5 Selling Products From Code to Product gidgreen.com/course - - PowerPoint PPT Presentation

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5 Selling Products From Code to Product gidgreen.com/course - - PowerPoint PPT Presentation

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5 Selling Products From Code to Product gidgreen.com/course Lecture 5 Introduction Payment models Pricing Payment methods Conversion funnels Problems From Code to Product Lecture 5 Selling Products Slide 2

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SLIDE 1

5 — Selling Products

From Code to Product gidgreen.com/course

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SLIDE 2

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 2 gidgreen.com/course

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SLIDE 3

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 3 gidgreen.com/course

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SLIDE 4

Desktop software

From Code to Product Lecture 5 — Selling Products — Slide 4 gidgreen.com/course

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SLIDE 5

In-app purchases

From Code to Product Lecture 5 — Selling Products — Slide 5 gidgreen.com/course

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SLIDE 6

Software as a service

From Code to Product Lecture 5 — Selling Products — Slide 6 gidgreen.com/course

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SLIDE 7

App store products

From Code to Product Lecture 5 — Selling Products — Slide 7 gidgreen.com/course

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SLIDE 8

SaaS and mobile app growth

From Code to Product Lecture 5 — Selling Products — Slide 8 gidgreen.com/course

$10 billion $20 billion $30 billion 2006 2007 2008 2009 2010 2011 2012 2013 2014 Software as a Service Mobile applications

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SLIDE 9

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 9 gidgreen.com/course

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SLIDE 10

Payment models

From Code to Product Lecture 5 — Selling Products — Slide 10 gidgreen.com/course

$0 $20 $40 6 12 18 24 30 36

Revenue Month

One time Subscription Pay as you go

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SLIDE 11

One-time purchases

  • Payment = ownership
  • Low transaction costs
  • Unstable cash flow

– Publicity bursts – Upgrades

  • Problem of ongoing costs

– Technical support – Online elements

From Code to Product Lecture 5 — Selling Products — Slide 11 gidgreen.com/course

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SLIDE 12

Subscriptions

  • Payment = membership
  • Periodicity

– Monthly, quarterly, annual – Discounts for longer

  • Stable cash flow

– Forgotten subscriptions

  • Problem of churn

– Active or passive

From Code to Product Lecture 5 — Selling Products — Slide 12 gidgreen.com/course

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SLIDE 13

Pay as you go

  • Payment = usage

– No easy money!

  • Credits or after-billing

– Credit expiry?

  • Volume discounts
  • Semi-stable cash flow
  • Problem of tiny customers

– Minimum credit purchase

From Code to Product Lecture 5 — Selling Products — Slide 13 gidgreen.com/course

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SLIDE 14

The free version

  • Cournot theorem

– Price ⟶ marginal cost – Marginal cost ≈ zero

  • Engine of publicity

– Everyone loves free

  • Get people ‘hooked’

