Case Studies
Innovative motorcycle accessory
Situation:
The company had developed a new, high-tech motorcycle accessory. The product mainly appealed to early adopters, but after several years of building its home market, it was time to expand sales internationally.
The challenge:
The company initiated sales in two overseas markets, and while the innovation the company brought to the market was well-published both in industry-specific and mainstream media, sales grew slowly and not nearly as quickly as in its home market.
Findings:
When comparing willingness to pay and how the buyer's use case affected their willingness to pay, it was discovered that these were markedly different between the home and international markets. In the company's home market, those who used their motorcycle to commute generated the highest willingness to pay; in one country, it was those who used the motorcycle to visit friends and family, and in the other country, those who just wanted to drive "the open road" that generated the highest willingness to pay.
Results:
After adjusting the marketing messages and prices to match the different country's preferences, sales increased in the company's home market, and in the other two countries, sales growth doubled.
SaaS Solution
Situation:
This new company provided a SaaS service to companies in the oil and gas industry. In order to quickly build market share from launch, the company had initiated sales with a low price. The company quickly built up to about 20,000 customers, but the company was barely profitable.
The challenge:
To find a way to increase prices to make the company highly profitable while minimizing the loss of subscribers.
Findings:
Buyers in this market did not have a reference to what the service the company provides would or should cost. Meaning that they saw value that generated a willingness to pay that is similar over a wide range of prices. Thus, the company could increase prices by about 50% without losing subscribers.
Results:
The company increased prices by an average of 41%, with zero loss of subscribers. The quickly added revenue not only made the company hugely profitable but also increased valuation so that, with the help of PE funds, it could purchase its main competitor.
Corporate Training
Situation:
The company, a provider of ongoing corporate training, believed they had the best training content and programs yet did not see the sales success they expected. Each of their training programs focused on different sub-verticals and had the same price.
The challenge:
To understand how the company could leverage its superior content to gain higher sales volume, preferably at higher prices.
Findings:
The company’s brand was substantially weaker than their competitors and it generated a much lower willingness to pay than the competing brands. The market’s sub-verticals served by the company had different willingness to pay for the specific kind of training content relevant for each sub-vertical.
Results:
By adjusting pricing for the different types of training content to match willingness to pay for each sub-vertical, it could leverage the differences among the sub-verticals, and by increasing its marketing spend, the company built brand value and brand trust. Consequently, the company saw a 40% increase in revenue over a three-year period.
Fishing Lure
Situation:
This small company was founded on the idea that fishing lures would be more efficient in attracting fish if the lure itself were painted in different colors and patterns. As opposed to resembling a small fish. This, of course, was also aimed at making the lure more interesting for the fisherman too!
The challenge:
The company had success in its home market and had built up a following of customers who appreciated the uniqueness and craftsmanship of the lures. The company decided to enter the US market, and despite considerable efforts in marketing, they never managed to get a foothold in the market.
Findings:
The company's marketing was completely ineffective; the focus on the color and pattern of the lure was only appreciated by a small (less than 10%) portion of the market, and those also had the lowest willingness to pay. No wonder the company's effort had been wasted.
Results:
Once marketing was adjusted to the product features that drove the highest willingness to pay and prices set to match willingness to pay, sales skyrocketed. Currently, the US market represents the majority of the company's business.
New electronic car accessory
Situation:
The company, a well-known car electronics supplier, was launching a dashcam, a new family of products in, at that time, a new product category.
The challenge:
With no prior experience from the dashcam market and with no competition, the company's CEO felt they did not have a solid understanding to develop a go-to- market strategy that would guarantee a successful introduction of the new products in this new product category.
Findings:
Several surprising data points were discovered:
• Females have a 25-30% higher willingness to pay than males, and they buy for different reasons than males; they want much more from the product than men do, such as a product that does not obstruct the view, that includes a night vision feature, and where the video quality is high enough to identify people.
• Demand for the product is maximized at $125; however, demand above peak demand is inelastic, leading to a revenue maximization point of $500.
Results:
The company decided to focus its marketing towards a female audience with a message related to safety as the features females specifically appreciate when related to their personal safety.
