Ever since we started Substribe we’ve been on a mission to find ways to cut the time to win with subscriptions. Previous experience told us that ideas and opinions alone does not equal success – you need tried and tested frameworks and a deep understanding of your customer to accelerate progress.
So here’s a framework we wished we’d used a few years back – which would have stopped 10+ products ideas and a lot of time and investment by making mistakes like these
- Cramming too many features into one product that it becomes hard to find the value
- Or a product that’s never been verified with customers
- Or an idea that was never given the support for it to succeed
- Or pricing a product so low that it doesn’t reach its potential
The focus here is ensuring you’re not in the 75% of products that fail*. It’s simple – designing new products around the price. So what can increase your chances of success and how should you go about it? We now follow a five-step process. There’s no silver a bullet, it will take effort, but your success rate will increase as will the rewards.
- Identify a need
- Stress test viability
- Prioritise features
- Refine price range
- Go to market
Often step 2, 3, and 4 are missed out – we’ve been there, you’ve done the hard work to listen to customers but in the eagerness to take something to market you’ve not identified what’s valuable for customers and what they are willing to pay. And in some cases it’s a full blow inside-out approach going straight from 1 to 5. Build it, slap a price on it offer it to the masses and hope for the best. Yep, we’ve been there too.
The ideal is you go through the whole process with an outside-in mindset. So let’s design the product around the price using the following steps…
1. Identify a need
First you must identify a need. The best way to do that is talk to your customers, of course. Before you do this, make sure you’re clear on your ideal customer and select key cohorts around that.
We have a structured approach but keep the conversation quite informal and most important it’s in absence of your brand or product. How many of us have gone straight in talking about us rather than the customer. This is about understanding how their world is changing and what help they need to navigate it
2. Stress test viability
Next, we go back to the customer. But this time asking them to respond to something specific. You haven’t spent money on building anything yet, just a simple outline on ppt or a few visuals, so it’s easy to iterate or go back to the start. Critically this is where you start asking about price, we’d recommend the Van Westondorp pricing questions that ask:
- Price would you think the membership is a bargain
- Price would you begin to think the membership is getting expensive
- Price would you begin to think the membership is too expensive
- Price would you begin to think the membership is too cheap
But the importance of asking these questions during a conversation rather in a survey at this stage is that you can dig deeper by asking why. This is where often the golden nuggets come out…”if it could do this it would be worth double” “It’s worth a lot to me but I already get this from another source so wouldn’t pay for another service unless it did this.” You’ll also start to see opportunities for segmentation based on price rather than something else like persona.
Lastly we’d recommend these conversations are listened to by a cross-functional team either live or recorded. The team will feel part of the process and they will contribute to result by completing a scorecard that will get reviewed at the end of the process. It will inform what’s a hit or miss, or things that need further work
3. Prioritise features
So, at this stage you should start to feel confident that you have a product idea that is fulfilling a need and is financially viable. Now’s the time to get more granular with your feature mix. You’ll be sending out a survey informed by the previous step and asking what customers least and most value.
It will answer questions such as: should you offer a different mix to different segments; what features should you lead with, and what ones don’t deserve taking forward?
This is one of the outputs from the exercise. By asking the least/most valued questions we get a chart that clearly shows a negative and positive score.
In this example news was least valued but customer interviews was most valued.
You can now start putting these into buckets – three of the features need to be front and centre of the offering (leaders). We needed to do more work with our fillers to whittle down and prioritise and we should forget the killers
4. Refine price range
Now you know the feature mix, we can get more granular on price by asking the WTP questions again but this time with a clearer proposition. You’ll aim to identify price thresholds and have the data to decide upon your go to market strategy.
Here’s an example outputs, using the data to make a simulation: if we had 100 people ready to buy – how would price impact their decision?
Let’s clear the chart – the red line is % sales lost aligned to the right-hand axis. The green bars are aligned to the price point on the bottom axis and simulated revenue on the left axis. For example, at the price point £2,000, you’d lose 55% of the market (too cheap) and achieve £90,000 from 45 people buying at £2,000.
Using this chart you’re able to review the value/volume equation. For example, you may not be interested in taking a bigger portion of the market so looking at revenue may be more important.
With this insight you can spot three price thresholds around £12k/35%, £15k/50% and £20k/70% aligned to the segments identified in the earlier steps.
Once you’ve followed the steps above, you’ll be confident in your proposition and your pricing page. You’ll know…
- Where and how to position our features i.e. leaders and fillers
- We also know what each segment needs and how much of it
- And of course their willingness to pay
There’s a whole other blog post on pricing models but here’s an example of a simple good, better, best line up designed around each audience segment.
In doing this you can steer customers to a choice based on their needs, which in this example is whether they are:
- Needing more practical help – for those that are establishing a subscription service
- Want to monitor and improve performance – for those that have a maturing subscription service
- Want to differentiate – for those that are advanced in their subs capabilities
There you have it, a simple five step process to take your product development to new levels. From now on, keep three things in mind:
- Put pricing front and centre of NPD
- Learn from insight/data, not opinions
- Iterate/review pricing REGULARLY