The Science Behind Mobile Pricing and Monetization
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The document discusses mobile monetization and pricing strategies, outlining Branch's success with significant funding and a global reach. It explores various pricing models, the importance of understanding customer behavior, and the interplay between pricing and marketing to drive revenues. It emphasizes identifying opportunities within the purchase funnel to optimize user experience and maximize profitability.
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The Value-Pricing “Thermometer”
Objective Value
Product Price
Perceived Value
Cost of Goods Sold
Consumer’s Incentive to Purchase
= [Perceived Value-Price]
Firm’s Incentive to Sell
= [Price-COGS]
Marketing
Efforts
Price of
Substitutes
Source: Principles of Pricing, HBR, January 12, 2006
The Floor
The Ceiling](https://image.slidesharecdn.com/thesciencebehindmobilepricingmonetizationw2flyndasmithstanfordfaculty-dexterzhuanggrowthmonetization-170615204050/85/The-Science-Behind-Mobile-Pricing-and-Monetization-15-320.jpg)
The Science Behind Mobile Pricing and Monetization
- 6. Questions? Intro The Science Behind Pricing and Monetization Mobile Monetization
- 7. ABOUT BRANCH $113 million in funding across 4 rounds 100+ Employees, 60% engineering Offices in SF, NYC, India, Russia, Brazil, UK 24,000 apps across the globe using links 2+ billion monthly users
- 8. Search Deep Linked Email Social Deep Linked Ads Web-to-App Campaigns BRANCH LINKS SOLVE MOBILE LINKING
- 11. The Science Behind Pricing and Monetization Lynda Kate Smith
- 12. Objectives • Leave with the basics of pricing • Understand the interplay between pricing levels and strategy • Grasp the tie between pricing, target markets, and company value proposition • Identify a company’s paths to profitability
- 13. 13 Pricing: An Often Overlooked Marketing Element Marketing’s efforts are directed at creating value for the customer and company: – Developing a product that satisfies… wants and needs – Designing a promotion that conveys the value… – Choosing a distribution program (place) that makes the product readily available – Designing a pricing strategy that simultaneously creates a consumer’s incentive to buy the product and the firm’s incentive to sell that product Source: Principles of Pricing, HBR, January 12, 2006
- 14. 14 Continuum of Value and Pricing Commodity Unique Price increases in importance Price becomes less critical = Product or Marketing Mix Element
- 15. 15 The Value-Pricing “Thermometer” Objective Value Product Price Perceived Value Cost of Goods Sold Consumer’s Incentive to Purchase = [Perceived Value-Price] Firm’s Incentive to Sell = [Price-COGS] Marketing Efforts Price of Substitutes Source: Principles of Pricing, HBR, January 12, 2006 The Floor The Ceiling
- 16. Price Point and Structure 16
- 17. 17 Customer Lifetime Value • Customer Acquisition Costs • Customer Break-even Analysis • Lifetime Value Analysis Marketing is rapidly becoming, “the science and art of finding, retaining, and growing profitable customers.” - Philip Kotler Source: Customer Profitability and Lifetime Value, HBR, August 7, 2002
- 18. Profitability Two Big Levers •Revenue Up •Costs Out Gross Profit (Pg = R – C)
- 19. 19 Price Sensitivity • Customer Economics – Will the decision maker pay for the product him or herself? – Does the cost of this item represent a substantial percentage of the total expenditure? – Is the buyer the end user? If not, will the buyer be competing on price in the end-user market? – In this market, does a higher price signal higher quality? • Customer Search and Usage – Is it costly for the buyer to shop around? – Is the time of the purchase or the delivery significant to the buyer? – Is the buyer able to compare the price and performance alternatives? – Is the buyer free to switch suppliers without incurring substantive costs? • Competition – How is this offering different from competitor’s offerings? – Is the company’s reputation a consideration? Are there other intangibles affecting the buyer’s decision? Source: How do you know when the price is right?, HBR, Sept – Oct 1995
- 20. Business Goals and Pricing
- 21. 21 Consistency and Pricing Successful pricing is dependent on synergy between: • Price and image • Price and the rest of the marketing mix • Price and company philosophy “Price has become a mirror for the other attributes we try to communicate.” - Nicholas Hayek, Swatch
- 22. 22 Traditional Pricing Models Deal Oriented Pricing is managed on a deal-by-deal basis. Value-based Pricing is consistent with the value returned to the customer. Competitive-based Pricing is established with respect to the competition. Cost-plus Pricing is a function of total cost + markup.
