doing the most you can, to get it right, generally accounts for a successful business in making.

Addressing few of the initial Questions

Should I charge for my MVP?

Despite validating the problem that I was solving, and clearly mentioning the price point during the customer interviews in my initial stages, I used to be afraid of asking money for the product, because I had a fear, the product is not ready, the Minimum Viable Product was minimal, I was not sure of the hidden bugs and I was not sure, how deeply have I solved the problem.

The two thought leaders Steve Blank and Sean Ellis had the following to offer –

Steve mentions pricing to be one of the important questions in your customer interview, this helps you validate that the product’s value proposition is compelling enough for them to pay, and the problem is worth solving. Once the MVP is built, Steve asks you to sell it to your early customers. There is no clearer customer validation than a sale.

Sean Ellis, removes pricing to the post-product/market fit stage:

“I think that it is easier to evolve toward product/market fit without a business model in place (users are free to try everything without worrying about price). As soon as you have enough users saying they would be very disappointed without your product, then it is critical to quickly implement a business model. And it will be much easier to map the business model to user perceived value.”

Well both of them have their own merits. So I did an A/B with my customers. I offered two of them, the software for free, and mentioned to the other that we will be charging. The folks who were given free product, did not use it and it got shelved, whereas the ones who were paying, had feature requests, reported few of the bugs they came across, solving these bugs, and responding pro-actively helped me develop better relations with them. The free users asked for additional features, whereas the paying users asked for improved features, which eventually meant a better product.

Personally, I align more towards Steve’s side, because, the best validation you can get for products value prop. is the customers’ bucks, and if it gets figured out initially, nothing like it.

Should I go for a freemium model?

Lincoln Murphy has a white paper on The Reality of Freemium in SaaS which covers many important aspects to weigh when considering Freemium, such as the concept of quid pro quo where even free users have to give something back. In services with high network effects, participation is enough. But most businesses don’t have high enough network effects and wrongly chase users versus customers. The notable point in the above paper is – “Freemium is a marketing tactic, not a business model.”

People have struggled with freemium, and dropped it, with few exceptions of Wufoo and FreshBooks. The conversion for free to paid accounts has been relatively low even for Pandora, Evernote, and MailChimp. 37signals has greatly deemphasized their free plans to almost being fine print on their pricing pages.

Its not impossible to launch successfully with a free plan but things can get easy, when we simplify freemium, not look at it as a business model, with the only objective for it being to get people using your product in a manner that makes them want to pay for more advanced features.

What should I consider while pricing my software?

There are a number of ways to approach this problem.

The amount of money a customer is willing to pay, primarily depends on the following two factors –

  1. Value extracted from use of the product
  2. Emotional Willingness to Pay, which is an after effect of perceived value of the product.

And hence, two of the most obvious pricing strategies are –

Pricing based on the value provided

This is customer-first strategy. The amount of value each customer gets out of using Sosio, corresponds with the amount they pay us. Tried doing it, but devising an excel sheet, where in we could go and show, that you used sosio for X, and it increased your value Y times, is something, we are yet to find.

Pricing based on cost

This strategy takes care of our engineering team, sales cost, server and other rentals. This is generally intuitive from an engineering perspective. Pricing based on the number of accounts, the amount of data that is processed and saved, give us a good number, as to how much we should charge.

But the above approach makes it a uni dimensional pricing strategy. Our product is not just the product, its the customer support, its the number of users, its the problem that we are attempting to solve. The Quality of Support we provide, the response time of the support, Email Support versus phone support versus in person support, number of support incidents, product features and depth of usage are other metrics are other dimensions to reflect upon while deciding the pricing.

There are several params, to consider, and you can go on complicating your pricing and creating complex tiers. Even, I was doing one, till I read this post by Dharmesh Shah, and how he randomly arrived at a price of USD 250. I could have gone for a ballpark of maybe 20k INR, but here is how I arrived at what I arrived – I had few features, which other softwares, were providing as well. I have tied down features, uniquely, but my software, as of now, lacks the depth that these enterprise softwares offer, primarily for 2 reasons –

  1. those features will add to the complexity of the product and cost.
  2. the customer segment, I am targeting, does not require such depth.

What I tried was, brutally trimmed the price 10 times, of each of the features, and talked to customers. They were not willing to pay that much, but because I wanted to get started, I reduced it 50% further, the ones who were, happy, continued, the rest were a good bye.

