Pricing model

 Pricing is a tactic, but not part of your revenue model. It is also a mistake to price your product based on how much it cost or to base your pricing to be lower than your competitors.

Pricing Model

You need to know what value are customers willing to pay for your product. Then you need to find out how they will pay for your product and how much they are currently paying.

Asset Sale

This refers to the sale of product to a physical market. For example, this can refer to this can be Ford or Walmart where you sell your assets for a profit.

Usage Fee

This refers to companies such as Telus or amazon where you pay everytime you use a service or product.

Subscription Fee

This is a fee where you are charged a month to have access to a service or product.

Renting

Renting refers to money that is made from lending your product or service.

Advertising fee

This is an example of companies such as Google where people may use for free, however companies will pay Google to advertise there company to the users.

Robert Herjavec

 

Robert Herjavec is a Canadian businessman, investor, and television personality. Herjavec was born in Varaždin, Croatia and immigrated with his family to Canada at the age of eight to escape communism in his home country. His family came with only 20 dollars and a suitcase. He attended New College at the University of Toronto, and began his business career with IBM mainframe sales. In 1990 he founded BRAK Systems, which soon became Canada's top provider of Internet security software. BRAK Systems was sold to AT&T in 2000 for $100 million, and Herjavec took a position there as VP of Internet Security. He subsequently became VP of Sales at RAMP Networks, which was later sold to Nokia for $225 million. In 2003, Herjavec founded The Herjavec Group, a security software company, of which he is presently the CEO. It is now recognized as the fastest growing technology company in Canada. Herjavec has also written the book “Driven” which has stayed on the bestseller list for over 8 months, and became one of the best-selling books in Canada. Herjavec is also in one of the leading roles on the TV shows Dragons Den and Sharks Tank. On his free time he enjoys running in marathons, golfing and motor racing.

Keeping customers and growing them

It is much more costly to get customers than to keep them. However, keeping customers can increase revenue multiple times over. For example, if you keep your customers for 20 months, compared to if you spent the extra time to keep your customer for 100 months. You have just increased your revenue stream 5 times and that is very significant.

Next you need to grow your customers, and this includes up-selling etc. This way your customer that you have kept will grow and spend more money on your business while being satisfied.

Finally what is most important is that you find your Lifetime Value (LTV). Your LTV is how much money you can get from your customer in a lifetime. This lifetime does not refer to your lifetime, but the estimated time you believe your customer will stay with your business. Your customer acquisition cost (CAC) is the amount of money it takes to acquire and keep your customers. You want your LTV to be larger than your CAC. That is how your business stays in business and the larger the LTV is to your CAC the more interested investors will be.

How do you get your product to your customer?

There are two different things your product can be. It can be either a virtual product on the web or a physical product. Then there is the direct and indirect channel. The direct channel means you go face-to-face with your customer and indirect means that you will go sell your product to customers without ever meeting them.

Web Distribution Channels

There are several channels that you can bring your product to your customer via the web. You can have a website or make an app. You could sell your product on Amazon or eBay. Another tool you can use is facebook and twitter.







Physical Distribution Channel

Another form of distribution is physical. You could sell your computer chips to companies such as Apple and utilize their marketing to sell you product. You can also resell products at a higher value. Another way is with a direct sales force. This way you can have sales representative sell your product for you. You can also use the web to get to your custoemrs as well. Finally you can sell your product to retailers and have them sell it for you.

Multi-Sided Market

Sometimes, many different customers are part of your customer segments. For example, google search have web users and advertisers as customers. When you have a 2-sided customer segment then you need a two-sided business model that include value proposition and etc. for both customer segments.

When you have a two-sided market, each segment has a value proposition and a revenue stream, but one cannot survive without the other.

Customers

Customer Segments
The customer is who you are biulding your business for. You need to see what you are solving and who you are solving it for. By the end of this, you need to have a personna of who your customer is, who they are, and what they do.

First of all, you guess who your customer is and then go outside of the building to see if they are who you thought they were. You may realize that your customers are actually someone else, or that your customers were who you thought they were, but your product features do not match up.









Customer Gains

You need to make a list of what the customer gains from your product such as: savings, feature, happiness etc.

Customer Pains

You also need to figure out your customer problems and pains are. You also need to know there ranking of pains. You need to get to know your customer's top 10 pains and try to solve them.