Pricing Innovation

One of the most difficult overcomings in marketing and commercializing innovation is pricing. Most visionary entrepreneurs and intrapreneurs spend months defining prices for their products.

Why is innovation pricing so hard?

1. Competition-based pricing strategies, such as Value Mapping, don't work anymore as there is absence of reference points (what marketers call Blue Ocean).

2. For technology in general, added-value pricing strategies based on measuring value chain stages are no longer coherent with target market demand. As an example consider web-based apps, such as Twitter. The largest social networks MVP's, having produced profitable results, were rather technically limited and coarse, relatively poor in value chain.  Also, mobile apps displayed in the app store can be developed by two people in few days and yet profit millions of dollars.

As in every other aspect of a business model, true innovation withstands the pressure of uncertainty at the highest levels. Some authors have suggested innovation pricing strategies, based on customer decision choices, such as presenting three different options with different prices and reach,   advising the customer to buy the one in the middle (not the cheapest, not the most expensive) and playing with the contrast principle.

Shedding some light

Once again, the lean startup approach is the best way of gathering the right information and make the best decisions (even better than market studies, as I will demonstrate in other blogs). Unfortunately, for mobile apps the pricing range has narrowed so much that it's sometimes worthless to even embark on the lean pricing methodology, as any price hypothesis test would be more a value test by itself.

Some more light can be shed on other innovation channels, including web apps, as the Plan-Build-Learn acknowledgement cycle may work pretty well on a wide pricing range. You should always keep in mind that pricing is also subject to the innovation industry: No matter how revolutionary your brand new project manager is (even so revolutionary you may not call it "Project Manager"), be sure it will be very hard to exceed the currently positioned project managers.

Innovation pricing in third-world countries isn't different, except in that revenue per capita, other financial indicators and severe personal budget restrictions may also serve as a pricing guide in B2C, C2C and some B2B models.

To conclude...

One would think that, almost by definition, the existence of an innovation pricing methodology is impossible, as innovation is usually thought as something not done before. In a free trade market you're free to sell whatever you want to whoever you wish at the price you're able/willing to (keeping legal). The old fashioned pricing strategies might not work for innovation and once again ancient sages need to understand innovation pricing is a science, not an established dogma.

If you would like to know more about me, please visit andresacostaescobar.blogspot.com. Comment below, should you have any contributions.

Why would an entrepreneur want to be employed?

Many times I've heard from my fellow entrepreneurs that entering the job market after entrepreneurship makes no sense and no fun for them at all. This could be right at times. Entrepreneurship is very entertaining and adrenaline generating, it's about conquering the market every day, being able to (at times unexpectedly) reach agreements with your market, your family, your friends, your partner in business, your partner in life and most of all, with yourself.  Every day is different and you can never know what will happen next, extraordinarily rewarding or surprisingly negative.

This doesn't imply working as an employee is a step back. Here are some reasons why an entrepreneur could be seeking for an opportunity in the job market.

Specific skill reinforcement

As an entrepreneur one would like to consistently learn by training particular skills such as selling, marketing, managing HR or promoting the value chain (coding, accounting, designing, planning, etc...); as any athlete would do. For example, soccer players practice free kicks for whole hours, in order to be accurate for the next match. For a soccer player this is as exciting as playing a match and it demands the same commitment to get results and stay motivated.

In my personal opinion, trying employment is not necessarily a sign of weakness in independence or lack of self-drivenness. Employment for an entrepreneur is also a chance to keep learning in many ways and a chance to recall forgotten techniques that might be helpful in the future. 

Industry Specialization

The best way to specialize your knowledge in a given industry is to be employed by an experienced company in that industry. You'll get to know lots of details that you may not be able to notice while entrepreneuring.

Exhaustion

Exciting as it may sound, entrepreneuring can be distressing, can bring mental or physical disease, if you don't watch carefully. An entrepreneur is an "all in one" machine. We're ready to do the toughest job in the industrial value chain, to commercialize, do lots of PR, manage finances, deal with employees and collaborators, among many other time-consuming endeavors. The roller coaster is not only financial, but also emotional, psychological and, in the end, physical.

Leave a comment to let me know what you think about this topic.

If you would like to know about me, please visit andresacostaescobar.blogspot.com.

An introduction to B2B hardships. Ten ways B2B customers reject offers.

In a business-to-business one single close can be the starting point for a profitable startup. However, the first close is far less likely to happen, when comparing to a business-to-customer. I'll now present the main issues for a B2B technological startup in Colombia.

When talking about B2B, we must be aware that value propositions are evaluated by a customer who's really a single director or a group of executives, whose success relies on bringing on more revenue to the company. What software can generally do to increase ROI is allow for more productivity (or some at all).  Please comment if you have further suggestions on how can software help companies. One may argue that competitivity is different and it may also increase ROI. Let's keep simple, plain and easy appropriate content for any CEO.

We all know competition is fierce. With the recent free trade agreements, colombian companies are more enticed than ever to act anew and try to keep the pace with foreign "first world" companies, establishing a customer base in Colombia. Some of these companies are asian, american or german, where productivity software and best practices are the rule and not the exception.

Before colombian companies get eaten by more productive counterparts and we start seeing protests as their sign of management paralysis, in this blog series I'll be discussing a set of techniques used by colombian companies to avoid acting and keep sit in an evolving economy. 

Let me be clear. I'm not stating that entrepreneurs should not be aware of the market needs, or that any faulty product or service should be considered by companies. Entrepreneurs need to offer high value material, with the best possible quality standards, while exhibiting the best attitude towards agreement, without blaming others for their own misconceptions or mistakes. I'll write on this later on. For now, I'll start with the powerful side, the one with some financial stability,  the buyer, the mid sized or large company, able to sky-rocket tech innovation by acquiring what they need and want. In the end, this is teamwork  and risk should be shared, or we'll be all doomed.

The techniques are

1. The "No one is entitled here" technique.

2. The "You do it to fit my chances" technique.

3. The "I can do it by myself" technique.

4. The "We're buying a Cisco solution" technique.

5. The "There would be too much work" technique.

6. The "We're in the middle of a project" technique.

7. The "Let's wait for the next year's budget planning" technique.

8. The "We'll discuss it in our next meeting" technique.

9. The "I know another like this one" technique.

10. Other common to any buying process.


I'm open to comments! If you want to know more about me, please visit andresacostaescobar.blogspot.com.