See how expanded access to data and new data technologies will transform your approach to pricing. Predictive analytics will make performance-based pricing more common.

1. Transform business performance
With integrated pricing data management
January 18, 2018
Steven Forth
Steven.forth@ibbaka.com

2. ©2018 Ibbaka. All rights
• A bit about your presenter
• Why pricing is a powerful lever
• The four pricing methods
• What is value?
• Pricing power
• The three pricing strategies
• Putting the pieces together
• How data used to be used in pricing
• How data will be used in pricing
• Three trends for 2018
• The importance of predictive analytics
What we will cover
Key Points
1. Pricing should be based on the value you
provide to specific customers or segments
2. Value can be quantified
3. You have more access to data than ever
before
4. You can use that data to predict usage
and value
5. This will let you innovate on pricing
models

3. ©2018 Ibbaka. All rights
Steven Forth
• Serial entrepreneur in B2B SaaS,
founder of Agreement Express,
LeveragePoint, TeamFit
• Adviser on pricing at Boston VC
OpenView Labs
• Co-founder of pricing design consultancy
Ibbaka
• Combines a passion for innovation and
design with a deep knowledge of
segmentation, revenue models, pricing
About your presenters

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Pricing is where everything comes together
Why pricing is a powerful lever
Value
Product and Service
Marketing SalesPrice

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Cost
Plus
Market
Following
Value
Based
Performance
Based
The four pricing methods
When customer
defines
deliverables
For
commodities
For
differentiated
offers
When you can
predict value

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• For a specific customer (or segment)
• Economic and emotional
• Relative to an alternative
What is value

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What is emotional value (frame using Maslow)
Pricing
Power
What data will indicate
emotional engagement?

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• The impact of your offer on your customer’s business
(relative to the alternatives)
• This can be quantified is your customer is willing to
work with you to share data
• Critical Question: Does your customer trust you enough
to share this data? Do you trust your customers?
What is economic value

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• There are well developed formal
models for understanding the
economic value of an offer
• For pricing what matters is the
differentiation value
• Building these models is a guide
to what data your application
should gather
Economic value estimation™ (EVE)
Price of Alternative
Lower
Capital
Expenses
Lower
Operating
Capital
Lower
Operating
Expenses
Increased
Revenue
Unique
Costs
Short-comings
Differentiation
Value
The EVE method was developed by Tom Nagle
See the book The Strategy and Tactics of Pricing

10. ©2018 Ibbaka. All rights
• Pricing power is a measure of how
much differentiated value you can
meaningfully claim
• The most important determinant of
pricing power is risk – how much risk
is there that the value will be realized
• Manage this risk and pricing power
increases
Pricing power
Price of Alternative
Lower
Capital
Expenses
Lower
Operating
Capital
Lower
Operating
Expenses
Increased
Revenue
Unique
Costs
Pricing
Power
Pricing
Weakness
Short-comings

11. ©2018 Ibbaka. All rights
The three pricing strategies
Price of Alternative
Lower
Capital
Expenses
Lower
Operating
Capital
Lower
Operating
Expenses
Increased
Revenue
Unique
Costs
Pricing
Power
Pricing
Weakness
Short-comings
Premium (Skimming)
Market Following
Penetration

12. ©2018 Ibbaka. All rights
1. Understand your differentiation value
1. Determine your pricing power
1. Choose one pricing strategy
Putting the pieces together

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How data was used in pricing
• Focus was on transactional data
(data collected from invoices and
where possible off-invoice credits
and costs)
• The pocket price waterfall and
price scatter plots were the most
common analytical tools
• Advanced systems tried to
estimate willingness to pay (WTP)

14. ©2018 Ibbaka. All rights
• Focus was on transactional data
(data collected from invoices and
where possible off-invoice credits
and costs)
• The pocket price waterfall and
price scatter plots were the most
common analytical tools
• Advanced systems tried to
estimate willingness to pay (WTP)
How data will be used in pricing
• To predict usage
(predictive Engagement)
• To have real-time estimates of
value for specific customers as
this changes over time
(predictive Value)
• In aide of performance based
pricing

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1. The pace of commoditization will accelerate
• Offers will rapidly become similar and easier to substitute for each other
2. Predictive analytics will begin to predict
1. Performance-based pricing models will become more common
• The main arguments against performance-based pricing are around
predictability
See Three Key Pricing Trends in 2018
Three trends for 2018

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Combine Value and Usage Data
Value
Model
Usage
Model
Pricing
Model
predictive Engagement
• Data from Application
• Other Applications
• External Data
predictive Value
• Data from Application
• Other Applications
• External Data
Performance Based
• Adjusted to optimize for
value and engagement
• Use predictive analytics to
see make costs predictable for
the client

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• A powerful way to use data
(so make sure you are collecting the data you need – in time series)
• Reduces risk for buyer and seller
(which increases pricing power)
• Enables performance based pricing
(the pricing model of the future)
The importance of predictive analytics

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• Look at your data model and the data you collect.
• Do you collect the data you need to predict future use?
• Do you collect the data you need to estimate the value you are
creating for customers?
• Have you been transparent with your customers about what data you
collect and how you are using it? (You need to do this to build trust)
What to do now

19. ©2018 Ibbaka. All rights
• Our focus is B2B SaaS, Industrial Internet of Things and Business Marketplaces (multi-sided market platforms)
• Our approach is rooted in understanding how value is created for customers (value creation) and how part of that value can be captured by
the vendor (pricing)
• Frameworks we use are
• Value-Based Market Segmentation and Customer Targeting
(define the market opportunity using value drivers and
buying process as segmentation axes)
• Economic Value Estimation (EVE as developed by Tom Nagle)
• Matrix of Competitive Advantage
• Multi-tier Pricing Architectures with optimization
• Value-Based Sales and Sales Training
• Additional tools we apply
• Design thinking and service design to drive pricing innovation
• Scenario Planning to explore different alternative
• Pattern recognition and machine learning software to
identify hidden market patterns & opportunities
Ibbaka Focus and Approach
Price of
Alternative
CapEx
OpCap
OpEx
Revenue Unique
Costs
Short-
comings
Pricing
Power
Pricing
Weakness
EVE Model

20. ©2018 Ibbaka. All rights
Contact Us
Pricing consultancy and technology
company built by experienced entrepreneurs
We understand innovation because we live it
Our passion is improving product launch and
in market success through better strategic
pricing and execution
Understand the larger picture of
segmentation, targeting, value modeling,
value propositions and pricing architecture
Steven Forth
Managing Partner
steven@ibbaka.com
+1 604 763 7397
LinkedIn
TeamFit
Karen Chiang
Managing Partner
karen@ibbaka.com
+1 778 628-4085
LinkedIn
TeamFit
Ibbaka on Twitter
Ibbaka on LinkedIn
Website