With subsequent improvisation of the product, the prices will increase, and we will keep iterating on it.

Another advice, I got, while I was discussing my pricing strategy with Prof. Prem was to charge for the service and strategy. Well I don’t want to go into the details of how, an analogy can be if you are selling Adobe Photoshop, reduce the price of software, and charge for educational offers. It is working for me, two of my customers are happy with it.

Deciding a pricing tier

The four things to be taken care of, while deciding on pricing are –

  1. The price tier should be simple(Mixergy just uses the names of the plans as calls to action)
  2. It should be easy to compare, with the competitors.
  3. You should help people choose a plan.
  4. Avoid giving, too many choices. (The paradox of Choice)

An easy way of arriving at the tier is, creating customer persona, and segregating them.Your pricing tiers are a visual representation of where your buyers fit in your business model, and each tier should align to one type of customer.

Tiers makes sense for a lot of startups. But as of now, we are doing without it. Because based on the 50 customers I talked to during the sales process, most of them, got stuck, while I was explaining them the pricing model. If you’re a startup (or any software company) consider if your customers really need the additional pricing levels.

To end it all –

“Although scientifically purer, it often doesn’t make sense to change a single variable at a time. Theoretically, you shouldn’t change the price of your product, your discounting strategy and the types of bundle that you sell, all at the same time. But practically, it can be the right thing to do. It’s more useful to fix the problem than to understand why it’s broken. When a scientist goes on a blind date that doesn’t work out then, in theory, he should fix one variable at a time, and re-run the date. first, he should change the partner but go to the same film and buy the same flowers. Next, he should keep the partner the same, vary the film and keep the flowers the same, and so forth. but the pragmatist in him will, or should, change the girl, the film, the flowers, and buy some new clothes and shave too. If it works, he might not understand why, but at least he’ll have girlfriend.” – Neil Davidson

And this awesome piece by Seth Godin –

Go ahead and act as if your decisions are temporary. Because they are. Be bold, make mistakes, learn a lesson and fix what doesn’t work. No sweat, no need to hyperventilate.”

Guest Post by Saket Bhushan, ADFL at Sosio Technologies

Posted on

Piracy and freemium killed the Indian software buyer

Nobody in India buys software.

If the above sentence draws your attention, read on! If you are based out of India, think of the last time you bought software (yes packaged products). Now think of all your friends and guess when they bought software. Now, here’s the clincher, “When was the last time you bought software made in India?”. 99% of the people, irrespective of their socio-economic status will respond in the negative. lr-processed-0399

Product evangelists will now talk about the cloud/SaaS and the subscription economy, and how it is the great leveler when it comes to software products. As an entrepreneur selling a SaaS software in India, let me be the first to tell you that it is really hard work. Most entrepreneurs have told me that the Indian customer is price sensitive, I say, a majority of them are insensitive. Now don’t get me wrong. I don’t wish to rant. I am trying to catalog and present reasons why selling SaaS software is hard. Here’s what I think it is:

Let’s talk a little bit about the Indian software market

In the last two decades, India has seen two revolutions which helped create a large software market. Firstly, the economic deregulation in the 90s which enabled a steady growth of the economy, disposable income and import of technology. Secondly, the telecom, and subsequently the PC and mobile revolution that has created a (supposedly) large software consumption market. PCs, Laptops and tablets are now commonplace in Urban and Semi-urban India and the latest numbers indicate 15 Million broadband and about 100 Million mobile internet users. A look at these gargantuan numbers and you might begin to assume a large consumption market, but to give you a sense of reality, let me ask you the same question one of my mentors asked me – “Name 5 large Indian software product brands selling in the Indian market”

Enterprise software is probably your best bet

If you are selling software, the enterprise market is probably your best bet. Bharat Goenka, co-founder of Tally solutions, said that “In developed economies, SMBs act like enterprises and in emerging economies, SMBs act like consumers“[2]. Many of our customers are SMBs who are looking to use technology to grow some component of their business. And most of the times, we don’t deal with the company, but with empowered employees. The ones who have a budget at their disposal and are forward looking in their outlook. What we found was that the same stigma that existed in the 70s and 80s in the US software markets exists in the Indian SME customers of today. A lot of them look at software as something that will displace them in the organization and are extremely defensive in the matters of adoption. But we all know how that worked out in the US and UK markets and I am hoping India follows a similar trend.

