EPP is pleased to announce a new partnership with Simon-Kucher & Partners

The European Pricing Platform (EPP) is proud to announce that they have added Simon-Kucher & Partners, a global consulting firm specializing in pricing and marketing strategy, to their partners. Simon-Kucher & Partners’ experience builds on over 2000 projects conducted by their pricing experts in the last three years alone. Simon-Kucher will become a new Pricing Expert Partner, exhibitor, and sponsor of upcoming EPP events throughout Europe. Simon-Kucher will offer EPP participants insights, benchmarks, proven tools and methodologies to illustrate how to maximize profitability through cutting-edge marketing and pricing strategies.

“The Global Pricing Study that surveyed more than 3,900 high-level decision makers from all major service and manufacturing industries about their profit culture indicated that 65 percent of companies are not able to charge the prices they deserve for the value their products and services deliver. As a result, they lose 25 percent of profits. Rather than focusing on profit, 46 percent of the companies fight price wars to gain volume and market share. And when companies finally bring themselves to raise prices, they only get half of what they planned,” explains Danilo Zatta, Partner at Simon-Kucher & Partner. “Partnering with EPP puts us in a position to address existing pricing practices even better and to show how the challenges identified in the Global Pricing Study 2011 can be solved.”

Simon-Kucher & Partners supports and partners with clients in the elusive and yet attainable hunt for sustainable business growth through profit margin improvement. A comprehensive and well-executed marketing and pricing strategy can result in critical profit gains and, ultimately, business survival during difficult times. With 23 offices in 17 countries and over 570 professionals, the company has been defined as the world’s leading pricing consultancy by both BusinessWeek and The Economist. Simon-Kucher & Partners has served more than 100 of the Global Fortune 500 companies. Clients come from all major industries and are often leaders in their markets.

“Simon-Kucher has been carefully selected to join our group of pricing experts worldwide because of their proven track record, experience, and pricing science methodologies,” says Pol Vanaerde, EPP president. “We are pleased to have Simon-Kucher & Partners included on our expert list and look forward to working closely with them to better serve our participants.”

EPP serves as the first ‘not-for-profit’ network for cross-industrial pricing and profit optimization decision makers in Europe. Through various on and offline media, EPP is dedicated to developing and sharing pricing best practices, effective tools, methodologies and technological solutions that help to successfully define and implement strategic pricing. Through various on- and offline media, EPP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

About Simon-Kucher & Partners Strategy & Marketing Consultants

Simon-Kucher & Partners is a global consulting firm specializing in strategy, marketing, pricing and sales. Founded in 1985, the company focuses on Smart Profit Growth^SM by helping clients to boost their top line instead of cutting costs. With over 570 professionals in 23 offices worldwide, the practice is built on evidence-based, practical strategies for profit improvement. Simon-Kucher & Partners is regarded as the world's leading pricing advisor and thought leader.

About European Pricing Platform

The EPP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.The EPP helps your company find the right pricing tactics to guarantee customer loyalty and generate sustainable margin growth for your business. Enhance your pricing know-how and be successful in it by joining this dynamic and resourceful pricing platform.

The Complete Guide To Freemium Business Models

Editor’s note: This guest post was written by Uzi Shmilovici, CEO and founder of Future Simple, which creates online software for small businesses. The post is based on a study done with Professor Eric Budish, an economics professor at the University of Chicago Booth School of Business. It also includes ideas and comments from Peter Levine, a Venture Partner at Andreessen-Horowitz and a professor at Stanford GSB

The idea of offering your product or a version of it for free has been a source of much debate.

Pricing is always tricky. Unfortunately, many entrepreneurs don’t give it enough thought. They will often copy the pricing strategy of similar products, base their decisions on pompous statements made by “experts” or rely on broken rationale (we worked hard so we should charge $X).

Free is even trickier and with so many opinions about it, we thought it would be refreshing to take a critical approach and dive deep into why some companies are very successful at employing the model while other companies fail. We’ve looked into economics academic papers, behavioral psychology books and strategies that worked for companies to come up with the key concepts below.

The Law of Marginal Cost

Pricing plays a huge part in competing for customers. Here’s an economic law that holds almost as much truth as the law of gravity: in a perfectly competitive market, the long-term product price (aka “market clearing price”) will be the marginal cost of production.

Guess what? Because of declining hosting and bandwidth costs, for most Internet products the marginal cost today is practically … zero.

In other words, if the cost to serve a customer (support aside) is zero, the long-term price of the product in the market will be zero (because of competitive pressure).

An Experience Good

At the core of the “Free” models are the products or services being offered to the customer. Most Internet products or services fall into the definition of an Experience Good: a product that needs a period of use before the customer can determine the value they can derive from it.

A good example is Dropbox. Consider Drew Houston’s words: “The fact was that Dropbox was offering a product that people didn’t know they needed until they tried.”

There are plenty of academics who looked into the pricing of Experience Goods. In 1983, the Economist Carl Shapiro wrote a fascinating paper about this subject. His conclusion was that since customers tend to underestimate the value of a product, the optimal pricing for an experience good is a low introductory price which is then increased when the customer realizes the value of the product.