– No barrier to usage – Upsell later on

From Code to Product Lecture 5 — Selling Products — Slide 14 gidgreen.com/course

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SLIDE 15

Time limited

From Code to Product Lecture 5 — Selling Products — Slide 15 gidgreen.com/course

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SLIDE 16

Capacity limited

From Code to Product Lecture 5 — Selling Products — Slide 16 gidgreen.com/course

mailchimp.com

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SLIDE 17

Feature limited

From Code to Product Lecture 5 — Selling Products — Slide 17 gidgreen.com/course

freshbooks.com

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SLIDE 18

Collaboration limited

From Code to Product Lecture 5 — Selling Products — Slide 18 gidgreen.com/course

highrisehq.com

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SLIDE 19

Ad supported

From Code to Product Lecture 5 — Selling Products — Slide 19 gidgreen.com/course

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SLIDE 20

Making freemium work

  • Problem: moving off free

– Fixed value notion – Search for alternatives – Especially time limits

  • Possible solutions

– Data lock-in – Increased usage over time – Collaborative momentum

From Code to Product Lecture 5 — Selling Products — Slide 20 gidgreen.com/course

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SLIDE 21

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 21 gidgreen.com/course

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SLIDE 22

$0 $5 $10 $15 $20 200,000 400,000 600,000 800,000 1,000,000

Price Sales volume

Demand curve

From Code to Product Lecture 5 — Selling Products — Slide 22 gidgreen.com/course

$4 × 500k = $2m $12 × 125k = $1.5m

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SLIDE 23

$0.0m $0.5m $1.0m $1.5m $2.0m $2.5m $0 $5 $10 $15 $20

Revenue Price

Optimal price

From Code to Product Lecture 5 — Selling Products — Slide 23 gidgreen.com/course

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SLIDE 24

Optimal price

$0 $5 $10 $15 $20 200,000 400,000 600,000 800,000 1,000,000

Price Sales volume

From Code to Product Lecture 5 — Selling Products — Slide 24 gidgreen.com/course

$5.77 × 370k = $2.13m

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SLIDE 25

Demand curve reality

  • Low prices look bad

– Charge more, sell more?

  • Curve not so smooth

– $x.99 effect – Competing products

  • Curve unknown

– Testing possible, sometimes

From Code to Product Lecture 5 — Selling Products — Slide 25 gidgreen.com/course

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SLIDE 26

$0 $5 $10 $15 $20 200,000 400,000 600,000 800,000 1,000,000

Price Sales volume

Multiple price points

From Code to Product Lecture 5 — Selling Products — Slide 26 gidgreen.com/course

$4 × 250k = $1m $8 × 125k = $1m $12 × 125k = $1.5m Total = $3.5m

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SLIDE 27

Customer segmentation

  • People know what they want to pay

– Give them a reason to pay it!

  • Multiple levels

– Capacity increases – Extra features – Type of user – “VIP support”

  • Clear comparisons

From Code to Product Lecture 5 — Selling Products — Slide 27 gidgreen.com/course

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SLIDE 28

Customer segmentation

From Code to Product Lecture 5 — Selling Products — Slide 28 gidgreen.com/course

wufoo.com Solid mid- range product in middle Cheap/crappy

  • ption

(decoy) Some people always want the best

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Choosing prices

  • Perceived value

– Marketing – Support

  • Competing products

– How do you compare? – Sense of fairness

  • Keep it simple
  • Don’t lose money per sale!

From Code to Product Lecture 5 — Selling Products — Slide 29 gidgreen.com/course

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SLIDE 30

Price vs Process

From Code to Product Lecture 5 — Selling Products — Slide 30 gidgreen.com/course

$1 $10 $100 $1,000 $10,000 $100,000 Impulse purchase Personal credit card Claim back from company Use company credit card Approval from dept head Approval from CEO

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SLIDE 31

Justifying high prices

  • Lack of competition

– Or become the standard

  • More features
  • Differentiate

– Have a personality – Create a tribe – Great support

  • Competing on price is dangerous!

From Code to Product Lecture 5 — Selling Products — Slide 31 gidgreen.com/course

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SLIDE 32

Other price games

  • Razors and blades
  • Fives and nines
  • Supermarket signposts
  • Bundling
  • Volume discounts?
  • Upgrades/sidegrades
  • Time-limited sales

From Code to Product Lecture 5 — Selling Products — Slide 32 gidgreen.com/course

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SLIDE 33

Lifetime value example

  • Constant monthly churn rate

– 5.6% per month – Compounds to 50% per year

  • Charge $10/month

– Assume no costs

  • Or $100 per year upfront

– “2 months free”

  • Which has higher lifetime value?

From Code to Product Lecture 5 — Selling Products — Slide 33 gidgreen.com/course

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SLIDE 34

$10/month vs $100/year

From Code to Product Lecture 5 — Selling Products — Slide 34 gidgreen.com/course

$0 $50 $100 $150 $200 6 12 18 24 30 36 42 48 54 60

Total Revenue Month

Monthly Annual

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SLIDE 35

$10/month vs $90/year

From Code to Product Lecture 5 — Selling Products — Slide 35 gidgreen.com/course

$0 $50 $100 $150 $200 6 12 18 24 30 36 42 48 54 60

Total Revenue Month

Monthly Annual

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SLIDE 36

$10/month vs $60/year

From Code to Product Lecture 5 — Selling Products — Slide 36 gidgreen.com/course

$0 $50 $100 $150 $200 6 12 18 24 30 36 42 48 54 60

Total Revenue Month

Monthly Annual

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SLIDE 37

Referrer Inbound Onboarding Retention Hearing

Viral arc

But if sales are funding ads…

From Code to Product Lecture 5 — Selling Products — Slide 37 gidgreen.com/course

Stranger Visitor Active User Paying Customer Adverts

Money arc

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SLIDE 38

Customer acquisition cost

  • How much to “purchase” a subscriber?

