Review

The key insight of this book resonated strongly with me: pricing and customer value should be placed at the beginning of the innovation process, not the end. The book challenges traditional product-first thinking, instead advocating for starting with market needs and price points to create solutions customers truly value. This is a critical message for product managers - it's too easy to postpone pricing discussions until the end of the process, by which time it's likely too late.

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Key Takeaways

The 20% that gave me 80% of the value.

New products fail at a staggering rate. Starting the product development process with building an understanding of what customer’s value and their willingness to pay will increase success rates.

The four major monetisation failures are:

• Feature Shock (overloading products with unwanted features). Feature Shocks arise when teams flood products with too many features. Warning signs include phrases like "But we can also add this..." or "Customers don't know what they want." These products end up overpriced, under-adopted, and often lead to desperate price cuts.
• Minivation (right concept but priced too low). Minivations are products that drastically undercharge or underreach potential. Teams may say "I don't want to overprice" or "It hit the sales targets." They might not look like failures initially, but deeper analysis reveals missed revenue opportunities.
• Hidden Gem (valuable ideas overlooked because they fall outside core focus). Hidden Gems are brilliant ideas that never reach their potential because companies fail to recognise their commercial value. Teams often say "We don't know what to do with this" or "It's not in our DNA." These innovations languish or vanish, robbing firms of significant market opportunities.
• Undead (products nobody wants that linger because they were built for non-existent needs).Undeads are products nobody truly wants, but they keep stumbling forward, draining resources and morale. They persist because nobody wants to be the one to pull the plug. Teams may say "Let's wait for more evidence" or "We've come too far to kill it now."

Successful innovators follow these nine rules:

1. Test willingness to pay early
2. Segment by willingness to pay rather than demographics
3. Approach product configuration methodically
4. Choose the right pricing model
5. Develop strategies for both short and long-term growth
6. Build business cases on real data
7. Communicate value clearly
8. Remember emotional factors
9. Preserve pricing integrity

Common innovation myths include the "build it and they will come" mindset, working in isolation from market data, accepting high failure rates as normal, believing customers can't determine willingness to pay before experiencing the product, and thinking products must be fully developed before determining worth. Price discussions should begin before any design work. Early willingness-to-pay conversations reveal if you can monetise the idea, which features customers truly value, and how to avoid wasting resources on costly missteps. Effective methods for gauging willingness to pay include direct questions about acceptable prices, purchase probability scales, Most-Least (MaxDiff) feature comparisons, Build-Your-Own product configurations, and Purchase Simulations (Conjoint Analysis). These approaches help separate must-have features from nice-to-haves. When conducting these conversations, use internal experts for pilot runs, frame discussions as "value talks" before transitioning to price, ask "why" frequently to uncover deeper reasoning, and keep surveys simple to get trustworthy responses. Different customers place different values on the same product. Segmenting by willingness to pay prevents falling into a one-size-fits-all trap. Common pitfalls include segmenting too late, focusing on demographics rather than needs, and creating too many segmentation schemes. The golden rule of segmentation is that you must treat each segment differently. Design products, features, and services for each segment's unique priorities. Begin with willingness-to-pay data, balance statistics with common sense, keep segments manageable, and identify observable traits for easy recognition. Product configuration determines which features to include in each version. Features fall into three categories: leaders (must-haves customers will pay for), fillers (nice-to-haves), and killers (undesirable if forced on buyers). A good/better/best lineup appeals to different budgets and prevents "take it or leave it" situations. Bundling combines related products or services to encourage higher spending. When done well, it aligns with how different segments value each component. Best practices include aligning offers with segment needs, keeping product numbers manageable, ensuring mutual benefit, and not overpacking entry-level offerings.

How customers pay can have as much impact as the product design. The five major monetisation models are Subscription (periodic fee), Dynamic Pricing (prices shift based on factors like time and demand), Market-Based Pricing (buyers compete through auctions), Alternative Metric (charge by usage), and Freemium (free version alongside paid upgrades). When choosing a model, consider whether customers will find it fair, what trends might make one model more future-proof, how competitors will respond, and whether your infrastructure can handle the operational requirements.

A pricing strategy clarifies goals, priorities, and planned responses to market developments. The three main approaches are Maximisation (optimal price for maximum profit), Penetration (lower price to capture market share), and Skimming (start high with early adopters, then gradually lower).

Define day-to-day decision guidelines including your monetisation model, price differentiation approaches, price floors, and increase protocols. Plan for both promotional and competitive reactions. Price elasticity is crucial—it shows how sales volume shifts with price changes.