Oh wow! I never knew you could do this

A lot of people we have met have been genuinely surprised at what our product does. It’s tough to manage these customers because we spend a lot of our acquisition time on sensitizing them about the problem before we present the solution. Even if you are doing something radically new, it is easier to bucket yourself into a genre that is popular and accepted. For example, we are a customer conversations player, but it helps if we refer to ourselves as a Social CRM or a marketing insights product. Ignorance about a genre of products has a big pitfall – customers don’t know how much to pay for the solution. This is really tricky because it usually leads to a customer deliberating on paying for the solution.

“But we can do this for free on Google”

Freemium is both a good and bad thing. Almost every customer of ours expects a free trial for a few days. In the products eco-system it’s become a norm,  but a lot of productized service companies I know have been asked for a free trial on bespoke software. Most users don’t understand the price they are paying when using services like Google or Facebook and usually expect the same when we tell them about our “use on the browser” service. Usually this means we have to get into a lengthy explanation about  why our product costs so much. The best experience I have had was when a customer, who understood the online advertising economy, asked us if he could use an ad supported model of our service for free!

Freemium might be a viable option early on but when looking at growth and scale, I don’t believe freemium is a sustainable economic model. It is a marketing tactic at best!

“muHive crack codes”

One morning, while peering through our website analytics, we were surprised to find a search keyword “muHive crack codes” in the list. This was a good and a bad thing: good because some customer actually found our service good enough to look for a cracked edition, and bad because we knew this customer wouldn’t pay. And yes, if it’s crack worthy, then it is probably good software – that’s the Indian psyche. Industry estimates put the total value of pirated software used in India to be upwards of $50 Billion[3]. Why won’t we pay for software? That’s a long post in itself, but to be brief: piracy was not controlled in the early days of the PC revolution and hence the assumption that software is free. Also, cost of software has always been calculated based on the affordability and costs in developed markets. To illustrate my point, I will end this section with a question – If Microsoft Windows were to cost Rs 1000 instead of $149 (Rs 9000) would the piracy numbers be different?

The pricing slope

Researchers put the Indian middle class at earning $10/day or roughly $300/month. To give you an estimate of why this matters, the urban poverty line stands at $14/month – yes, a month. The Indian middle class is about 100 million people and $300 per month usually supports 2 to 3 people on an average. Now when you think in these terms, you can imagine what the cost of ownership of a $149 software sounds like. Add the fact that software is a non-tangible artifact and you understand why Indian customers are extremely cautious when it comes to software purchases.

Even with enterprise customers, your pricing strategy has to be “just right”. And you have to account for discounts. A majority of the Indian customers we meet ask for some form of special pricing. Now, this might not be a trait which is unique to the Indian market, but understanding the cultural and economic context of the demographic becomes very essential when it comes to pricing. Marketers talk about using tricks like prepaid accounts (India has a large prepaid mobile subscriber base), daily subscription and data based pricing but all of them have the underlying assumption that the customer is willing to pay and understands the cost of the solution.

In conclusion

All these are what we have found to be the issues with selling software in India. Even though we have good answers to some of the questions our customers pose, in my opinion, it will still take a long time for the Indian software buyer to evolve and for good product companies to make a mark. Rather than end on a dismal note, I will now list down what actually seems to be working for us, and also some insights from other producteers.

– Customer don’t mind paying for bundled software. Hardware, especially mobiles and tablets might actually help in software sales.

– Customers will pay for immediate utility. What someone referred to as “First order business” solutions; meaning something that can make them more money instantly. Example: Email and SMS marketing solutions. Customers don’t mind paying for advertising and reach.

– Customers usually pay when they feel they are missing out on revenue or an opportunity. A loss averse technique to selling is what we have seen work best.

References:

 

 

Posted on

Pricing dilemma

A year back I was involved with a leading mobile apps company on an issue related to product pricing. The company developed customized mobile apps for business. At the time it had a staff of 20 programmers and reasonably successful – having on its customer list several top global corporations like cola companies, few leading banks, advertising giants and others. It had revenues close to USD 1 million. The company had identified 20+ software functions (routines) that were commonly used in most mobile apps. They had put these together into a single library that programmers could access from a central repository when working on a mobile app project. Examples of such routines included memory management, real-time authentication, camera control, text messaging within the app and so on. Use of this central repository of frequently used routines had resulted in 30% saving in programmer time, standardization and uniform quality across projects, shorter time to market and finally the monetary benefit.