– At scale, marginal cost of ads

  • If LTV ≤ CAC, go home
  • Assume CAC is $50
  • Charge $10/month?

– Lifetime value = $180

  • Or $60/year?

– Lifetime value = $120

From Code to Product Lecture 5 — Selling Products — Slide 38 gidgreen.com/course

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SLIDE 39

Start with $10k in the bank…

From Code to Product Lecture 5 — Selling Products — Slide 39 gidgreen.com/course

2,000 4,000 6,000 8,000 10,000 3 6 9 12

Active subscriptions Month

$60/year $10/month

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SLIDE 40

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 40 gidgreen.com/course

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SLIDE 41

Credit cards

Visa $2,040B MasterCard $901B AmEx $540B Discover $114B

US Purchases 2011 nilsonreport.com

From Code to Product Lecture 5 — Selling Products — Slide 41 gidgreen.com/course

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SLIDE 42

Credit card payment process

From Code to Product Lecture 5 — Selling Products — Slide 42 gidgreen.com/course

Shopping cart Credit card form

Product & Price

Payment gateway

Card & Amount

Payment processor

Card & Amount

Merchant account

Cash − charges

Your account

Cash − charges?

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SLIDE 43

Online payment processors

From Code to Product Lecture 5 — Selling Products — Slide 43 gidgreen.com/course

Shopping cart Credit card form Payment gateway Payment processor Merchant account Your account

Cash − 5 to 10%

  • Simplest and easiest
  • Paid weekly or monthly
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SLIDE 44

Your own merchant account

From Code to Product Lecture 5 — Selling Products — Slide 44 gidgreen.com/course

Shopping cart Credit card form Payment gateway Payment processor Merchant account Your account

Cash Cash − 2 to 5%

  • Merchant account approval
  • Harder for non-US
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SLIDE 45

Collecting card details

From Code to Product Lecture 5 — Selling Products — Slide 45 gidgreen.com/course

Shopping cart Credit card form Payment gateway Payment processor Merchant account Your account

Cash Cash − 2 to 5%

  • Control e.g. recurring
  • PCI DSS compliance
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SLIDE 46

Selling via PayPal

  • Pay with PayPal balance

– Popular with non-Western customers – You can also use it

  • Credit cards also accepted
  • Low fees (2.5% to 5%)
  • Problem: account freezes

– Receive but no withdrawal – You are at their mercy

From Code to Product Lecture 5 — Selling Products — Slide 46 gidgreen.com/course

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iOS/Android app stores

  • Controlled software marketplaces
  • Hit-driven, e.g. Top 25 paid

– Advertise on other apps, not in-store – Promote via free version

  • Apple/Google take 30%

– No credit card / distribution fees – Same for in-app purchases

  • Avg paid prices $2—$3 but most free

From Code to Product Lecture 5 — Selling Products — Slide 47 gidgreen.com/course

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SLIDE 48

Games and games on iOS

From Code to Product Lecture 5 — Selling Products — Slide 48 gidgreen.com/course

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SLIDE 49

A mix on Android

From Code to Product Lecture 5 — Selling Products — Slide 49 gidgreen.com/course

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Invoicing

  • (Semi-)manual process

– Only worthwhile for bigger customers

  • Paid by check or bank transfer

– No %-based processing fees!

  • Delivery or payment first?

– Customer may expect delivery – Payments need to be chased

  • Also: receipts for prior payments

From Code to Product Lecture 5 — Selling Products — Slide 50 gidgreen.com/course

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SLIDE 51

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 51 gidgreen.com/course

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SLIDE 52

Customer concerns

  • Am I buying the right thing?
  • Is the price what I was promised?
  • Are there additional costs, e.g. tax?
  • How long is this going to take?
  • Who are these guys, anyway?
  • Is it safe to enter my credit card?
  • Will I be able to get technical help?
  • Can I cancel or be refunded?

