If you had to classify your digitization knowledge, would you consider yourself a digital hero, a digital follower or digitally naïve? When it comes to pricing in a digital world – it’s crucial to know where you stand.
Last week, the Syncron team touched down in Chicago for the 29th Annual Spring Pricing Workshops & Conference at the Loews Chicago O’Hare Hotel. Hosted by the Professional Pricing Society (PPS), the conference is focused on bringing pricing’s foremost thought-leaders together for events, workshops and online courses to facilitate ongoing learning, networking, and shared experiences.
In the midst of all the thought-leadership, we got to hear from Brad Soper of Simon-Kucher on “Monetization in a Digital World – Avoiding the Big Digital Fail.” Coming from a company touted for its renowned pricing experience, creating top- and bottom-line growth strategies that deliver measurable results, Soper was well versed in strategies for successful monetization, what makes certain digital initiatives work, and designing better digital plans.
In digitization, there are three types of companies:
- Companies that make things happen – The Digital Heroes.
- Companies that watch things happen – The Digital Followers.
- Companies that wonder what happened – The Digital Naives.
According to a Simon-Kucher Global Pricing and Sales Survey in 2017, only 18% of all companies are best-in-class and can be considered Digital Heroes. These are the companies that have invested in digitization without starting a price war, and have had that investment make a topline impact to their business. Digital Heroes outperform other companies on four levels:
- Strategy: 84% have a digitization strategy roadmap and a specific focus on revenue improvements.
- Marketing: Cover the marketing basics (ie: value communication) and deploy 1.8 times more use of Big Data for customer segmentation.
- Sales: Have a better understanding of ideal salesforce size, adjusting faster, while digitizing the sales process itself.
- Pricing: Employ 3.8 times more people working full-time in pricing, using Big Data for major pricing decisions.
Ultimately, in order to become a part of those 18 percenters, your company needs to recognize that digitization is happening. Right now. It will affect every part of your business, and it doesn’t rewrite the basic rules of commerce: It’s about customers, value and monetization. Here’s Soper’s seven lessons learned from pricing in a digitized world:
Recognize that digitization is NOT an IT-only project – technology is simply the enabler for new revenue opportunities. They should have a seat at the table, just not at the head.
De-mystify digitalization: it’s not the same as technical advancement. There are tons of technologies – 3D printing, VR, AR, AI – but, but the difference is in the ones that drive revenue for a business. For example, a modern tractor demonstrates all three branches of digitization slowly developing over decades:
- Digitizing core technology: maximize product uptime, increase equipment precision, dynamic response times and promote safety.
- New digital products: driving patterns for optimum vehicle efficiency, yield optimization and crop suggestions.
- Digitizing the customer experience: web-portal for online ordering, etc.
Optimize your digital portfolio design. All you need is a stronger leader, some fillers, but no killers.
“Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it’s the process of moving into a digital business” -Gartner
Monetize your digital offering; traditional price models are no longer sufficient. Instead, shift from one-time price of traditional products to flat rates and licenses. A few examples include:
- Heating systems: shift from price for device to price for generated warmth.
- Aircraft engine: shift from price for engine to price per flown mile.
- Automotive: shift from higher price per vehicle upfront, and low after-sales revenue, to low price per vehicle upfront, and high-after sales revenues.
Use a customer-centric approach. Design thinking is an important element of a customer-centric approach to design highest-value digital platforms, products and services. Develop a customer segmentation model and target your digital content. What happens here is a paradigm shift from selling products to developing customer relationships on digital platforms. Leading companies like Amazon, Facebook and YouTube are a few examples of heroes that have mastered this shift.
Apply basic human psychology in cross-selling. Logically time and recommend upsells, and apply more cross-selling over time. Think about rental cars: say the user selects a sedan. The next screen should provide simple options to potentially upgrade them – “more space” for a minivan, “more fun” for a sporty SUV, or “more sun” for a cool convertible. Upsell paths and nudging like this works across industries, both B2B and B2C.
Evaluate how you are doing regarding digitization maturity over time. These changes must be lead by the C-suite, as any major organizational change does. The only way to avoid the fail is to be proactive about each of these individual lessons, serving as the change agent along the journey.
There’s no magic formula for succeeding in a more digitized world – a digital transformation process does not exist. That’s why it’s crucial for you to take charge today and get ahead of the digitization revolution, before the bottom 82 percenters leave you in the dust.