- 23. 23 Mobile Pricing Models Free Free; Revenue comes from other sources. •Free to Premium •In-App Advertising •In-App Purchases •Subscription Paid One-time payment.
- 24. 24 Pricing and the TALC Source: Moore (2002), Crossing the Chasm; Wiefels (2002), The Chasm Companion. Chasm Early Market Bowling Alley Tornado Main Street Total Assimilation Innovators Early Adopters Early Majority Late Majority Laggards •Deal oriented •“Guess work” •Value-based •Goal=margin •Price inelastic •Competition-based •Goal=market share •Price elastic •Status impacts price •Growth from differentiation •Buyer has power •Price often lower then entry price Skim Penetration
- 25. 25 Source: Lynda Kate Smith Ease of Seeing Value for Price Ease to Buy and Get Started Hard Easy Easy Hard iTunes/App Mac Computer Jive Porsche GTE Sales Driven Revenue Marketing Driven Revenue Any Phone Plan Yammer Sales + CSM Marketing + CSM Twilio API Carrier API Pricing and Role of Marketing
- 26. Mobile Monetization Dexter Zhuang, Growth Manager @ Dropbox
- 27. Agenda Monetization Models Building the Funnel Understanding Drivers Identifying Opportunities
- 30. Freemium
- 31. Pay Per Download
- 32. In-App Purchases
- 33. Subscriptions
- 34. Sponsorship
- 36. What does a mobile purchase funnel look like? Purchase screen viewed Tap buy CTA Start payment Complete purchase
- 37. For example, Spotify Purchase screen viewed Tap buy CTA Start payment Complete purchase
- 38. Break down the numbers Steps Total users % completed from previous step % drop-off from previous step Purchase screen viewed 100 Tap buy CTA 25 25% 75% Start payment 15 60% 40% Complete purchase 10 66.6% 33.3%
- 39. Create segmentations Platform / device Android, iPhone, iPad, etc. New users, day 30, existing users, etc. WAU / MAU, used X feature, etc. Demographics User type Behavior Gender, age, location, etc.
- 41. How and why do people purchase?
- 42. Look at top sources for payment flow Sources # taps to payment screen Home screen 250 Upsell #1 450 Upsell #2 200 Account screen 100 Total = 1000
- 43. Understand which sources have highest intent Sources # taps to payment screen # purchases % purchase rate Home screen 250 50 20% Upsell #1 450 50 11.1% Upsell #2 200 20 10% Account screen 100 5 5% Total = 1000 125 12.5%
- 44. Where in the user journey do people buy?
- 45. What value propositions do users care about?
- 47. Let’s go back to the funnel Steps Total users % completed from previous step % drop-off from previous step Purchase screen viewed 100 Tap buy CTA 25 25% 75% Start payment 15 60% 40% Complete purchase 10 66.6% 33.3%
- 48. 75% of users drop-off before tapping buy CTA
- 50. Develop and test hypotheses Headlines, subheadline Value props CTA copy Pricing message / free trial UI / illustrations Personalization
- 51. Prioritize experiments Consider: 1. Impact 2. Probability 3. Effort
- 52. Top monetization themes 1. Pricing / free trials 2. CTA and value props messaging 3. UX / UI optimizations 4. Notifications
- 53. Questions?