Business cases must incorporate solid external insights about willingness to pay rather than relying on internal assumptions. Treat your business case as a continuous guide rather than a static document. Gather basic inputs, include elasticity data, model competitor responses, and update continuously with new data.

Customers buy benefits, not features. Articulate benefits clearly to match customer priorities. Convert features into clear "so what?" outcomes, make benefits segment-specific, and continuously test which messages resonate with customers.

People don't buy on pure logic. Emotions and context affect willingness to pay.

Here are six key behavioural tactics that influence pricing psychology:

1. Compromise Effect: Customers tend to select the middle option when presented with multiple choices.
2. Anchoring: By including higher-priced options, lower prices appear more attractive to customers.
3. Price Signals Quality: Higher prices can communicate premium quality and increase perceived value.
4. Razor/Razor Blades: Offering low upfront costs while generating revenue through ongoing consumables.
5. Pennies-a-Day: Breaking down larger costs into smaller daily amounts to reduce sticker shock.
6. Psychological Price Thresholds: Certain price points (like $9.99 vs $10) are perceived as significantly cheaper.

Resist knee-jerk price cuts when sales lag. Once prices are slashed, they're nearly impossible to restore. Identify root causes beyond price, track metrics beyond financials, conduct regular deal analyses, try non-price actions first, and war-game competitive responses. When competitors cut prices, avoid matching them blindly, price wars typically favour only the lowest-cost supplier. The implementation process has two phases: Jump-Start and Pilot (assessing recent products and running a pilot with a cross-functional team) and Scale and Stick (rolling out lessons to multiple products and establishing consistent processes). Six elements for scaling include creating a documented process, forming a dedicated monetisation team, assigning clear roles, running regular checkpoints, tracking detailed KPIs, and conducting frequent reviews. Common pitfalls include putting all eggs in one basket, failing to form cross-functional teams, attempting big-bang rollouts, and allowing too many opt-outs from the process. The core principle remains simple but powerful: Design your product around the price, not the other way around. By identifying what customers value and are willing to pay for before development begins, you dramatically increase your chances of innovation success.

Deep Summary

Longer form notes, typically condensed, reworded and de-duplicated.

Part 1: The Monetising Innovation Problem

Chapter 1: How Innovators Leave Billions on the Table 1

New products fail at a staggering rate—around 72 percent miss revenue and profit goals, and many crash entirely. Startups fare no better, with up to three-quarters never succeeding. The core reason is that most innovators fail to start with a clear focus on what customers truly value and what they will pay for. Instead of building first and pricing later, successful innovators reverse the process: they pinpoint customer willingness to pay, design around that value, and only then develop the product.

It's hard to innovate. Technology is moving faster than ever. R&D costs are high and returns are uncertain. You'll likely face competition from well-funded agile startups capable of taking bold risks. Increasing globalisation brings competition from emerging markets.

There are 4 main categories of failure when monetising innovation:

1. Feature shock: Overloading the product with features nobody asked for, often leading to an overpriced and misunderstood offering.
2. Minivation: When you get the concept right but price too low undercutting potential.
3. Hidden gem: A big idea shelved or overlooked because it falls outside the company's core focus.
4. Undead: An offering no one wants, yet it lingers because it was built for a non-existent need.

The 9 rules that consistently improve innovation outcomes:

1. Test willingness to pay early, so you know which features matter and how much customers value them.
2. Segment by willingness to pay, not demographics—recognise that customers differ in how much they're ready to spend.
3. Approach product configuration and bundling methodically, aligning features with each segment's priorities.
4. Choose the right pricing model (subscriptions, pay-per-use, etc.)—sometimes how you charge matters more than how much.
5. Develop your pricing strategy for both short-term wins and long-term growth.
6. Build your business case on willingness-to-pay data, rather than guesswork, to validate revenue assumptions.
7. Communicate value clearly so customers understand why the product justifies its price.
8. Remember the human factor—people's choices aren't purely rational. Emotional triggers affect willingness to pay.
9. Preserve pricing integrity by controlling discounting. If demand lags, adjust everything else before slashing price.

Many innovators leave money on the table by failing to anchor their entire product design on the customer's willingness to pay. Those who do so achieve alignment and profitability. Those who ignore it risk building a perfectly engineered but unwanted product. Follow the nine rules to avoid the four classic failure modes and you'll raise the odds of creating products that truly succeed in the market.

