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.

B2B pricing work usually focuses on the economic value, but that is only part of the story. Few B2B sales take place without an emotional commitment from the buyer. Emotion, how buyers and users feel about a solution, are also central to the customer journey and impact subscription renewal. Understanding emotional value drivers is part of B2B pricing.

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.

The value cycle defines how organizations create, communicate, deliver, document and capture value. It is generally used by companies to align different business functions around how they create value for customers. The value cycle turns around a deep understanding of how value is created for customers.

Lifetime Value of a Customer (LTV / CLV) is the total worth of a customer's business over the whole period of their relationship. It costs less to keep existing customers than to acquire new ones, so increasing the value of existing customers is a great way to propel growth.

EVE, or Economic Value Estimation, quantifies the monetary value created by an offering for a particular customer versus their next best alternative. Since value is at the center of pricing strategy, modeling economic value estimation becomes critical in value-based pricing.

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.

Are you planning a price increase for 2023? Before you execute on a price increase you need to segment your customers. The segmentation is based on Value to Customer (V2C) and a measure of the value of the customer to the company like ARR or LTV (life time value of the customer). You want to move customers into the segment where they are getting a lot of value and providing a lot of value.

Market dynamics can change in a recession and different customers will respond in different ways. Understand how market dynamics could change and then resegment your customers to craft pricing and price communication strategies. You will also want to model scenarios for different competitive responses.

Net Revenue Retention (NRR) or Net Dollar Retention (NDR) will be a key way that B2B SaaS companies demonstrate their value to investors in 2023. Pricing will play a critical role in how companies improve NRR and NDR. As you price to improve NDR in 2023, plan for how this will position you in 2024.

The 2nd excerpt from the Ibbaka eBook Pricing Strategy for 2023. The economic landscape has changed in important ways and these changes will shape pricing strategy in 2023. Inflation, higher interest rates, the threat of a recession, supply chain challenges, the lack of talent and competitor actions all need to be taken into account.

In the summer of 2022, long years of work on AI content generation exploded into the mainstream. In 2023, billions of images will likely be produced by systems like Dall-E and Stable Diffusion. How will AI content generation deliver value? Is this category creation or disruptive innovation? How will these systems and the images they generate be priced? The 3rd part in Ibbaka’s series on Pricing and Innovation.

Service-Led Growth is a concept blend of Product-Led Growth and Strategy Consulting - it draws on the most powerful ideas in each approach. Concept blending is a powerful tool for innovation across all growth models. We invite you to explore the power of service-led growth and think about how it can apply to your business.

2023 will be a pivotal year for pricing strategy. The trends of the last few years will come together leading to fundamental changes in the operating environment. Pricing will need to change as well. The 1st in a series of posts to help investors, boards and C-level leadership prepare.

Pricing and value management can play a key role in giving direction to innovation. Value drivers are one way to do this. Does the innovation augment an existing value driver or create a new one? Does it do this for existing users or for new users? Understanding value is the key to successful value creation and capture.

One of the most crucial roles in a subscription business is customer success. Communication of the value offer to the customer and ensuring that the value promised to the client is fulfilled are the responsibilities of customer success. Healthy renewal rates, increased Customer Lifetime Value (LTV), and more success with up-sell and cross-sell opportunities are all ensured by consistent value communication and measurement of value supplied to the customer.

As the economy shifts, the key goals for pricing are changing. Net Dollar Retention (NDR) has come to the fore for many companies. Growth models are shifting as buyer behaviors change.