How will you make money?

Google_wave_logo

The recent demise of Wave causes IT buyers concern. What else might Google discontinue? While it seems unlikely that they’ll stop offering Google Apps what if they did? As a result, IT buyers are reluctant to put business data on any of Google’s apps.

It once seemed logical to put all employees on Gmail instead of hassling with Exchange but now I don’t know.

Say what you will about Microsoft, it’s clear that they will continue to support the business products that they offer--Outlook, Exchange, Sharepoint--and it’s not always so clear for other vendors. Can I trust Apple’s MobileMe? Can I trust Google’s Gmail? I know I can trust Microsoft Exchange.

Your buyers are asking these questions too… about your products. Should we go with [new thing that is better] or stick with [old thing that is stable]? Perhaps that’s why roadmaps are so popular with enterprise buyers. They want to see that you have a plan beyond the current release, for at least a couple of years. See Creating the Right Product Roadmap for more on this.

Posterous_75

I love Posterous (rhymes with “preposterous”), the tool I use to dash off blog entries with embedded photos, video, music, attachments of any kind; my blog entries are forwarded to my “official” blog at www.productmarketing.com. But what is the Posterous business model? How will they make money? How will they survive as a business? I love the tool but can I run a business on it? (I’m told they make money from adding their referral codes to product links so if you’re not getting revenue from Amazon and others, they will.)

Sure, the product is valuable but is the business sustainable?

Pricing has to do with the value that you deliver today; roadmaps reveal the value into the future. For business products, evaluators of business solutions need to understand both. Do you deliver enough value now? And will you be around after they’ve committed their business to your product?

Filed under  //  pricing  
Posted by Steve Johnson 

Sure it's cool but will people pay for it?

One of the key ideas for any new product is "how will we make money?" or "Will our customers be willing to pay for it?"

Julie O'Dell writes, 

In a new study, researchers found that while half of all Americans surveyed have tried a free web app like Twitter, zero percent of them would be willing to pay to use Twitter or a similar service.

This finding is just one unearthed by USC’s Annenberg School for Communication and Journalism’s 2010 Digital Future Study, a study that’s been tracking online and social media behavior for the past nine years.

In December 2009, users were hit with a hoax that Facebook would start charging $5/mo. My friends and family went insane but all agreed that they'd pay for it. 

How will your product make money? The old school answer was "advertising." The new school is "value add." Look at the fabulous Flipboard app which turns Facebook and Twitter into a magazine format.

How will your product make money?

Filed under  //  pricing  
Posted by Steve Johnson 

Customers don't care about your costs

The most common method of pricing is cost-plus, where you take the cost of your manufacturing and add 10% (or 50% or 200%) to create a selling price. And pricing experts assure us that cost-plus is always wrong. 

The cost of components in the new iPhone is $181.55. And Apple appears to barely recoup their costs with phones starting at $200. Of course, to get the $200 price, you have to sign up for a $40/month subscription with AT&T so Apple makes much more in the long-run. Still 60,000 people bought new phones on the first day, so I guess price wasn't their issue. People who hate AT&T will opt for Android but the same scenario applies. 

What's your pricing scenario? Do people get value at once or over time? Price your product in alignment with the customers' perception of value. 

Filed under  //  pricing  
Posted by Steve Johnson 

How do you turn data into revenue?

Scott Brinker offers this view of pricing for data, answering the question

How do you turn data into revenue?

Data_marketing_business_models
It's organized by how revenue is generated, from direct money-for-data to indirect branding programs.

Filed under  //  pricing  
Posted by Steve Johnson