Chapter 2: Feature Shocks, Minivations, Hidden Gems and Undeads

Feature Shocks: They arise when an overzealous team floods a new product with too many features, driving up costs and confusing customers. The product becomes a muddled mix of “nice to haves” without a compelling standout. It typically ends up overpriced, under-adopted, and often panics the team into slash-and-burn pricing.

• If you hear this, you are likely designing a feature shock:
• “But we can also add this...”
• “We want to be on the safe side.”
• “Customers don’t know what they want, so we need to decide what to build.”
• “One size should fit; our market is not segmented.”
• “Let’s build it, then position it.”
• “Let’s get something out there.”

Feature shocks stem from a culture that prizes product complexity over customer insights. Proper segmentation and a disciplined willingness-to-pay analysis, done before building, can keep teams focused on features that matter most to customers.

Minivations: These are products that drastically undercharge or underreach their potential. They may hit sales targets easily, leading teams to assume success, when in fact they’ve left significant money and opportunities on the table. Minivations often arise from a comfort-zone mentality—teams fear overpricing or are satisfied just to see some positive reception.

• If you hear this, you are likely designing a minivation:
• “We checked all the boxes.”
• “I don’t want to sign up for a big number.”
• “I don’t want to overprice. I would rather be conservative.”
• “With our margins, we don’t need to worry about price.”
• “It’s good enough.”
• “We need to penetrate the market.”
• “It hit the sales targets.”

Minivations may not look like failures at first, but a deeper analysis typically reveals underestimated demand and missed revenue. The key is to assess real customer value and match your price and production volumes to that demand instead of defaulting to “safe” legacy methods.

Hidden Gems: Hidden gems are brilliant ideas or technologies that never see their full potential because the company either fails to recognise their commercial value or deems them too far from its core. Often relegated to a backroom or given away as a freebie, they languish or vanish altogether, robbing the firm of significant market opportunities.

• If you hear this, you are likely missing out on a hidden gem
• “We don’t know what to do with this.”
• “This isn’t business as usual for us.”
• “We don’t have a process for that.”
• “We’ll throw that into the deal.”
• “It’s not in our DNA.”
• “This goes against our culture.”

Companies that avoid hiding such gems keep an open mind toward disruptive or adjacent innovations, closely track customer reactions, and create internal pathways that let novel solutions thrive even if they threaten core revenue streams.

Undeads: Undeads are products nobody truly wants, but they keep stumbling forward, draining resources and morale. They address a need that isn’t really there or solve the right problem in a way customers find unappealing or too costly. Often, these offerings float along because nobody at a senior level wants to admit the product is doomed.

• If you hear this, you are likely designing an undead
• “I’m not going to be the one who says ‘no’”
• “Personally, I’d never buy this myself, but...”
• “Screw what the research says; I know this will work!”
• “Let’s wait for more evidence before we pull the plug.”
• “The train has left the station.”
• “We’ve come too far; if we kill this now...”

Undeads happen when market validation and willingness-to-pay discussions occur too late or not at all. Fast, honest feedback can kill them in the concept phase, saving teams from pouring money into a solution that simply won’t find enough paying customers.

Chapter 3: Why Good People Get it Wrong

5 Myths and Misconceptions with the Prevailing Mindset:

1. The "build it and they will come" mindset assumes customers will automatically pay for great products - a hopeful but risky assumption.
2. Innovation teams often work in isolation, rejecting market data and customer perspectives. They believe, like Henry Ford, that customers can't know what they want until shown the finished product.
3. Many accept high failure rates as normal, believing more attempts increase success chances - the winners will compensate for the losers.
4. There's a common belief that customers can't determine willingness to pay without experiencing the product first.
5. Companies often think they must fully develop a product before determining its worth, focusing on costs before considering price.

To many in the world of innovation, the above seem like laws of nature. They have shaped innovation practices for decades.

Understanding if customers are willing to pay for your invention, before you commit too many resources to building and launching it, will dramatically increase your likelihood of success.

By designing your product around a price, your innovations will stand a far greater chance of surviving and thriving. Figuring how much customers will pay for your product when it is still in the concept stage will make your innovation process far more reliable. You and your company will be far more likely to succeed.

Monetisation should be front and centre in the product development process. Rigorously assess the potential of new products, with the aim of truly satisfying your customers and thus generating a big hit.