In some cases, a customer might overestimate the value of the product. In that case, the optimal pricing strategy is to charge as much in the beginning or to lock in customers with long-term contracts.

This is why customers are reluctant to buy when someone asks them to prepay for a service or product or sign a long-term contract.

Hence, the introductory price is a signaling mechanism. The conclusion?  A low entrance price signals that you are confident that your product will create value for the customer.

The Psychology of Free

Much has been written about the Psychology of Free. Two books that looked specifically into the subject are “Free” by Chris Anderson and “Predictably Irrational” by Dan Ariely. Putting it simply, Free is an emotional hot button that immediately reduces the mental barriers for the customer. Free makes people think that they have “nothing to lose” since many ignore time as an investment.

From this perspective, free is a huge accelerator of adoption. The flip side of this is that after using the product for free, it is very hard to get the customer to start paying for it. This phenomenon was broad enough to get its own name: “The penny gap”—the hardest part is to get your customer to pay you the first penny. This is why it is so critical to choose your premium features wisely.

Decision Factors

If all that is true, it seems like Free (or Freemium) is the answer. Well…. not so fast. The decision is definitely not easy. Here’s a basic framework to help you make a more informed decision. A word of caution though: for every complex problem there’s a simple solution … and it’s wrong. The framework is helpful as a thinking tool but there’s no magic formula.

Here’s a set of questions that you’ll need to ask yourself:

1. How big do I want my company to be? If you are looking to build a lifestyle business that’ll make you $8,000 a month and you have a good product, you can probably do without Freemium. If you want to build a dominant company that has a substantial market share, Freemium can help you accelerate adoption.
2. What is the value of the free users? Across all successful Freemium companies, there is a way of making money or saving money from the free users. Either by saving on marketing costs (Dropbox) or by making money from ads or data (Pandora, Evernote, Mint) or both. If you cannot turn your free users into savings in marketing costs or revenues from third parties—figure out how!
3. What is the cost to serve free users?  This is a critical aspect of the model. If you spend a lot of money and/or time servicing free users, you are going to lose a lot of money. The cost of servicing free users must be lower than the dollar value they provide.
4. How big is my market? “The easiest way to get 1 million people paying is to get 1 billion people using,” says Phil Libin, the CEO of Evernote. Free adds another conversion step on your way to revenues. You need a big market to have enough people who will be paying you at the end of the day.
5. Is there value to one customer from other customers using the product? This will determine how many new users the free users will refer. There are three levels of value:

1. Inherent value – You can use Skype only if the person you talk with also uses Skype. You can share a Dropbox folder only with other Dropbox users. In this case, Freemium can be a powerful strategy.
2. Added value – You wouldn’t want to be the only user of LinkedIn. You derive value from other people using it. In this case, Freemium can help you gain traction if you use an effective invitation mechanism.
3. No value – You don’t care if someone is using Evernote or not. The only reason for one person to tell another about the product or service is if they think it is awesome.

The Types of “Free”

One of the key factors in making Freemium work is the structure of the offering. What is it that you offer for free vs. charge? There are different types of free strategies. Let’s take a look at the popular ones:

1. True Freemium – Give a version of the product for free and charge a fee for the other versions. There are two ways to go about this:

1. Value based – The most successful type of Freemium strategy. The more a customer uses the product, the more value she derives, the higher the switching costs are, and at some point she’ll hit a usage limit and convert to a paying customer. Evernote and Dropbox are beautiful examples of this.
2. Characteristic based – For example offering the product for free for one user (so it is based on company size for instance). Let’s think about a B2B application. If I’m a freelancer, I will use the application forever and I will never have to upgrade. If I’m a 3-person company, I can’t add more users and try the application for real and hence might not get to the point where I see the value in using it.
3. Free Product for a Cross Subsidy  - Give one product for free and charge for complementary products.
4. Time Based Free Trial – Give a free trial for X days and start charging once the trial ends. The issue here is figuring out what X is. On one hand you want to create a sense of urgency, on the other hand you need the customer to see the value in the system.

Open Source as a Free model

Lately I’ve seen many entrepreneurs confuse Open Source with Free so I thought it would be helpful to make the distinction. An open source model can definitely accelerate the distribution of your product and is a viable free model. It has two main advantages. You might get developers to contribute to your product (see WordPress). By doing that you can accelerate the development of your product. The other advantage is that you give customers peace of mind as they have control over the source code. You can then make money from selling pro features or value added services. There’s a critical distinction here and that is that your code is out there and anyone can start a company to commercialize this code. Bear in mind that it is very hard (often impossible) to reverse a decision to open-source.
The Last Bit And The Secret To Success

There are many factors to consider when you are evaluating whether to use the Freemium model or not. However, there’s one last secret that I didn’t share with you. During the study, while looking at the successful Freemium companies, a pattern emerged. They all had phenomenal products. All of these decision factors are useless if the product or service you are offering is nothing short of amazing. If your product is not creating great value for its users, no tactic in the world will make Freemium work for you.S


Source: 

Techcrunch: http://techcrunch.com/

Image credit: Shutterstock/JelenaA

ePP is pleased to announce a new partnership with Pricing Solutions Europe AG

The European pricing Platform (ePP) is pleased to announce that they have added Pricing Solutions Europe AG (PS Europe), a global pricing strategy, pricing management, pricing research and pricing consultancy firm as a new Expert Partner. Our new partner will be an exhibitor, and sponsor of upcoming ePP events throughout Europe. Furthermore they will provide ePP participants with relevant pricing content through state-of-the-art pricing: articles, white papers, research papers, academic papers, surveys, etc.