The price was set at $199, which gave the company a good compromise between demand (sales volume) and margin.
Sales volume in the 12 months after the product launch came in at twice the projected amount.
Industrial components
Situation:
A manufacturer of high-end aluminum components could not command premium prices and consistently lost business to inexpensive imports.
The challenge:
Understanding which of the company’s product and company differentiators affected the company’s pricing power. Understanding if certain market verticals specifically appreciated those differentiators and how these affected willingness to pay.
Findings:
Two market verticals were identified: verticals that have a specific appreciation of the company’s services and support, including expert engineering support. Services that drove a higher willingness to pay and that their competitors did not offer.
Results:
By focusing marketing and sales efforts on those two market verticals and by developing market and sales messages related to the value of their services, the company was able to grow sales by about 20% at an average of 15% higher prices.
Data center software
Situation:
The company was marketing its advanced infrastructure software globally. Within most of the developed world, the company enjoyed a commanding market share. Not so in the developing world, where its main competitor had more than twice the sales volume of the company.
The challenge:
Realizing that increasing its already large market share in the developed world would be hard, if not impossible, the company needed to know how it could successfully grow in the developing world.
Findings:
Not only were the purchase patterns different in the developing vs. the developed world, but the features that most influenced willingness to pay were different. Furthermore, in the developing world, a different pricing structure would lead to an increase in sales.
Results:
The company changed what features it pushed in marketing and its pricing structure to meet the buying preferences of the developing world. According to the company's annual report, the company now, four years later, has doubled its market share in the developing world while retaining its commanding share in the developed world.
Video streaming service
Situation:
The company, owned by a religious organization, had a twofold mission, both to operate as a profitable business but also to further the Christian faith. It had launched the service at a relatively low price, $7.99/ month, thinking it would generate a high sales volume. However, neither the number of subscribers nor revenues met corporate objectives.
The challenge:
To find ways to increase sales volume at higher subscription prices, enabling the company to reach its goals.
Findings:
Willingness to buy (demand) among the company's target market is virtually unchanged in the price range from $5/month to $15/month. This means that at the original price ($7.99/ month), revenues will be approximately half of what it would be at $15/month.
The company's message of "family-oriented content" was not effective in generating demand. Neither was the marketing focus on movies. Instead, messages related to TV shows with "Content for kids that is appropriate, entertaining, and uplifting" drove much higher demand at prices up to $10/ month, and a message of "No Sex or Violence Surprises" drove a higher demand up to $15/month.
Results:
A segmented content and subscription model were developed: a "Kids package" with content specifically aimed at young kids at $9.95/month and an "All content" package at $14.95/month.
Marketing altered the focus away from movies and towards TV shows with specific messages around the theme of "No Sex or Violence Surprises."
The price of the "All content" package was increased (in several stages, over 24 months) to the recommended price, leading to a doubling of revenue.
The new "Kids package" generated a surge of new subscribers, increasing the total subscriber base by about 40%
Innovative bicycle helmet
Situation:
The company had marketed its high-tech bicycle helmet for several years.
As with all bicycle helmets, once it protect a biker's head at a fall or accident, the product needs to be replaced. The company is preparing to release a new generation of this product and wants to offer it under a subscription model, with regular software updates and replacement hardware in case of a fall or accident.
The challenge:
The company wanted to find out several things. Was there consumer interest in a subscription model? What would consumers expect to be included in the subscription? What subscription price were they willing to pay? Did different demographics and those with different use cases have different willingness to pay?
In short, was this subscription model a good idea or not?
Findings:
Approximately 20% of the entire market is interested in this innovative product. Those who frequently use their bicycle are particularly interested in a subscription to this new helmet.
Willingness to pay for the monthly subscription is equal to 10% per month of the list price for the product when it is purchased in the retail channel. As this subscription will be sold directly to consumers, circumventing the channel means an ROI of 10 months or less for the subscription option.
Results:
The subscription option was just recently launched, and the company reports a higher-than-expected interest and has been forced to set up a waiting list as the supply of the new product is limited.