Chapter 4: Have the Willingness-to-Pay Talk Early: You Can't Prioritise Without It

Price discussions should begin before any product design. Talking about willingness to pay (WTP) early immediately reveals if you can monetize the idea, ensures you prioritize only what customers value, and keeps you from wasting resources on costly missteps. By identifying a viable price point up front, you prevent late-stage firefighting, avoid underpricing, and uncover hidden gems that might otherwise be ignored.

You learn two vital things from WTP conversations: how much customers will pay for the offering as a whole and how much they value each specific feature. This separates must-haves from nice-to-haves, letting you drop the irrelevant add-ons that inflate costs and confuse buyers. By limiting features to what customers truly appreciate, you create cleaner, more profitable products that stand a better chance in the market.

Early talks need to capture overall price acceptability and the perceived value of each feature. Ask customers which features they deem indispensable versus expendable, then explore how price shifts might change their decisions. This data shows you where to invest R&D efforts and which features deserve top billing in your final product.

In practical terms, it’s best to frame these initial interviews as “value conversations,” not purely about price. Sample direct questions include:

• “What do you think is an acceptable price?”
• “What do you think is an expensive price?”
• “What do you consider prohibitively expensive?”
• “Would you buy this product at $X? Why or why not?”

Following up with “why?” uncovers deep insights into perceived benefits, deal-breakers, and improvement areas.

Different Methods:

1. Direct WTP Questions: Ask customers outright what they would consider an acceptable, expensive, and prohibitively expensive price. This helps you see if the concept appeals at all and immediately flags cases where your projected price is far from reality.
2. Purchase Probability: Show a concept and a given price, then ask for a likelihood-to-buy rating on a 1–5 scale. If ratings are low, reduce the price and repeat. Observing how customers respond to changing price points reveals at which level they truly consider buying.
3. Most-Least (MaxDiff): Present sets of features and ask which one the customer values most and least. Repeating with multiple subsets forces trade-offs, exposing which features matter most—and which can go. This prevents feature shock by focusing on the top draws.
4. Build-Your-Own: Give customers a list of potential features and a corresponding price for each. Let them "build" their ideal product, with the total cost rising as more features are added. This identifies which specific combination creates the best value for them without exceeding what they'll pay.
5. Purchase Simulations (Conjoint Analysis): Offer various product configurations at different prices, asking if they'd buy each. Collecting responses across several scenarios helps pinpoint the exact value of each feature. This is the most advanced approach for precise pricing and feature prioritization.

10 of the most important lessons from these early WTP conversations:

• Use internal cross-functional experts first for a pilot run.
• Frame it as a “value talk,” then transition to price.
• Simple, direct questions yield critical insights.
• Ask “why?” often to uncover deeper reasoning.
• Mix structured and unstructured approaches.
• Involve product, sales, and marketing in the interviews.
• Don’t rely on averages—look for price distribution and segmentation.
• Combine qualitative interviews with quantitative surveys.
• Phrase questions carefully (“Would you buy this for $20?” vs. “Would you buy this?”).
• Keep it simple. Overly complex surveys lead to untrustworthy responses.

Early WTP discussions keep your product design aligned with real customer value. By identifying must-have features and accurate price thresholds, you reduce your risk of feature overload or settling for “safe” underpricing. Properly used, WTP insights ensure you build profitable offerings that resonate with the market.

Chapter 5: Don't Default to a One-Size-Fits-All Solution: Like It or Not, Your Customers Are Different

Different customers place different values on the same product, so starting with willingness-to-pay (WTP) discussions for each group ensures you build offerings that resonate. Segmenting by WTP prevents falling into a one-size-fits-all trap. It reveals crucial differences in the benefits people care about and how much they’ll pay for them.

When you investigate different groups, you often discover significant contrasts in what they value, whether it’s speed of delivery, product quality, or reliable service. Once you see these differences, you can tailor product features—offering simpler versions for price-focused customers and premium features for those willing to pay more.

Three big pitfalls undercut segmentation:

• Segmenting too late: leads to poorly matched products and forced, last-minute marketing fixes.
• Segmenting by surface traits (like age): instead of deeper needs and WTP.
• Having too many segmentation schemes: causes internal confusion and muddled offerings.

The golden rule of segmentation is that you must treat each segment differently. Dividing customers into groups that you’ll serve in exactly the same way defeats the purpose. Instead, design products, features, and services for each segment’s unique priorities, then align marketing and sales tactics with those distinctions.

