Defining Your Goals: Turning Insights into Actionable Revenue Targets

With insights from Question 1 (Market Definition), Question 2 (Competitor Analysis), and Question 3 (Trend Analysis), you now have a clear understanding of your market, competitors, and trends shaping your industry. The next step in the Marketing Canvas process is to translate this knowledge into financial hypotheses and set quantitative goalsthat serve as benchmarks for success.

Your goals will be rooted in the revenue equation:

Revenue = Customers × Transactions × Average Price per Transaction

Step 1: Define your financial hypotheses

Start by linking the insights from the three market questions to each growth lever in the revenue equation.

1. Customers

• Question 1: How large is your addressable market (TAM/SAM/SOM)?

  • Example: If your SAM is growing, focus on acquisition (GET strategy).

• Question 2: How does your offering compare to competitors in perceived benefits (M9)?

  • Example: If you’re a challenger, leverage your unique strengths to attract new customers.

• Question 3: What trends influence customer behavior?

  • Example: Social trends like sustainability might help you acquire eco-conscious consumers.

2. Transactions

• Question 1: How frequently do customers interact with your product/service?

  • Example: Subscription models or habitual usage patterns could encourage consistent purchases.

• Question 2: Are competitors driving repeat transactions through cross-selling or upselling?

  • Example: Competitors may use targeted promotions to increase purchase frequency.

• Question 3: What trends drive increased engagement?

  • Example: Digital transformation enables seamless reordering or auto-renewal subscriptions.

3. Average Price per Transaction

• Question 1: What is the price sensitivity in your market?

  • Example: Luxury segments might allow for premium pricing, while mass-market segments may not.

• Question 2: How does your perceived price (M8) compare to competitors?

  • Example: If you have a strong perceived benefits score (M9), you may justify a higher price point.

• Question 3: What trends impact pricing?

  • Example: Economic trends like inflation or demand for premiumization could shape your pricing strategy.

Example Financial Hypothesis:

Based on these insights, a business might define the following hypothesis:

• Increase the customer base by 15% using sustainability-driven acquisition campaigns.

• Boost transaction frequency by 10% with loyalty incentives.

• Raise average price by 8% through premium features and bundles.

Step 2: Set quantitative goals for revenue

Translate your financial hypotheses into measurable revenue targets, broken down into the components of the revenue equation.

Example: Revenue goal breakdown

• Current revenue: €1,000,000

• Target revenue: €1,300,000 (+30%)

Revenue Breakdown:

1. Customers: Increase from 10,000 to 11,500 (+15%)

   • Linked Insight: Your SAM indicates a potential for 20% growth.

2. Transactions per customer: Increase from 2.0 to 2.2 (+10%)

   • Linked Insight: Competitor analysis shows a successful subscription model driving higher frequency.

3. Average price per transaction: Increase from €50 to €54 (+8%)

   • Linked Insight: Trends highlight premiumization as an opportunity to increase price mix.

How Market Insights Drive Goal-Setting

Here’s how the three market questions guide your financial goals:

• Market definition (Question 1):

  • Use TAM/SAM/SOM to understand potential customer acquisition targets.

  • Identify where your offering fits within the growth and experience curves (M3, M4).

• Competitor analysis (Question 2):

  • Leverage perceived price (M8) and benefits (M9) to define customer acquisition and pricing strategies.

  • Use competitor insights to identify gaps and opportunities in transaction frequency or price mix.

• Trend analysis (Question 3):

  • Align goals with accelerators and brakes.

  • Example: Sustainability trends might drive both customer acquisition and higher pricing.

Final Thoughts

Defining financial hypotheses and setting quantitative goals creates a solid foundation for aligning your strategy with market realities. By using insights from Questions 1–3, you ensure that your goals are not only ambitious but also achievable.

The next step will assess each dimension of your strategy to determine whether it helps or hinders your ability to achieve these goals.

What financial hypotheses are you setting for your business? Share your approach in the comments!

Marketing Canvas - Pricing

Last update: 24/11/2024

In a nutshell

The Pricing sub-dimension in the Marketing Canvas examines how your pricing strategy supports your value proposition, aligns with customer expectations, and reflects your brand positioning. Pricing is not merely a financial decision but a strategic tool that communicates value, differentiates your offering, and influences customer behavior toward sustainable choices.

For instance, a brand like Green Clean might emphasize pricing transparency and offer incentives for sustainable behaviors, such as discounts on refillable products, to align with its eco-friendly mission and customer expectations.

Introduction

The Pricing sub-dimension in the Marketing Canvas is critical to ensuring your value proposition is both competitive and aligned with your brand’s goals. A well-designed pricing strategy balances customer Willingness To Pay (WTP), perceived value, and cost structure while promoting sustainability. It ensures your offering creates more value than its cost and encourages customers to engage with your brand’s most impactful and sustainable options.

Pricing also reinforces brand positioning by reflecting the quality, exclusivity, or accessibility of your product or service.

What is pricing?

Pricing is the monetary expression of your value proposition, reflecting the worth of your product or service to customers. A strong pricing strategy:

• Communicates Value: Ensures that customers perceive the benefits of your offering as exceeding its cost.

• Reflects Willingness To Pay: Aligns with what customers are willing to pay for solving their problems.

• Covers Costs: Accounts for the full costs associated with delivering your value proposition.

• Supports Positioning: Aligns with your brand’s image and goals in the category.

• Promotes Sustainability: Incentivizes customers to choose sustainable options.

For example, Green Clean might set a premium price for its eco-friendly cleaning solutions to reflect their unique value while offering subscription discounts for refills to encourage long-term sustainable behaviors.