The company saw a window of opportunity externally. They knew the mobile app business was growing at a fast clip with app vendors mushrooming all over. They were also aware of the trend of end customers developing mission critical apps internally. Both these customer segments would see a value proposition in the library if the company offered it. The company was at a critical point – thinking how to breach the psychological revenue barrier of USD 1 million. It faced fierce competition that had brought down margins from 80% to 25% in just two years. They thought the library was a ticket to new profit stream and improved competitive position. They were debating how to price and market the product.

However this meant a sea-change in the way the company thought and worked. So far, they delivered single project as per known customer requirements to a single known customer at fixed price. They did their best to deliver within time and budget. They priced their services at cost plus margin. Any delay ate into their margin. Selling the tool externally would involve selling a generic product to external customers whose size and number was unknown and uncertain. They had a hunch but did not know for sure the external customers would really see value in the offering. For example a tribe of software programmers take pride in and get thrill from solving tough problems. They would not care for such a product. A few team members even felt that their competitors would also acquire the library thus diluting company’s competitive advantage in the market.

The company sought answers to several questions:

1. Should they sell the library externally at all?
2. Should they price it on cost plus basis or some other method e.g., value based pricing?
3. What should be the list price of the product?
4. What should be the license structure i.e., kind of licenses they should offer?

The company made a set of decisions. I will share those in the next post. Meanwhile, I invite you to share your suggestions on the questions facing the company.

Posted on

Lean way of sales

“Not meeting desired sales target?” is perhaps the most important question in any of senior management meetings.  But how do most companies react? Answer: “Re”setting the targets,“Re”structuring marketing campaigns and finally “Re”placing sales team (starting from executives ending up replacing sales director) and what will happen by doing several “Re’s” together…absolutely nothing. On the contrary such measures can damage team morale.

It is time to change, to replace traditional methodologies, to innovate and to spark. Time to analyse the mistakes.

Let’s rethink

What is a sale?  Act of selling a product or service in return for money or other compensation

Whats makes a sale?

  • Make the relevant presentation – Yes.. its necessary
  • Create connection between product/service and prospects. .. – Yes.. its necessary
  • Get to the point – Yes…its essential
  • Be animated … OK
  • Use showmanship… Ok ok
  • Use physical demonstration … Yes It’s necessary.
  • Believe on your product and Services… Aaahhhhhh….Its impossible….I have never seen it never utilized it ..how can i.. yes but I have capability to convenience customer though I haven’t  Utilized it …” True Salesmanship J”

And How much % this “making of a sale” will individually or contributed generate sales ?…Can’t Say. May be our sales guys are not proper… (In reality, sales guys are the most smartest guys in any of the organization).

It’s time for thinking…and changing. Let’s  make it the Lean Way…change “Re’s with Do’s

  • Do we are really addressing customer problems, completely?
  • Have we minimized cost of consumption (Price+ Time+Hassle)?
  • Do we provide exactly what customer wants?
  • Do we deliver value where customer wants?
  • Do we supply value where customer wants?

Remember, first sale to a customer could be important but it is the second sale that matters the most. Second sale will happen only if customer the is satisfied. Maximum value and minimized organizational waste is key to customer satisfaction. These are the only things that make a sale, make a customer buy, make it a competitive.

Guest Post Contributed by Meghshyam Gholap, Lean Sales Specialist

Posted on

Mindmaps for Product Startups!

In a product startup you may need to deal with lots of information about your own product features, your market, your competition, your competition’s product features, results of internal brainstorming sessions you may conduct or information about who you can partner with for various aspects of your business.

Mind-maps provide a great way of organizing all the information you gather or generate internally, and create documents or pictures that capture the relationships between them precisely. Most importantly, it can help convey the same concepts to your investors, co-founders, colleagues, employees and partners. It can help you organize mentally for your own use or convey a large amount of information to others in a short amount of time.

Wikipedia’s definition:

A mind map is a diagram used to visually outline information. A mind map is often created around a single word or text, placed in the center, to which associated ideas, words and concepts are added. Major categories radiate from a central node, and lesser categories are sub-branches of larger branches. Categories can represent words, ideas, tasks, or other items related to a central key word or idea.