Below are practical tips for segmenting by needs, value, and WTP:

1. Begin with WTP data. Group customers by what they value and are willing to pay for.
2. Balance statistics with common sense. A perfect cluster analysis is useless if it’s too abstract for sales to implement.
3. Keep the number of segments manageable. Fewer segments are easier to serve, but they must capture real differences.
4. Skip unattractive segments. You aren’t obliged to build for every possibility if it won’t yield sufficient returns.
5. Pin down observable traits that let you identify segments easily. Make sure the sales team can recognise who belongs in which group.

Segmentation isn’t a marketing afterthought; it’s the foundation for profitable product development. Done early and correctly, it guides the features you include, the price you set, and the messages you craft, all of which boost your chances of delivering solutions that each group is genuinely willing to pay for.

Chapter 6: When designing products, configuration and bundling is more science than art

Product configuration focuses on which features and functions to include in each version of a new offering. The core principle is ensuring each customer segment gets the set of features it values and is willing to pay for, while avoiding the temptation to overstuff every product. This often means building a minimal version for price-conscious customers and more advanced versions for those willing to invest in added benefits.

Bundling combines related products or services to encourage higher total spending and greater convenience for buyers. When done well, it aligns with how different segments value each component, possibly raising total revenue more than selling each item separately. Sometimes, mixed bundling—offering both single items and a discounted package can unlock even greater gains by catering to divergent willingness-to-pay across segments.

Two important concepts steer product configuration and bundling.

1. Categorise features as leaders (must-haves customers will pay for), fillers (nice-to-haves), or killers (undesirable if forced on the buyer).
2. Consider a good/better/best lineup, where each higher tier includes more benefits at a higher price. This approach appeals to different budgets and prevents “take it or leave it” discussions.

Unbundling can also be profitable if customers are especially price-sensitive to the base product. By splitting out every extra as an optional add-on, you can draw people in with low headline prices and then capture incremental revenue on the features or services that matter most to them. This tactic works best when core and ancillary benefits have very different perceived values across your target segments.

Ten tips keep configuration and bundling on track:

1. Align each offer with a known segment’s needs.
2. Keep the number of products and features manageable.
3. Ensure both you and your customers gain from bundles.
4. Don’t pack too much into the entry-level offering.
5. Remember hard bundling only works if you have market power.
6. Raise individual item prices when also offering a bundle.
7. Highlight “savings” in the right place—especially on the most valued item.
8. Offer integrated bundles where 1+1 = 3 whenever possible.
9. Avoid bundling merely for bundling’s sake if people would buy items anyway.
10. Capitalise on inverse preferences among different segments.

By carefully combining or separating features, you make it easy for customers to say “yes” to what they genuinely value. This approach lessens the risk of feature shocks, minivations, or undeads, since each configuration or bundle aligns with specific segment priorities. When well executed, configuration and bundling can become a powerful driver of profitable growth.

Chapter 7: Go Beyond the Price Point: Five Powerful Monetisation Models

A monetisation model defines how customers pay for a product or service. It's vital to get right because it can have as much impact as the product design itself. Choosing a model that aligns with both customer preferences and your unique value can drive faster growth, lock in recurring revenue, and create a strong competitive edge. Michelin, for example, vaulted ahead by charging truck fleets per mile driven instead of per tyre, capturing more value from its longer-lasting tyres and giving customers a fair, usage-based deal.

Subscription: This model charges customers a periodic fee to keep using the product or service. It locks in revenue predictably and can deepen relationships by reducing churn—people avoid deciding over and over again whether to buy. Subscription also allows for upselling over time. It's right for scenarios where customers engage regularly (like streaming video, music, or software), and it works best when you have low friction to sign up and strong reasons to stay.

Dynamic Pricing: Here, prices shift quickly based on factors like time, demand, and capacity. Airlines have done this for years, and ride-hailing services like Uber now use it to balance supply and demand. The advantage is maximising revenue from fixed assets or variable demand. However, it can upset customers who feel exploited, so it's critical that the higher price confers a real benefit—such as fast access or guaranteed availability.

Market-Based Pricing (Auctions): Instead of setting prices directly, you let buyers compete, as in online auctions or ad-spot bidding. This can be lucrative when demand outstrips supply or when you're a marketplace platform. Auctions remove the seller from tricky price negotiations and let the market set the final figure. They need careful design and robust systems to avoid large losses if supply is plentiful or if the process isn't transparent.

Alternative Metric (Pay As You Go): Rather than selling a unit outright, you charge for each hour, mile, or other metric of usage. Michelin revolutionised its tyre business with a per-kilometre model, and tech giants have done the same with pay-per-use computing. This approach can align perfectly with customer value if you have reliable data tracking and high-performing products. It also encourages loyalty, as customers pay only for what they use.

