Pricing technology
When dealing with innovation, a constant issue is being able to get out of the product mindset. As most decision-makers come from a marketing, financial, or engineering background, the default mode is thinking of price, product, promotion, etc. Something doesn't sell? Lower the price! Still not working? Promote more aggressively!
And you know where I'm going with this... No customer really cares about your product as much as the value it delivers for solving a problem. Which, if you're an innovator, is good news on two levels.
- You can pitch your innovation as adding value by solving a problem for your customer and don't have to linger for too long on the underlying technology (if any).
- Your price is not defined by comparable products in the market (again, if any) but by the amount of value you create for your customer.
Of course, if you don't have value all this falls apart (but then you weren't innovating, to begin with).
Companies like NVIDIA that specialize in unlocking specific technologies for the market are quite fascinating to observe in that regard. They understand very well they don't have a fixed market. From games to cars, industrial processes, or healthcare, they are in the business of adding value/solving problems for many value chains and potential customers.
And they provide many stories and scenarios to explain their impacts in various business settings...
There is something they never do with clear intent, though.
Would you have an idea of what it is?
(You're not going to like it...)
It's linking their pricing strategy to the performance they unlock.
And I'm not saying they don't do it to some extent. In many cases, NVIDIA systems are commanding a premium on the market, which does reflect their edge in terms of capabilities. It's true. But it's never really linked to what they achieve for the customers.
The interesting question to ask to a big pharmaceutical corporation that can now unlock part of its R&D pipeline because you're providing ground-breaking tools is "how much value are we creating for you" and then as a follow-up question, "how can we invoice 20% of this value created and make sure you keep 80% of it?"
In the end, despite their impressive technology leadership, very few innovators manage to get the powerful Problem - Value - Price connection going on.
Is this marketing? Sales? Or business strategy? The answer is YES. Until your price is really linked to the value you deliver, you're still missing the point.
