Today’s guest post is by Ravish Bhatia, Head of Products at indiagold.

Product monetization is one of the hardest, albeit most critical things entrepreneurs and product managers often find themselves struggle with.

Some products have a monetization strategy built in from day 1 while others (especially disruptive products that need to create a market first) require getting to a certain scale before then can create any meaningful net revenue.

Here are 3 good examples of pricing hacks adopted by some of the most successful companies.

Framing - Make it difficult to compare!

This hack works especially well for SaaS products. Look at cloud storage providers. One could argue, there is not a lot of difference when it comes to plain old cloud storage, right? Whether you store your files in A or in B, ultimately as a consumer you are deriving similar value from both. As a user, what would you do? You would go with whatever is the cheapest!

But here is something successful products do position themselves uniquely - they purposefully make it difficult for users to compare their product features against their competitors’. The root of this hack lies in the fact that a majority of users hate doing complicated math (or any sort of additional coginitive load for that matter). For example, Dropbox has a loooong list of features across its plans and even if one opens the website from India, it still prices its plans in USD, making it harder to compare it to Google Drive. It also distinguishes itself with different feature highlights (say number of users allowed vs GBs available).

Differentiating your product offering allows you to dictate your own pricing. Smart, right? Something to consider while prioritizing features and making roadmaps.

Predatory Pricing: Uber, Ola, Swiggy, Jio, Delhivery, Bounce

One of the hardest things to do is new market creation/ new habit creation. Think about the early days of e-commerce in India when products were heavily discounted to incentivize shoppers to buy online. Or when as Indians we first learnt to ditch the then omnipresent autos for air conditioned cabs. Such instances, often funded by venture capital, require an aggressive, pricing strategy.

Predatory pricing is one such aggressive pricing technique where you price your product (at say, P1) lower than the equilibrium price in the market (P0 in graph 1). This allows you to capture a significant market share. Once you’ve built enough customer loyalty, or acquired a decent market share, you change the demand curve altogether.

Now if you increase the price of your product from P1 to P2 (iwhere P2>P1), even though some customers will stop buying your product but a few will stay back because there is an exit cost/ switching cost involved and new habit has been created.

Building loyalty at scale takes both time and big coffers! Do it only if you can afford both. Luckily or sadly (depending on your perspective), a lot of venture backed startups do this (especially in consumer focused companies). In hallowed VC circles, it’s the age-old debate .

Bundling with other product/ offerings

Perhaps one of the best examples of bundling implemented in the Indian context is Times Prime. For just ₹999 you get subscriptions from Gaana, Sony Liv, ET Prime, TOI, Google One apart from several other benefits from other partners. Successfully communicating the “EXTRA” that a user gets at the defined price – helps create an increased sense of value derived amongst users.

Say you are an Ed-Tech platform offering government exam prep services. Now the content tested in most of these exams is the same. While making your course pricing catalogue you could offer an SSC exam preparation course for ₹599/ month or you could make a combination and offer SSC + RBI + LIC exam for ₹799/ month. Note that ₹599 is a decoy placed to make the consumer find greater perceived value in the ₹799 bundle (even if the user aims to sit for just the SSC exam and not the other 2).

Such strategies work especially well with digital offerings where the marginal cost of creating a new product is zero (unless say in models where royalty fee is involved).

Product Managers, often called the CEO of their product, are tasked with having to walk the perilous tightrope of achieving business results while thinking long term and creating the best possible user experience. If this is something that excites you, check out our latest 6 week course taught by Ravish that starts on May 6, with special guest lectures from some of the most renowned Product Leaders in India.

The course comprises of the following 6 modules, where you would be creating a product yourself from scratch and pitching it at the end of the course in a virtual demo day to potential investors.

Module 1: Wire-framing and UX heuristics

Module 2: User psychology and product positioning

Module 3: Product Analytics

Module 4: Day to Day PM skills

Module 5: Fintech 2022 deep dive

Module 6: Final pitch

Seats are filling fast, grab your spot today! Find more details here.

Have a wonderful week ahead. — Your Network Capital Team

“Time only moves in one direction. Remember that. Things always change.” ― Mohsin Hamid

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