Freemium: You offer a free version alongside paid upgrades. This can attract huge numbers of users quickly at minimal cost, then convert a portion to premium tiers. However, the conversion rate can be low, and you risk giving away too much. It's best used by digital businesses with near-zero marginal costs (like software or apps) that can afford to support a large free user base in hopes of upselling premium features.

Five questions to guide your choice of model:

1. Will customers find the model predictable and fair, or will it confuse or alienate them?
2. What trends or scenarios—like changes in usage or demand—might make one model more future-proof than another?
3. Does your stage of growth (start-up vs. mature firm) or competitive situation favour a simple approach or a more complex, differentiated model?
4. How will rivals respond, and can you use this model to set yourself apart?
5. Can your infrastructure handle the operational complexity of tracking, billing, and explaining the model to customers?

The right monetisation model can be a breakthrough on its own, often overshadowing even a strong product concept. By testing different models, aligning them with customer willingness to pay, and checking your operational readiness, you can maximise both revenue and satisfaction.

Chapter 8: Price Low for Market Share or High for Premium Branding? Pick the Winning Pricing Strategy

A pricing strategy is your short and long-term plan for monetising a new product. It clarifies your goals, priorities, intended price levels, and how you'll respond to market developments. By writing it down, you gain alignment across the company and avoid impulsive decisions later.

Setting clear goals: You decide which key metrics to prioritise (market share, profit margin, revenue, etc.) and accept that you cannot maximise them all. Forcing trade-offs—like a "Goal Allocation Exercise" that assigns points across objectives—ensures everyone understands the primary targets and how you'll handle inevitable price-volume-profit trade-offs.

Choosing one of three pricing strategy types:

• Maximisation: Seek the optimal short-term price for maximum profit or revenue. You use price elasticity data to check how volume changes as you raise or lower price and pick the best point.
• Penetration: Price intentionally lower than the maximisation point to capture market share fast, often in industries where early scale or network effects matter. You then later raise prices or upsell.
• Skimming: Start with a higher price to capture early adopters who are less sensitive to cost, then gradually lower the price to reach later segments. This often applies where the first group has a much higher willingness to pay.

Defining price-setting principles to guide day-to-day decisions. These include:

1. Your monetisation model (subscription, pay-per-use, etc.).
2. Whether and how you'll differentiate prices by region, channel, or customer type.
3. A price floor or maximum discount you won't go below.
4. The endings you'll use, such as .99 vs. .00.
5. How and when you'll increase prices (e.g., annual escalators).

How you'll react to changes in the market. There are two reaction categories.

• Promotional reactions: Decide who gets a discount, how large, and for how long, or whether you avoid promotions in favour of a premium position.
• Competitive reactions: Plan what you'll do if a rival cuts prices or changes terms. You can define thresholds beyond which you'll act—for instance, only matching competitor discounts above 20%. Running "war-gaming" sessions helps prepare for these scenarios.

Price elasticity is crucial when selecting and fine-tuning your price. It shows how sales volume shifts if you raise or lower price. To measure it, you need good data on willingness to pay, forecasted volumes, and cost structures. Products vary in elasticity; some lose many sales if prices change slightly (steep demand curve), while others barely see a drop. By plotting different price points against potential volumes and costs, you find the optimal price for your chosen goal whether that's profit, revenue, or fast market penetration.

Chapter 9: From Hoping to Knowing: Build an Outside-In Business Case

A business case is essential for internal approval and resource allocation, but it must include solid external insights about how much customers are willing to pay (WTP). If you rely only on internal assumptions, you risk building projections that ignore actual market conditions. By collecting and incorporating data on WTP, you gain a realistic view of the revenue, costs, and demand for your new product.

WTP is the linchpin that connects price, value, volume, and cost. Knowing what customers will pay makes your revenue and profit forecasts far more accurate. It also alerts you to potential fail points (e.g., a product no one wants at your intended price) and uncovers opportunities where a higher price may be justified.

