1M/1M Strategy Roundtable: Get Your Pricing Model Validated
Friday July 02, 2010,
5 min Read
Recap of the July 1, 2010 roundtable by Sramana MitraToday’s roundtable had a couple of mobile and social media app companies that I thought were quite promising. At least at the concept and market analysis level, I could resonate with them, although the devil is always in the details.
Sean Malatesta started off by presenting Marengo Movies, a film distribution and marketing venture built on top of the Apple platform, spanning iTunes, iPad, iPhone, and iTouch. Marengo is building a mobile app for all three platforms that will utilize viral consumer behavior to market movies and episodic video content by independent producers who are struggling with distribution and marketing challenges. The films would be sold on iTunes, and Marengo wants to take a percentage of the retail price as its primary monetization model, aside from a set-up fee of about $500 per film. Apple charges 30% to sell digital content on iTunes. That leaves another 70% to share between the producer and Marengo. Marengo is pointing to Apple’s $1.1b app sales on its mobile platforms, and estimating that the 80-85 million units of Apple devices (iPod, iPad, iTouch, iPhone) constitute almost 69% of the US television audience of 115 million households that may be ripe for buying independent films that do not have access to any other distribution channel. While I like the value proposition very much, I am also of the opinion that distribution will become commoditized over time, and Marengo’s real value proposition would be its marketing capabilities. Nonetheless, this is a company worth building, and Sean needs to validate his business model and pricing model with customers. His app is just two weeks from launching, and I am looking forward to it!
Then Gili Torovezky pitched MyStudiyo, an online app for increasing customer engagement through interactive quizzes. More than 20 million quizzes have been taken on this platform, and conversion rates of MyStuiyo’s clients have increased 3-fold in some cases. However, the monetization model of the business has not quite been worked out yet, and that is what we focused on at the roundtable. My advise to Gili is to focus on ad agencies and talk to about 25 of them to see how they would be interested in working with MyStudiyo. The value proposition is quite powerful in my opinion, and eminently quantifiable, with a direct impact on revenues. The question is how do they charge? Does the agency pay, or the client? Pay for performance vs. Flat fee? There are multiple options, and a comprehensive set of discussions with the agencies will help validate the pricing model. Gili will collect some of this feedback, and then we will talk again to sift through it to iron out the precise pricing model.
G Creative World
Next, Govind Ramaiah introduced G Creative World, his dream of building an ad agency. Govind got a slight chiding from me for coming to the roundtable without doing any homework. I pointed him to my Clarify Your Story questions to help him through the process of testing and validating his business idea, and I hope he follows through.
Up last was Mia Melle with RentToday.us. They help residential property owners rent out and manage their properties, including repairs, evictions, collection, etc. This company did $1.1 million in 2009, and projects $1.3 million in 2010 and operates in four counties in Southern California. The problem is, they have been around since 2001, and growth has been quite slow. They seem confused about how to grow the business and somewhat stuck on the low-differentiation services like repairs. They asked if they should franchise the business, to which I asked how much of their business happens through in-person contact versus virtual. Well, it turns out that 99% of the business is virtual, although they do need physical resources to do inventory and photography of properties, as well as repairs and maintenance. Those are, however, backend services that can easily be done by creating partnerships with contractors in various geographies, while their core business remains virtual, technology leveraged, and highly scalable. I advised them against franchising. I also advised them against building in-house resources for repair and maintenance type of functions. I believe this business, freed from the shackles of the physical services, can grow MUCH faster as a virtual business, while leveraging a fluid pool of distributed physical resources.
About Online Strategy Roundtables
I started doing my free Online Strategy Roundtables for entrepreneurs in the fall of 2008. These roundtables are the cornerstone programming of a global initiative that I have started called One Million by One Million (1M/1M). Its mission is to help a million entrepreneurs globally to reach $1 million in revenue and beyond, build $1 trillion in sustainable global GDP, and create 10 million jobs. In 1M/1M, I teach the EJ Methodology which is based on my Entrepreneur Journeys research, and emphasize bootstrapping, idea validation, and crisp positioning as some of the core principles of building strong fundamentals in early stage ventures. In addition, we are offering entrepreneurs access to investors and customers through our recently launched our 1M/1M Incubation Radar series. You can pitch to be featured on my blog following these instructions.
The recording of this roundtable can be found here. Recordings of previous roundtables are all available here. You can register for the next roundtable here.
About Sramana Mitra
Sramana Mitra is a technology entrepreneur and strategy consultant in Silicon Valley. She has founded three companies, writes a business blog, Sramana Mitra on Strategy, and runs the 1M/1M initiative. She has a master’s degree in electrical engineering and computer science from the Massachusetts Institute of Technology. Her Entrepreneur Journeys book series, Entrepreneur Journeys, Bootstrapping: Weapon Of Mass Reconstruction, Positioning: How To Test, Validate, and Bring Your Idea To Market and her latest volume Innovation: Need Of The Hour, as well as Vision India 2020, are all available from Amazon.