Typical ways you can use MindMaps in Product Startups:

  • Analysis of the Market: How does the market you are looking at addressing organized? Mobile devices could be tablets, smartphones and feature phones. Tablets could be smaller or larger. Within each you could have iOS and Android Devices. Within Android devices you could have different versions supported by different devices, and so on. All of these branches could be captured effectively in a mind map.
  • Product Ideas Generation – What are all the different product ideas you could consider initially and in an on-going basis. How are they organized with respect to the various products and versions that you are already producing or planning to produce?
  • Generation and Organization of Product Feature Groups and Ideas – Very useful for product managers modeling existing feature groups and features, new features generated and where they might fit in.
  •  Analysis of the Competition: Competition in the market is not always straightforward. Competitors may offer products and services that may be in a related market, overlapping markets or completely unrelated markets. Competitors may be offering a service that may compete with your product. All these nuances can be captured effectively in branches off branches.
  • Analysis of Pricing Models:  If you considering different pricing models – One-time licensing vs Subscriptions, Annual or Monthly, etc., you could capture all the different variations in mind maps.

There might be plenty more uses for mindmaps once you get comfortable with what it does and how it can be used. Some of the Mind Mapping tools come up with ways of annotating each node with additional notes that can pop up once you hover over a node in the mind map with the mouse or a pointer. This can come in handy in naming each node with a short name and including more descriptions in the additional notes.

Mind mapping can come in very handy at the start-up stage even before you have a plan for your business. When you are doing your preliminary research or putting together your business plan later on. Or when you are already operating and your product management takes on a formal function!

There is a huge selection of Open Source and Commercial Mind Mapping Software that you can use – more details here in Wikipedia.

I have had very good luck with the Open Source version of FreeMind. It allows me to create mindmaps in their proprietary format and send them to others who have the same software (.mm format). For others who may not have FreeMind, I export the mind maps to PDF formats and send them along.  You can check out downloading FreeMind available for various Operating Systems and playing with it here.

Here are a few examples of Mind Maps I created using Free Mind. These are PDF versions of two mind maps I created when I read two interesting books sometime ago:

Jennifer Aaker’s Book The DragonFly Effect

Designing Brand Identity – Alina Wheeler

 A Picture is worth a Thousand Words! – Anonymous

 

Posted on

The little Spark with great promise – Inaugural #PNMeetup on Pricing for Enterprise Sales

When a bunch (around 45-50, I didn’t keep the count) of Product enthusiasts – with experience accumulating into decades – gather at a single place to share their learning on specific topic in a compact & well-moderated session of 2 hours, it’s worth every bit. That’s how I felt coming out of the inaugural session of #PNMeetup – Pricing for Enterprise Sales: Specific & Important Topic, Quality Participation, Richness of Experiences, and Quality Conversations.

The location, Hauz Khas Village in New Delhi, carries a constant buzz and energy. Very apt for a meet-up like this. Kunzum Travel Café (Thanks for being a great host for the event!), should be happy because participants used up every nook & corner of the place. Many of us had to settle down on the carpet with no more sitting or standing space left! Of course, the snacks & coffee was great too. But, that’s not what everyone coming in was specifically looking for (especially since the last 500 yards got harder to make with the traffic and parking situation ;-)).

We were looking for some great (practical, experience based, relevant) conversations and takeaways on Pricing. And, there was plenty of it, coming from speakers as well as from the participants. As much as is possible in 2 hours of time, that is, also thanks to some great moderating & counter-questioning by Arvind Jha during speaker sessions, and Rajat Garg & Vivek Agarwal in the un-conference session.

Tushar Bhatia, Founder of Saigun Technologies, set the tone for Enterprise Products Pricing by sharing his experiences on Pricing Strategies and Sales tactics. Tushar emphasized that Pricing is not a linear decision, but a complex process and subject to assessment from multiple parameters. He also differentiated the Pricing Strategy from Sales Process. Pricing, as per him (in the context set of Business Planning, Scalability, Consistency, Standardization, and a reflection of the Value Proposition) is a guide at broader level, while on sales tactics front, one should be willing to consider the customer & geographic circumstances as well. The decision matrix for Pricing decisions typically is pretty complex, and a product undergoes multiple iterations of pricing models

Pricing for Enterprise Sales
Pricing for Enterprise Sales – Tushar

before arriving at the sweet spot. However, various types of customers may need to be assessed in their own contexts when deciding on a deal pricing, especially in the traditional Enterprise Sales scenario.