Below are nine steps to create a "living" business case that evolves as your product progresses:

1. Forget your old approach. Most business cases are static, designed just to secure budget. Treat yours as a continuous guide.
2. Gather basic inputs. Capture market size, segments, WTP, costs, and possible competition.
3. Include price elasticity. Know how volume changes at varying prices so you can make realistic forecasts.
4. Use data, not guesswork. Validate market size, adoption, and cannibalisation assumptions with external evidence.
5. Add risk assumptions. Consider best and worst-case scenarios, using tools like Monte Carlo simulations if needed.
6. Weigh trade-offs. You can't simultaneously maximise share, revenue, and profit. Know your priorities.
7. Factor in competitors. Model how rivals might respond to your launch, and plan countermeasures.
8. Look beyond the new product. Assess impacts on your entire lineup, including cannibalisation.
9. Update continuously. Use new data to refine forecasts and link price, costs, volume, and value over the product's life.

Following these steps ensures your business case remains a dynamic tool rather than a one-time document. By connecting outside-in WTP insights to cost and volume data, you can move beyond wishful thinking and build a realistic plan that guides decision-making from concept to launch.

Chapter 10: The Innovation Won't Speak for Itself: You Must Communicate the Value

Value communication matters because even the best innovations won't sell themselves. Customers buy based on benefits, not features, so it's essential to articulate those benefits clearly and match them to the customer's language and priorities. Teams often struggle here because sales and marketing are brought in late, missing the deeper product insights that emerge early on. Involving them from the start avoids disjointed messages and weak pitches.

Some organisations succeed by focusing on the most critical benefits and quantifying them so customers see the financial or operational impact. Others replace long lists of technical features with simpler, more powerful statements of how the users' lives will improve. This approach works best when marketing and sales have thoroughly tested messages on real customers and tailored their pitch for each segment's needs.

Below are three steps to guide value communication:

1. Develop benefit statements instead of features.
• Emphasise outcomes customers care about, rather than technical attributes.
• Convert each feature into a clear "so what?" that shows how it solves a customer pain point.
• Keep the language short, simple, and easily memorable.
2. Make those benefits segment-specific.
• A single message rarely resonates with every type of customer.
• Identify each segment's top priorities and highlight the specific advantages they'll gain from your offering.
• Consider offering different benefit statements or product versions for each group.
3. Measure the impact and refine.
• Continually test whether customers grasp your value claims.
• Track which messages resonate, and adjust when you find weak points.
• Stay vigilant as competitors respond or your product evolves.

In the end, customers buy outcomes, not just products. A clear, targeted value message ensures they see precisely why your new offering is worth the price. By collaborating early with sales and marketing, focusing on benefits that matter, tailoring those benefits per segment, and regularly testing them, you can bridge the gap between a brilliant innovation and a successful launch.

Chapter 11: Use Behavioural Pricing Tactics to Persuade and Sell: Sometimes Your Customers Will Behave Irrationally

People don't always buy based on purely logical reasoning; emotions, context, and perceived fairness affect willingness to pay. Even the best value messages won't close every deal if you ignore these irrational factors. Behavioural pricing tactics tap into the psychology of buying, helping you position and frame prices so that more people find your offer compelling. This applies to both consumers and business customers, because in the end, it's always people making the decision.

Six key behavioural pricing tactics boost new-product sales:

1. Compromise Effect
• Most people avoid extremes. They pick the middle option among three choices (good/better/best).
• A middle-tier product can become the popular compromise if positioned between a cheaper and a more expensive alternative.
2. Anchoring
• Setting a high-price option makes lower-priced choices appear more attractive by comparison.
• B2B sales negotiations benefit from stating a high anchor first, then conceding downward.
3. Price Signals Quality
• Premium prices can convey higher perceived worth.
• Starting too low undermines credibility—raising prices later is tough if you've already signalled a bargain image.
4. Razor/Razor Blades
• Keep up-front prices low to "land," then charge for consumables or add-ons to "expand."
• Best if you're sure customers will buy your follow-on products or services.
5. Pennies-a-Day
• Smaller, more frequent payment frames reduce sticker shock.
• Converting annual fees to monthly or hourly rates can encourage adoption and lock in recurring revenue.
6. Psychological Price Thresholds
• Certain numbers (e.g. £99, £199) feel significantly cheaper than crossing round-pound boundaries.
• Identify and stay on the right side of your product's price cliffs.

Testing these tactics prevents confusion or overshooting. You can run focus groups to probe reactions, set up A/B website tests to compare outcomes, or conduct large-scale studies in survey format when price transparency or brand perception constraints make live tests risky. By combining rational value-based pricing with these psychological levers, you make it easier for customers to see what they're getting—and commit at a profitable price.

Chapter 12: Maintain Your Price Integrity: Avoid Knee-Jerk Repricing

Pricing integrity means sticking to the price you carefully determined for a new product, rather than quickly discounting at the first sign of slow sales. It's crucial because once you slash prices, it's almost impossible to restore them without harming profits or damaging your brand. Knee-jerk repricing can also broadcast the message that you have less faith in your product's quality or value than you initially claimed.