By delivering content through these resources, PS Europe contributes to improve the pricing knowledge of our Pricing Platform Participants.

“Pricing is right now a hot topic in most CEO’s mind.

Current market dynamics about raw materials rising costs, disruptions on the competitive landscape, mostly driven by BRICS, and some recovering markets niche’s opportunities are evidencing that organizations who have a good level on the Pricing discipline are outperforming the Market.

By their ability to price better their products & services, and be more agile against competitive and market reactions, they are able to manage more efficiently the money spent on Discounts, Rebates and others “Sales Levers”, and translate on their P&L the Value perceived on their products & services, ” said ‘Fernando Ventureira , Managing Director, Pricing Solutions Europe AG. “Partnering with ePP puts us in a position to divulgate better and more extensively the Pricing Discipline, at this time quite exclusive of professionals working on large and multinational organizations.”

Pricing Solutions Europe AG is an expert Consultancy in Pricing, with more than 20 years of experience and quite well known for the high standard deliveries on services related to People & Organizations (i.e. Training & Coaching), Pricing Management (i.e. Pricing Diagnostic & Roadmap for Excellence), Pricing Research & Analytics (i.e.: Value Map and Price Optimizer) and Systems & Tools (RFP Management & Business Intelligence).

“Pricing Solutions Europe AG has been carefully selected to join our group of pricing experts worldwide because of their proven track record, experience, and pricing science methodologies,” said Pol Vanaerde, ePP president. “We are pleased to have Pricing Solutions Europe AG included on our expert list, and look forward to working closely with them to better serve our participants.”

ePP serves as the first ‘Not-for-profit’ network for cross-industrial pricing decision makers in Europe. Through various on- and offline media, ePP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

About Pricing Solutions Europe AG

Our mission is “To significantly improve our Clients Profitability by helping them achieve a World Class Level of Pricing Competency”

About European Pricing Platform

The ePP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.

The European Pricing Platform is pleased to announce that they have added Navetti AB as a new Expert Partner

The European pricing Platform (ePP) is pleased to announce that they have added Navetti AB, a global expert on pricing know-how and pricing software solutions, as a new Expert Partner. Our new partner will be an exhibitor, and sponsor of upcoming ePP events throughout Europe.

Navetti will offer ePP participants with experience from true customer cases where participants will recognize its own situation and understand the value of implementing a global pricing strategy. Navetti has a strong track record of successful implementations of value based and market driven pricing strategies, methods and processes all supported in the Navetti PricePoint™. The main objectives from previous implementation projects have been;

·        Improved price quality

·        Improved customer trust

·        Improved Profitability

·        Improved efficiency,

all supported in Navetti PricePoint™ to secure sustainability.

“International companies have recognized the importance of implementing a global pricing strategy to secure profit optimization and manage all aspects of the price waterfall in a global business.” said ‘Andreas Westling, Senior Partner, Navetti AB.

“Partnering with ePP puts us in a position to reach a wider audience and provide guidelines to international manufacturing companies on the journey to pricing excellence.”

Navetti is an industry-leading pricing software supplier toward the manufacturing industry. Navetti offers both management consultancy services and license its own developed software solution Navetti PricePoint™.

“Navetti has been carefully selected to join our group of pricing experts worldwide because of their proven track record, experience, and pricing knowledge,” said Pol Vanaerde, ePP president. “We are pleased to have Navetti included on our expert list, and look forward to working closely with them to better serve our participants.”

ePP serves as the first ‘Not-for-profit’ network for cross-industrial pricing decision makers in Europe. Through various on- and offline media, ePP is dedicated to develop and share pricing best practices, effective tools, methodologies and populate technological solutions assisting in successful definition and implementation of Strategic Pricing.

About Navetti

Navetti has received recognition for its domain expertise in the field of pricing for international manufacturing companies, where price optimisation between markets and product families are critical.  Navetti has over the years developed a solid value and- market driven based pricing methodology, that has delivered increased profit and pricing quality to its clients.  The methodology in combination with Navetti PricePoint™, has clearly increased profit, customer trust and sustainability.

About European Pricing Platform

The ePP offers your company to have the right pricing tactics in place to guarantee customer loyalty and deliver sustained margin growth to your business. Enhance your pricing know-how and be successful in it by joining this dynamic and yet resourceful pricing platform.

Source: Britt Dejager - European Pricing Platform & Andreas Westling - Navetti AB