Tushar also emphasized that the Enterprise Licensing deals should consider not only the product pricing, but also the other costs (such as, hardware) and provisions (such as, for Product Support). The considerations on TCO are critical, because the customers assess the products, not only functionally, but also very critically from an operational viability perspective in longer term. Tushar also laid out few questions that need to be answered while deciding the pricing model. The detailed presentation from Tushar on “Pricing for Enterprise Sales” can be found here.

The discussion, then, veered towards the product pricing strategies in areas such as Telcos, serving also as a cue for Tarun Anand (CTO & Co-founder at Semusi) to pitch in and provide his perspective. He shared his experiences in working with the big Telcos on working out product strategies and pricing models. They tried out various pricing models, in partnership with Telcos especially, and had mixed results over time before arriving at something that seemed to work. However, pricing remains a volatile when dealing with the larger partners and in more complex ecosystems, such as Telcos.

In Tarun’s experience, one needs to ascertain that the partners in the ecosystem are ready to take your product to the market if that is the expectation. It is also important to ensure that the pricing terms & conditions are clear, and you are able to hold the customers as well as partners accountable in the operational limits as much as you can. After all, you want to focus on running the business and do not want complications of financial & legal nature. In the context of Pricing and products strategy, in areas such as VAS, as per Tarun, one needs to be very careful. “VAS is dead” in his words! 🙂

Tarun also emphasized “there are takers for product at ANY price point”. One need to clearly understand whom one wants to target, and also understand that it’s not only a question of moving the pricing point up & down in inverse proportionality with the volume of customer base. There are various triggers for the pricing, one of which is the “premium value perception”, and also the fact that once you move into a market with a particular price point, increasing it later on is almost impossible without hurting your customer base and overall strategy.

App Pricing Tactics
App Pricing Tactics – Prashant

The heat in the Mobile Apps makes the App Pricing a very sought after topic, and that’s where Prashant Singh (Co-founder at Signals) came in and provided a good framework for the high level App pricing approach. There are two clear distinct possibilities – Free & Paid. Complete Free, as per Prashant, directly leads to an Ad based model for revenue that shouldn’t be a preferred model as such for most app developers. In fact the question is not whether to go Free or Paid. Question is when is the user ready for monetization. “You hit when the iron is hot, as simple as that”, Prashant says.

Prashant provided a high level framework to judge which approach should be adopted by the App Developers, based on the two parameters: “App Life Span” and “Time to Realization of Value”. Based on a combination of the two, one can decide on the high level strategy (Portfolio/Platform/Utility/Device Embedding/Brand Apps…) and Pricing model (Advertisement, Paid, Transaction based, Freemium, Development level, and so on). Check out this presentation – App Pricing Tactics for more details.

One key point that drew interest was around the Price Point for App at the launch time. Contrary to the normal belief, Prashant says, one needs to launch the app at a price point that is higher than the Median price point for the App store. That provides the App Store an incentive to showcase the App, and it is important since App Stores control the downloads more than the “content” or “quality”, at least until critical mass. Growth Curve of the app can be maintained around Median and depending on the value prop of the App, the baseline pricing can be used at sustenance phase. Another strong point of view from Prashant came around the Advertisement model, which as per him is the last to be considered. And if Ad model is considered, his advice is to “not” let the control away – “Always have your server in loop”.

While all the content and discussion, and few laughs in between, served well to our appetites, snacks were served amidst a quick “Unconference” session moderated by Rajat and Vivek. We discussed and debated on some great points. I’m finding it harder to capture every bit here and I don’t want to be partial to only what I remember right now! I hope that if you attended and are reading this, you would be able to add your takeaways in comments section! 🙂

Overall, I had a great time. The highlight of the session, for me at least, was the richness of experience and passion for products. And I met some really cool folks! Many of us hung out until later in the night and continued the conversations, which is a great sign. A small impetus can go a long way, and I’m very excited that Avinash has triggered this spark that all of us as a community have to fuel into a passionate ecosystem around products. Great initiative, ProductNation! Looking forward to the next edition on Jan 19th 2013!

PS 1: And, there was a cake-cutting for Avinash on his Birthday! Great gesture!

PS 2: Some Tweets from the session!