Six ways to prepare for post-launch without resorting to rash price cuts:

1. Pinpoint the root causes. If demand lags, analyse every possibility—competitive undercutting, poor messaging, distribution issues—before blaming the price.
2. Go beyond financial KPIs. Track metrics like win-loss reasons, volume sold at target price, and how many deals escalate for management approval. These reveal if sales teams, training, or product issues need addressing.
3. Conduct deal deconstructions. Meet regularly with cross-functional teams to dissect wins and losses, identifying what worked in pricing and messaging—and what went wrong.
4. Mandate three non-price actions. Before lowering price, consider alternatives like better marketing or bundling additional features. Preserve your price unless you're sure a discount is the best move.
5. War-game competitive responses. Study how rivals might react and run scenarios to see if cutting price will really help—or just trigger a damaging price war.
6. Treat surprising success the same way. If sales are unexpectedly high, investigate whether you set the price too low. You might raise it carefully in small increments to avoid a customer backlash.

When competitors lower prices, the worst response is to blindly match them and spark a price war. Such wars favour only the supplier with the lowest cost basis. As a general rule, the only way to "win" a price war is by not playing along—sticking to your value, exploring non-price tactics, and leaving profit-killing discounts as a last resort.

Chapter 14: Implementing the "Designing the Product Around the Price" Innovation Process

Two Phases of the Pricing Innovation Process

First comes Jump-Start and Pilot. You begin by assessing recent products, diagnosing whether they met their planned financial goals, and seeing how your existing process might have led to feature shocks, minivations, or other failures. Then you run a pilot on a specific new product idea with a cross-functional team that includes R&D, product, finance, marketing, and sales. Gather real data on willingness to pay, segment the market, and focus on building a living business case. The team iterates quickly, testing new concepts for bundling, pricing strategy, and messaging as they go.

After that, you Scale and Stick. This means rolling out the lessons from your pilot to multiple products or business units, ensuring each has a consistent process for willingness-to-pay conversations, monetisation models, and value messaging. You set up training so everyone understands the new approach, emphasise disciplined checkpoints before moving from one development stage to another, and equip leaders to reinforce the mindset of "design the product around the price."

6 Elements of Scale

1. Create a documented process or playbook based on what you learned in the pilot.
2. Form a dedicated monetisation team with experts who participate in every new product meeting.
3. Assign clear roles and responsibilities to cross-functional members.
4. Run regular team checkpoints—use the nine rules as a reference.
5. Track detailed KPIs that reflect both financial results and customer/operational metrics.
6. Conduct frequent review sessions to identify what succeeded or failed and refine the approach.

Stick

"Stick" means making the new approach part of the company's DNA so it doesn't disappear after early successes. This requires training your people to run willingness-to-pay talks, building repeatable processes with stage gates to prevent skipping steps, and backing up the changes with strong executive support. Telling internal success stories and quickly killing unworthy ideas further cements the new habits.

9 Pitfalls of Implementing a New-Product Monetisation Process

1. Putting all your eggs in one basket: Relying on a single department or idea rather than involving everyone. Distribute the ownership of the new approach across functions.
2. Not forming a cross-functional team: R&D alone can't handle pricing decisions, and sales alone can't shape product features. Bring them together from day one.
3. Banking on the big bang: Rolling out the new process at once across the entire company usually fails. Start small, show success, then expand.
4. Imagining one size fits all: Every product or business unit might need slight adaptations. Stay consistent with the core principles, but tailor the details.
5. Having too many opt outs: If people can easily skip steps, they'll revert to old ways. Build strict stage gates and require approvals before moving on.
6. Getting blinded by science: Don't chase perfect numbers too soon. Early estimates of willingness to pay should give a ballpark, refined later.
7. Avoiding messy information: Real market data is rarely neat. Embrace partial or conflicting signals, then step back to make a practical judgement.
8. Cheaping out: The investment in research, cross-functional team time, and training can be significant but pays off. Underspending ruins the effort.
9. Letting the c-suite delegate everything: Senior leaders have to champion the new process. If they don't treat it as a top priority, the organisation slides back to old habits.

By methodically applying these two phases—Jump-Start/Pilot and Scale/Stick—and avoiding the common pitfalls, a company can embed a lasting system for "designing the product around the price" and capture the full value of its innovations.