The majority of CEOs in b2b media, data and information companies are planning moderate to robust pricing increases (source: Substribe CEO think tank July 2021). Challenges include creating certainty and belief in their teams to carry out the price rises. At the same time, the post pandemic landscape is creating complexity for b2b customers.
This dynamic presents an opportunity to be more creative about pricing. Creative pricing was the topic in our most recent CEO think tank with pricing expert David Smith, Partner at Simon-Kucher & Partners.
Based on insights gathered from the many years of experience in the room, here are five stand out creative pricing options to unlock value:
1. Identify a new audience and/or route to market
- Go deeper with an existing customer. For instance, you may be serving a front office function and identified a back office customer segment. This approach requires fencing of your product to prevent cannibalisation of sales e.g. serving a new segment that has a lower willingness to pay can be fenced off, by limiting a critical part of your service such as the timeliness of data. The front office may require data in the moment, whereas the back office periodically.
- Provide a self service/ecommerce service – being mindful that self-serve ecommerce means you create 100% price transparency, in a context where data and information businesses that aren’t native to ecommerce typically have wide price variance through widespread discounting put in place by direct sales. If you pitch ecommerce to the current list price, it means legacy customers are below that price point but, where discounting has taken place, this runs the risk that the price point is unachievable. If you pitch ecommerce at what you’ve been achieving, you hit a situation where some customers may be paying more than the published price on the website. Differentiate to avoid creating a competitive situation between ecommerce and direct sales.
2. Differentiate your service for key segments
- The same triggers of value can be used for both high volume and high value customers when applied creatively. For example, surfacing a hot topic and using this to inform individuals, while differentiating for enterprise accounts by creating a premium experience. Done well, this pulls in more people who will go on to use the service and expand your revenue per account.
- Consider a move to unbundle or bundle. Take a single product business to a good, better, best line up, aligning with each key customer segment.
- Create add-ons where something that is highly valuable but niche should be a bolt on (compared to something that is high value and broadly applicable that should be in the core offering). A key point here is to identify your marmite features.
3. Investigate consumption based pricing
- The best performing subscription companies have around ~20% usage based component in their pricing mix (source: David Warren, Zuora at Substribe SubsLab) but examples within the data and information space are few and far between.
- B2B firms want to get their data as embedded as possible into their customers’ workflow and the challenge with usage based pricing is it may run counter to that goal. A cut through is where the use of your product means the price can scale with value. But if your usage is patchy, then you’ll potentially inhibit adoption because of the metering effect.
- Investigate the breakeven point for your business. Watch how customers are using your service for a while until you land on a reliable usage metric. Review the cost per go (revenue/quantum of usage) and see if it is viable. Look at expected bands of usage, where the bigger the commitment the cheaper the unit becomes. When customers start to use more, then it’s time for them to move to the next band.
4. Change your internal and customer mindset
- The journey to data-as-a-service requires getting out of the mindset of publishing – a rethink and reimagination about how to deliver value. A lot of businesses underestimate the true value of their data.
- Enhance the perspective of the customer’s view of your data. Align the value of the data to each client by being clear about the value proposition, how the data is being used, the impact it will have.
- Concentrate on the delivery, robustness, and accuracy of the data. For example, how might the sales proposition link to desirable customer outcomes.
5. Read the road ahead about new delivery methods
- Consider options to plug straight into your customers’ workflow e.g. API or data feed. But be careful. If your data gets fed into a data lake it’s hard to monetise because you won’t know how it’s being used.
- How you stand out amongst multiple other data sources is important. Have detailed conversations with the customer to understand the use case and extent of the audience.
- Use metrics that scale the price .e.g company revenue, or assets under management, to add a kicker to your pricing.
Substribe’s quarterly CEO think tank helps elite subscription leaders to explore progressive topics, develop fresh thinking and create new collaborative relationships to unlock recurring revenue innovation. To join in, contact firstname.lastname@example.org