If software is eating the world (Mark Andreessen) than Artificial Intelligence is eating software. AI has come of age and over the past few years we have seen a blossoming of real world applications. There is still a lot of confusion about how to price and monetize this innovation. Ibbaka proposes a general framework for pricing AI.

Many B2B SaaS companies have multiple types of users,

Chat GPT from Open AI has been getting a lot of attention recently. It is a window into the future of how AI and how we will work with AIs. Ibbaka asked Chat GPT about pricing and product-led growth. See what an AI has to say.

Many companies are under pressure to take pricing actions in 2023. Investors want higher prices. Customers want relief from a recession. Inflation is causing some people to raise prices while customers are becoming more cost conscious. Before taking any pricing action, take a look at how you are performing on discounting.

A value model is a system of equations built from value drivers that estimates how much value a solution will provide to a customer or set of customers (market segment).

Many B2B SaaS companies are planning aggressive price increases in 2023. They are doing this because they see inflation as a good to slip in a price increase while their customers will accept one. This is naive. B2B SaaS companies need to be focussed on how they are creating value and how this is changing for their customers. There are opportunities to raise prices, but they need to be targeted and not broad brush.

Value ROIs and value models are best communicated as a story. This is the ‘Art of Value Storytelling’. One approach to value storytelling uses ‘the hero’s journey.’ The hero of the customer value journey is not you or your software. It is the customer. Value storytelling makes the customer the hero of their own story.

Value is central to the design, sale and support of B2B software. Sophisticated ways of understanding and measuring that value have been developed, from basic ROI calculators to sophisticated Economic Value Estimation models. But at the end of the day, we are human, and humans respond to stories. Converting value models into value stories is key to communicating value.

Value-based pricing and customer success are coming together into a new discipline customer value management. Prepare yourself for this transition with Ibbaka’s new course on pricing and customer value management. Sign up for updates on this course and to help us shape the approach.

In his excellent new book, Pricing for Growth (Jeff Robinson), asks us to adopt a growth mindset for pricing. A growth mindset (as opposed to a fixed mindset) assumes we are operating in a world full of opportunities that learning is central to execution. Will you adopt a growth mindset for pricing in 2022?

How do you know if you are executing on a service-led growth model? Like any business model having a clear set of metrics that you are tracking and planning to is critical. For service-led growth, the metrics need to capture both sides of the service-led growth flywheel and the interactions. The best overall metric is net aggregate customer lifetime value.

The power of customer journey mapping is well understood in the service design world. Ibbaka has introduced swimlanes for value and price into the customer journey. It is important to remember that the customer journey is not a given, it is designed. Value mapping is the key tool to design the customer journey experience.

Choosing a pricing metric is the most important pricing decision you will make. It is what frames all of your pricing decisions. The pricing metric should track the value metric so that you can frame your pricing in terms of the value you deliver. Here is a simple process to help you choose your pricing metric.

Pricing challenges come in all shapes and sizes. In some cases, the pricing challenge is a symptom of some other underlying issue, not something that can be solved with a quick pricing fix. Understand the five major types of pricing challenges. Then use the Ibbaka Pricing Diagnostic to answer some questions on the type of pricing challenge that you have. Ibbaka will respond with a preliminary diagnosis.

Prices cannot be left static. Differentiation value changes as your customers change their own business and as new competitive alternatives enter the market. There are several different reasons to reconsider your pricing. Explore these with the Ibbaka Pricing Diagnostic.

Ibbaka speaks with a lot of people about value and pricing. Sometimes, when people hear that we are pricing experts, they assume that we are out to gouge buyers. This could not be more wrong. Good pricing aligns the interests of the buyer and seller.

Value-based pricing emerged from the need to price differentiated products and services in the B2B context. Price optimization models based on simplistic economic theories proved inadequate for complex solutions with multiple stakeholders in the decision making unit. But over the past two decades, applications have expanded, first to sales and marketing, then to product management and marketing and most recently to customer success.

People come to Ibbaka with many different pricing challenges. Sometimes these are symptoms for deeper problems. How can we organize the many different types of pricing challenge and diagnose the root causes?

Sometimes we think of price as a number, the number, often ending in a 9 or 7 or 5, that we see on the pricing page. But to price effectively one needs to think of a price in the context of what is priced and how the price is presented. Price is a lot more than just the number on the price tag. It is how we frame value communicate differentiation.

Value-based pricing is much more than way to set prices, or even as a tool to justify prices in the sales conversation.