Costs & Pricing. Workshop 4 STAGE FOUR

Transcription

1 Costs & Pricing Workshop 4 STAGE FOUR

2

3 Values

4 Rules

5 Ready? Workshop 4 STAGE FOUR

6 Pitch your progress! Workshop 4 STAGE FOUR

7 TOOLKIT 00 THE BUSINESS MODEL CANVAS* STAGE ZERO Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. 1 The Business Model is a conceptual framework that describes how a venture creates, delivers and captures value. Start by describing a Customer Segment and identifying their needs. 2 The Value Proposition is the collection of products and services that your venture will provide to satisfy those needs. A good value proposition is aligned with the strengths of your team. The remaining components are there to help you create and deliver the Value Proposition to each Customer Segment. Start designing your venture by answering the questions in each box. KEY PARTNERS Who could help you to provide value to your Customers? Who could help you with Activities, Resources or Costs? What benefits will you offer these partners in return? KEY ACTIVITIES What skills will your team use to create the Value Proposition? What skills will you need that you don t yet have? 2 1 VALUE PROPOSITION What products and services will you provide to satisfy the needs of your Customer Segments? Why is this important to you? CUSTOMER RELATIONSHIPS What is the best way to build a relationship with your Customers? How could you involve them in developing your idea? CUSTOMER SEGMENTS Who are the people and/or organisations that you are looking to benefit? What are their needs? KEY RESOURCES What are the things the team needs to have in order to create the Value Proposition? Which resources does your team already have? CHANNELS What are the best channels to engage with your Customer Segments? How could you start engaging with them now? COST STRUCTURES What are the main ongoing expenses your venture needs to cover? How much funding would you need to get it started? REVENUE STREAMS How will you capture revenue from your Customer Segments? What else could they provide in return for the Value Proposition? *Adapted from Strategyzer.com

8 What are returns?

9

10 What are returns? A profit made from an investment. + In general, they measure the difference between the costs and gains, to determine whether value is being created. + Investment can include time, effort ( sweat equity ) and money spent towards executing the venture. + In order to know what your potential returns are, it is crucial to understand your costs, revenue streams and pricing strategies. Oxford Dictionary

11 Cost structures The most important costs inherent to our business models, expressed in monetary terms. 1. Setup costs are the costs and expenses that the venture needs to cover in order to begin operating; 2.Operating costs are the variable and fixed costs that a business will have to incur in order to operate continuously. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

12 TOOLKIT 07 1 The Customer Journey is a tool that helps to understand the 2 Once you have a map of the customer s journey, you can identify 3 experience of a Customer as they interact with your venture. the different Research, Production, Promotion and Networking Begin by mapping the customer s tasks in stages. Activities your venture must perform to help them along the way. 1 THE JOURNEY Map the sequence of tasks that your customers must complete when interacting with your venture. CUSTOMER JOURNEYS STAGE THREE Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Each activity your venture must perform will require resources including skills, assets, materials and networks. Identify those you need to acquire and use these insights to improve your pitch. Attach additional sheets if needed > List any obstacles they may face or expectations they may have for each task. Include positive and negative emotions they feel when completing these tasks. 2 ACTIVITIES List the activities your venture must perform to facilitate each of your customers tasks. Include Research, Production, Promotion and Networking activities. 3 RESOURCES List the resources you need for each activity, identifying those you already have access to. For the rest, list possible suppliers or partners who could provide them, along with their cost in time, money or effort.

13 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

14 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

15 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

16 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

17 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

18 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

19 But first Meet the IACT Collective and Committee

20 Key partners A network of collaborative alliances with suppliers And partners that make the business model work. Cost mitigating are aimed at gaining access and providing opportunities to resources or networks that would be costly, time-consuming or unrealistic to develop from scratch; Value creating Those that increase the value of your venture above and beyond what you are each able to generate internally. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

21 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

22 The value proposition What is it?

23 What is value? A bias or interest that motivates action. Value is a verb as well as a noun. People value things, and what they value is personal; we can only tell what another person values from the way they behave. Value is a process. People anticipate value, which motivates them to act. By taking action, they realise value. Depending on the realised value, they re-evaluate and may act differently in future. Dr Christopher Nailer (2016), citing Perry, R. (1914) The Definition of Value The Journal of Philosophy, Psychology and Scientific Methods, Vol. 11, No. 6, pp

24 Value & business models A business model orchestrates the value process for all stakeholders involved. Business models must allow every stakeholder to realise value. Not just customers, but also the team, the mentor, supporters, employees, investors, partners, suppliers, etc. Dr Christopher Nailer (2016)

25 The value proposition The bundle of products and services that create value for a specific stakeholder. They are formed through activities of reciprocal exchange of knowledge between stakeholders. They respond to the needs of the customer, providing ways of overcoming pains and achieving gains. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

26 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

27 TOOLKIT 08 COSTS & PARTNERS STAGE FOUR 1 Key Resources can be the main source of Costs for a venture. Begin 2 List a range of suppliers for each of the resources you need. One form 3 by identifying those you will need to start and operate the venture. of innovation is to find new or underused sources of supply. Compare This is a good way to determine your costs and potential partners. how much it would cost your venture to engage with each source. Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. You can sometimes access resources by providing value other than money to your suppliers. This is the key to forming Partnerships. To achieve this, develop a value proposition for each of your suppliers. 1 REQUIRED RESOURCES Choose the skills, assets, materials or networks you need for your venture. 2 SOURCES OF SUPPLY List possible suppliers for this resource. Measure the cost of accessing them in terms of time, money and effort. INITIAL / ONGOING INITIAL / ONGOING INITIAL / ONGOING SOURCES OF SUPPLY SOURCES OF SUPPLY 3 Circle the suppliers who you think could become key partners. PARTNER VALUE PROPOSITION What are the benefits you will provide to partners in exchange for their resources? PARTNER VALUE PROPOSITION PARTNER VALUE PROPOSITION Why should they provide them to you for a reduced cost?