From Code to Product Lecture 5 — Selling Products — Slide 52 gidgreen.com/course

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SLIDE 53

Entry to purchase

From Code to Product Lecture 5 — Selling Products — Slide 53 gidgreen.com/course

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SLIDE 54

Entry to purchase

From Code to Product Lecture 5 — Selling Products — Slide 54 gidgreen.com/course

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SLIDE 55

Choose a version / level

From Code to Product Lecture 5 — Selling Products — Slide 55 gidgreen.com/course

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SLIDE 56

Order summary

From Code to Product Lecture 5 — Selling Products — Slide 56 gidgreen.com/course

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SLIDE 57

Customer information

From Code to Product Lecture 5 — Selling Products — Slide 57 gidgreen.com/course

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SLIDE 58

Payment information

From Code to Product Lecture 5 — Selling Products — Slide 58 gidgreen.com/course

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SLIDE 59

Subscription concerns

  • Will I be able to cancel?

– Will it be a fight? – Can I get a payment refunded?

  • Can I upgrade/downgrade?

– Is there a penalty for that?

  • Will the price go up?
  • Will I be informed of each payment?

From Code to Product Lecture 5 — Selling Products — Slide 59 gidgreen.com/course

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SLIDE 60

Subscription concerns

From Code to Product Lecture 5 — Selling Products — Slide 60 gidgreen.com/course

highrisehq.com

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SLIDE 61

Lecture 5

  • Introduction
  • Payment models
  • Pricing
  • Payment methods
  • Conversion funnels
  • Problems

From Code to Product Lecture 5 — Selling Products — Slide 61 gidgreen.com/course

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SLIDE 62

Credit card fraud

  • X uses Y’s credit card without permission
  • Why do you care?

– Y comes after you – You get a chargeback

  • Payment processor solutions

– Card security code (not on stripe) – Address confirmation – Verified by Visa / MasterCard SecureCode – Fraud detection algorithms

From Code to Product Lecture 5 — Selling Products — Slide 62 gidgreen.com/course

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SLIDE 63

Risk assessment

From Code to Product Lecture 5 — Selling Products — Slide 63 gidgreen.com/course

  • If possible, review manually

– Big orders – Purchase from “unusual” country

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SLIDE 64

Chargebacks

  • Customer asks bank for money back

– Card was stolen – Product absent/deficient – Friendly fraud

  • Full price taken back from you

– No recourse without customer signature

  • You pay fine, $15—30

– Much higher if too frequent

From Code to Product Lecture 5 — Selling Products — Slide 64 gidgreen.com/course

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SLIDE 65

Refunds

  • Customer asks you for money back
  • You can argue, but…

– It’s (probably) not worth your time – It harms your reputation – They have chargebacks

  • You pay back full price

– But no additional fees

  • Easy interface at payment processor

From Code to Product Lecture 5 — Selling Products — Slide 65 gidgreen.com/course

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SLIDE 66

Subscription retention

  • Active churn

– Try to intercept – Ask why afterwards

  • Passive churn

– Card failed / expired – Notify and request renewal – Special offers

  • Expect average 1—3 years
  • Acquisition > Retention cost (generally)

From Code to Product Lecture 5 — Selling Products — Slide 66 gidgreen.com/course

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SLIDE 67

PCI DSS compliance

From Code to Product Lecture 5 — Selling Products — Slide 67 gidgreen.com/course

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SLIDE 68

Customer support

  • Money = obligation

– Threat of chargebacks

  • Pre-sales enquiries
  • Email + phone is best
  • Respond within 1 working day
  • Really read / listen

– Speak their language

  • Never get angry

From Code to Product Lecture 5 — Selling Products — Slide 68 gidgreen.com/course

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SLIDE 69

Bitcoin: The solution?

From Code to Product Lecture 5 — Selling Products — Slide 69 gidgreen.com/course

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SLIDE 70

Bitcoin: The solution?

From Code to Product Lecture 5 — Selling Products — Slide 70 gidgreen.com/course

Pros Cons Extremely low cost No (easy) subscriptions Irreversible Exchange rate fluctuations Pseudonymous Confirmation delay Universally available Government interference? Rapid settlement Easy to steal (like cash) Decentralized Accounting uncertainty

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SLIDE 71

Coinbase Offering

From Code to Product Lecture 5 — Selling Products — Slide 71 gidgreen.com/course

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SLIDE 72

Books

From Code to Product Lecture 5 — Selling Products — Slide 72 gidgreen.com/course