Posted on

How To Do Pricing For Enterprise Sales #PNMeetup

Pricing is a mix of art science. Most product startups have a hard time figuring out their revenue model (freemium or, paid only) and what they should charge. If you chose freemium, you have to be careful that cost of incremental customer is low and it will be great, if this customer also helps spread the word about you. On the other hand, if you choose paid, you run the risk of having minimal traction, especially if your sales cycle is long and complex.
In either of the business models, you need to have clarity on who your customer is, what they are really looking for, does it have a direct impact on creating additional revenue or, eliminate inefficiencies and what your competitors are charging and why. Is your sales cycle long or, short? In a product company, you expect to cover the cost from multiple customers and not just one. However, most businesses falter as they fail to take into account the cost related to acquiring paid customers and customer service.

All being said, do remember that for most companies, pricing is an evolution as your product is.

You will hear from our experts on how they went about pricing their products and what if any adjustments they made along the way based on their learning.

Speakers:
– Tushar Bhatia – (EmpXTrack) Saigun Technologies
– Varun Shoor – Kayako.com
– Prashant Singh – TheSignals

#PNMeetup is an initiative by ProductNation and is meant for Entrepreneurs, Product Startups, Product Managers in the NCR Region. Here you can share, learn and network with fellow Product Managers and also discuss new trends innovations, get feedback on prototypes and insights from experienced people in the industry.

The objective of #PNMeetup is to provide each attendee with practical skills and knowledge that they can put into practice tomorrow to improve the products they bring to market, enhance their companys success and further their own careers. Some of the people supporting this initiative are: Amit Ranjan(Slideshare), Arvind Jha(Movico Technologies), Jainendra Kumar(Pitney Bowes), Pawan Goyal(Adobe), Rajat Garg(SocialAppsHQ), R. P. Singh(Nucleus Software), Vivek Agarwal(Liqvid eLearning).

These meetups will be done on Third Saturdays of the month and will include an opportunity for professional networking. If you would like to volunteer and make a difference to the Product Eco-system in NCR, do send us a mail at volunteerpn.ispirt.in

Supporting Partners:
– Indian Product Management Association, Institue of Product Leadership, Delhi Startups, TLabs, The Hatch, Startup Saturday. Ignita

Registrations:
Limited seating and registrations is strictly for Product Startups and Product Managers. No onsite registrations will be allowed. Register Now to avoid disappointment. This is a closed event and If selected you will get the confirmation for the event.

Venue: 
Kunzum Travel Cafe: Address: T-49, GF, Hauz Khas Village, New Delhi, Delhi 110016

Posted on

The three stages of the buying mindset

The buyer had told you that they were in the market for exactly what you were selling, and the timing couldn’t be better. The pricing was right and your solution met all the buyer’s needs but lo and behold the sale did not happen. Has this ever happened to you?

If you are like me and many others, you have been in this situation before. Why does this happen? I had thought long and hard about it and developed some theories around it, and then about 10 years back my boss introduced me to a book called “Solution Selling” by Michael Bosworth. As I went through the book I realized that what Mr. Bosworth said made perfect sense and was completely consistent with my experience and hypothesis. We were losing deals in situations like the one described above because we were too late.

What Mr. Bosworth suggests is that there are essentially three phases a buyer goes through.

Latent Need – The need is either not defined or the buyer is resigned to the fact that no solution exists for her need. For example, it could be that buyer has collection of old 78 RPM records (remember those?) and has in the past tried to digitize them. The last time she looked for a solution it was prohibitively expensive to do. So she shelved the idea and the need to digitize became a latent need.
Pain – This is when a latent need becomes an active pain. In our example above, the need would become a pain if the buyer reads an article about a new inexpensive service that digitizes old records.
Evaluating Alternatives – This is the last stage. This is where the buyer is convinced that they have a pain and that a solution(s) exist for it. This is when they are in the market for alternatives.

To often, a smart seller has already taken the buyer through the stages of latent need and pain and painted a shared vision with the buyer to where they are “singing his tune”. When you come in at this stage you are at a disadvantage because you are playing a game that somebody else has defined the rules for.

The ideal situation, therefore is to think hard about what you have and help walk your buyer through all the three stages of their buying cycle. If you do it right, both the buyer and seller will have a shared vision of the end state. The shared vision will solve the buyer’s problem and result in a sale for the seller. A win-win situation for all.