Pricing Digital Products and Data - Part 5
The third alignment that is necessary for successful monetization is aligning your value metric with your offer and pricing structures. Today, we first take a look at how a value metric works and why getting your value metric right is key to successful monetization.
What's a value metric?
A value metric can be defined as the dimension along which your customers benefit from your offering. So in that sense, the customers who benefit more pay more. And a good value metric benefits both you and your customer.
Your revenues should grow as your customers’ businesses grow
Ask yourself this question: what’s the one value metric that would allow your revenues to grow if you acquire no new customers? A monetization model so aligned with the customers’ value metric allows a company to grow as their customers’ benefits grow. Sometimes innovating the monetization model in which the value exchange takes place can be the source of innovation itself.
What’s the one value metric that would allow your revenues to grow if you acquire no new customers?
Flipping the Flop
So when we put it this way, it all makes sense, right? We would just identify what customers value, measure it, determine the different value stacks, align our offer structures with the stacks and price it using the right value metric. So why do so many innovations flop then?
Well, the simple answer is, most innovations are not viable even when they are valuable.
Why? Well, because they cannot price and monetize their valuable offers to financial viability.
Why? Well, because you cannot get the right outcomes by using the wrong process.
And that’s what we talk about next in our series. In Part 6, we take a closer look at why the product innovation process that most companies use fails 7 out of 10 times, and how we can flip it on its head.