28 The value proposition What value will you offer to your key partners?

29 Revenue streams The value a business model captures from each customer segment (& other actors). Value is captured by delivering benefits that induce payment. Pricing involves determining how much payment a customer is willing and able to pay for that value. This will also be influenced by costs and competitors. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

30 Types of revenue Asset sale provides ownership rights over an offering. Usage fee based on how much a service is used. Subscription fee providing continuous access to a service. Lending, renting or leasing provides exclusive use of an asset. Licensing provides permission to use protected intellectual property. Brokerage fee is derived from intermediation between parties. Advertising is derived from promoting third party offerings. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

31 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

32 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

33 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

34 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

35 Types of revenue Asset sale provides ownership rights over an offering. Usage fee based on how much a service is used. Subscription fee providing continuous access to a service. Lending, renting or leasing provides exclusive use of an asset. Licensing provides permission to use protected intellectual property. Brokerage fee is derived from intermediation between parties. Advertising is derived from promoting third party offerings. Adapted from Osterwalder, A. & Pigneur, Y. (2010) Business Model Generation Wiley & Sons, p

36 But first Let s play a game.

37 Pricing strategies Determining how much an innovative offering should cost is difficult. There are several strategies to help you: Cost-based is derived from on the cost of producing your offering. Competition-based looks at the price of competing offerings. Customer value-based engages the customer to determine how much value they are perceiving. Adapted from Hinterhuber, A. (2008). Customer value-based pricing strategies: why companies resist Journal of business strategy, 29(4),

38 Increasing value Growing customer knowledge directly or indirectly allows customers to perceive more value from the offering. Reducing costs & effort makes it easier for the customer to access and use the offering. Leveraging expert customers empowers experienced customers to share with their communities. Adapted Priem, R. L. (2007). A consumer perspective on value creation. Academy of Management Review, 32(1),

39 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

40 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

41 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

42 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

43 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

44 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

45 Price sensitivity Engage your customers to ask how much value they would perceive. The Price Sensitivity Index asks for four options: At what price would the offering be too expensive? At what price would the offering be too cheap? At what price would the offering be a hard choice? At what price would the offering be good value? Adapted from van Westendorp, P. H. (1976, September). NSS Price Sensitivity Meter (PSM) A new approach to study consumer perception of prices. In Proceedings of the ESOMAR Congress (pp ).

46 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

47 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

48 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

49 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

50 TOOLKIT 09 VALUE-BASED PRICING STAGE FOUR 1 This toolkit will help you in pricing the Value Proposition offered 2 List the different benefits this offering will deliver to customers. 4 by your business model. Choose a Customer Segment, one of your Then, develop strategies that will add to the value they perceive. Offerings for them and the type of Revenue you plan to capture. 3 Keep track of how these strategies affect your Cost Structures. 5 Complete this toolkit and take a photo. Upload it to your IACT Team Page to access the Workshop Challenge. Go to to start. Summarise your key benefits into a Value Proposition. Using the Price Sensitivity Index, engage with several customers. Compare their answers across all questions to find an approximate price. 1 CUSTOMER SEGMENT: 2 BENEFITS DELIVERED Which job are you helping them to complete? OFFERING: Which pains are you relieving? Which gains are you creating? REVENUE TYPE: How are these benefits delivered? Measure each of these benefits in time, money and effort. 3 4 INCREASING KNOWLEDGE How will you give your customers more information about these benefits? How can you increase interactions between customers and your offering? Which other offerings does yours have synergy with? REDUCING CUSTOMER COSTS How can your offering require less time, money and effort from your customers? Which communication channels will make it easier to choose? Which distribution channels will make it easier to obtain? ENGAGING EXPERT CUSTOMERS How will you enable customers to share their experience? How can you facilitate reviews and recommendations? How can customers get involved in further development of your offering? THE VALUE PROPOSITION Write a short paragraph describing your offering and the key benefits it provides. Focus on those that will result in payment and quantify them. ADDED COSTS How will these strategies affect your costs? 5 PRICE SENSITIVITY INDEX Share your Value Proposition with your Customer Segment and ask them the following four questions: TOO EXPENSIVE At what price would you consider the offering to be so expensive that you would not consider buying it? TOO CHEAP priced so low that you would feel the quality couldn t be very good? HARD CHOICE At what price would you consider the product be expensive, but not out of the question, and would give some thought to buying it? GOOD VALUE a bargain or a great buy for the money?

51 Price sensitivity What s the sweet spot?

52 Take photos of your toolkits. + This will allow you to complete the Workshop Challenge. + Complete Workshop Challenges on time to earn IACT Points!

53 Bonus Challenge 3 To earn this point speak to at least ten potential customers and ask them the Price Sensitivity Index questions in relation to your offering. Then, in the IACT Community Facebook group, share: - The average Too expensive amount - The average Too cheap amount - The average Hard choice amount - The average Good value amount - Something unexpected you learnt from these results. + Complete this challenge by 5pm, 21 st September to earn 1 point + And stay tuned, we may be posting another Bonus Challenge in the next week