Successful Venture Scaling 11: Marketing & Sales | Pricing
Author: Kilian Veer
Successful Venture Scaling – the Learning Series
While the success of corporate venture building is clearly visible, it has a significant shortcoming: Founders lack guidance or a framework for the crucial later scaling stage. To address this gap, we have developed a unique framework for venture scaling, distilled into an accessible book. This book summarizes decades of experience in both corporate and independent venture building, offering a straightforward approach to scaling ventures alongside insights into all relevant business dimensions for scaling success. In our series of mini blogs, we aim to spotlight each sub-dimension of these business areas, providing a valuable resource for those seeking to navigate the complex terrain of venture scaling.
Introduction to the Marketing & Sales Dimension
In the previous set of chapters we have covered everything relevant for the foundation of your venture. Now that we have covered the foundation of your venture, it is time to come to the most critical dimension for the scaling phase: marketing, sales, and service.
To better understand, let us divide the three along a typical customer funnel: Marketing is the first part of a customer’s journey with your company. From the awareness that your venture and its product or service exist to generating a first interest in them, that is marketing. The next part is sales: matching your offering against the customer’s needs and shaping the offer in a way that the customer decides to purchase. Last comes service after the customer has purchased the product/service and starts using it. Service aims to increase customer engagement and improve the experience so they buy again or recommend your venture to other customers. In the last step of purchasing again or referring a new customer, the sales team is responsible again.
Often, the responsibilities of the three are split into three teams. Sometimes, an additional team called customer success is added or replaces the service team. The idea behind the customer success approach is to move away from a passive service approach, where your team waits for customers to complain, towards a support function that engages (pro)actively with your customers after the purchase.
Once you reach the proper product-market fit, marketing, sales, service, and customer success have great potential for standardization and automation. They are all crucial for your success in the scaling phase.
Fourth Marketing & Sales Chapter: Pricing
Pricing is a tricky topic. Setting prices too high means losing customers, and setting them too low results in unfavorable unit economics and a negative bottom line.
It is usually a topic venture founders do not spend enough time with. In the building phase, most ventures I know will be happy once they find a price that customers are willing to pay and that one day (if the volume is high enough) will result in positive unit economics.
While I agree that spending too much on highly sophisticated pricing is a waste of time in the building phase, this behavior becomes critical in the scaling phase. You do not want to start increasing the sales volume with a non-ideal price for your product or service. Optimize your pricing first.
Depending on your product and market, different pricing approaches exist. Start with analyzing typical prices of competitor products, as yours will be compared against them (competitor-based pricing). Next, try to understand the value of your product to your customers and calculate a fair price based on that (value-based pricing). This information will give you an idea of a reasonable total price of ownership. Now, you must identify the optimal pricing approach. This can be a monthly fee for a service or software in combination with a subscription. You can also use a one-off approach, like buying products in a supermarket. Freemium and price-tier models are another approach.
I recommend diving into the pricing basics and testing a few approaches with your customers. There is a ton of good literature on the topic, but look for pricing principles that fit your product and market.
Pricing should not be too complicated, but sometimes customers look for different pricing options. Also, ensure your marketing and sales teams can easily explain your prices to customers.
Questions helping to assess the current status of your pricing are:
Have we defined a pricing strategy?
How did we set prices?
Have we done customer interviews, A/B testing, and market research for pricing purposes?
Have we calculated our unit economics and found ideal prices to optimize them?
Is our business case pricing sensitive? Can we adjust it easily when changing our pricing model?
This excerpt is one of many becoming available on our LinkedIn page. Follow our page to never miss a mini blog post on more lessons from the book, and follow Kilian on LinkedIn as he shares his knowledge and learnings from his time leading startups successfully through the first years of scaling.