Pricing: an in-depth perspective

PRICING is a pivotal element of your marketing strategy that requires meticulous analysis due to its complexity and profound impact on value creation. In the Marketing Canvas Method, PRICING goes beyond simply competing with market rates for similar offerings. Instead, it focuses on leveraging pricing as a strategic tool to create or preserve value, propelling your brand upward on the economic value curve.

Perceived Price and the Value Curve

At the core of effective PRICING is the concept of the Perceived Price—how customers interpret the value of your offering relative to its cost. Understanding the standard pricing unit in your market is critical to analyzing your position.

For instance:

• In a supermarket, shampoos or soaps are typically priced per milliliter in Europe, while coffee is sold by weight.

• In the service industry, consulting services are often charged per hour or day.

Once the reference pricing unit is established, you can calculate the perceived price of your offering compared to competitors using the formula:

24 / (E - C) * (M7 - C) - 12

Where:

• E is the highest unit price in the market,

• C is the lowest unit price,

• M7 is your unit price.

This calculation helps determine your position on the value curve, indicating whether your PRICING strategy accelerates or impedes your business growth.

Example: Artisanal Coffee

Suppose your artisanal coffee beans are priced at $15 per pound (M7). In your market, the highest-priced coffee is $20 per pound (E) and the lowest is $10 per pound (C). Applying the formula provides insight into where your pricing strategy positions you on the value curve.

A strong position on the curve suggests your pricing reflects perceived value, while a weak position may signal the need for adjustment to better align with market conditions and customer expectations.

PRICING and Perceived Value

PRICING is intrinsically tied to how customers perceive the value of your product or service:

• If your offering is seen as a commodity, customers will gravitate toward the lowest price.

• Conversely, if your unique value proposition is clear, customers may accept higher prices that reflect this differentiation.

For example:

• Starbucks customers willingly pay premium prices because they perceive value beyond the coffee itself—a unique experience.

• A luxury fashion brand can command high prices because it offers a transformational experience, making cost secondary for its target audience.

Key Principles of an effective PRICING strategy

An effective PRICING strategy should adhere to the following principles:

1. Be Value-Based: Align your price with your position on the economic value curve.

2. Consider Market Conditions: Analyze competitor pricing and customer price sensitivity to ensure relevance.

3. Enhance Your Brand’s Purpose and Positioning: Reflect your brand identity. For instance, a disruptive brand might challenge market norms with innovative pricing.

4. Strengthen Your Value Proposition: Reinforce the unique aspects of your offering to justify the price.

Ignoring these principles can lead to a PRICING strategy that acts as a brake on your progress, rather than an accelerator.

Assessing your pricing strategy

To evaluate your pricing, consider a scoring scale from -12 to +12:

• 12 represents a low price that may correspond to a low perceived value.

• +12 indicates a high price with a high perceived value.

For example:

• If your artisanal coffee is priced above average market rates but customers appreciate its unique quality and sourcing, resulting in a high perceived value, your pricing might score a +8 or higher on this scale.

• On the other hand, a low-priced coffee with limited differentiation might score closer to -8 or -12, reflecting a misaligned pricing strategy.

Value Map that helps you understand your current pricing situation

Translating pricing into action

A strong pricing strategy should consistently reflect your value proposition and support customer decision-making. Pricing decisions should be based on insights into customer behavior, cost structures, and competitive analysis, while integrating sustainability as a core principle.

Questions to consider:

• Does your pricing strategy create more value than the cost for your customers compared to alternatives?

• How well does your pricing align with your customers’ Willingness To Pay for solving their problems?

• Does your pricing account for all costs associated with delivering your value proposition?

• Is your pricing consistent with your brand positioning and category goals?

• How does your pricing strategy encourage sustainable choices?

Method for self-assessment

For a comprehensive evaluation of your understanding and application of the Pricing concept, rate your agreement with the following statements on a scale from -3 (completely disagree) to +3 (completely agree):

1. Your value proposition is creating more value than the cost of the next best alternative for your customers.

2. Your pricing strategy is based on customer Willingness To Pay (WTP) for solving their problem.

3. Your pricing strategy takes into account all costs associated with your value proposition.

4. Your pricing strategy is aligned with your brand positioning and your goals for the category.

5. Your pricing strategy encourages customers towards the most sustainable option available.

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Marketing Canvas Method - Value Proposition - Pricing by Laurent Bouty

Interpretation of the scores

Negative scores (-1 to -3): Negative scores suggest that your pricing strategy is misaligned with customer expectations, cost structures, or brand positioning. This can result in undervaluing your product, losing competitive advantage, or failing to support sustainability goals. Immediate action is required to reassess your pricing approach.

A score of zero (0): A neutral score reflects uncertainty or incomplete alignment in your pricing strategy. While some elements may be in place, such as cost coverage or WTP analysis, they lack cohesion or fail to drive sustainable behaviors effectively. Further refinement is needed to strengthen your strategy.

Positive scores (+1 to +3): Positive scores indicate that your pricing strategy effectively communicates value, aligns with customer WTP, covers costs, and supports brand positioning. Additionally, your pricing encourages sustainable choices, reinforcing your commitment to long-term impact and differentiation.

Case study: Green clean’s pricing

Misaligned understanding (-3, -2, -1): Green Clean’s pricing fails to reflect the value of its eco-friendly products, either undervaluing them compared to competitors or setting prices that exceed customer WTP. The lack of cost alignment and sustainability incentives weakens the brand’s positioning and reduces customer appeal.

Surface understanding (0): Green Clean’s pricing covers basic costs and aligns with industry averages but lacks differentiation or focus on sustainability. Customers may perceive value but are not incentivized to choose more sustainable options, limiting the brand’s impact and competitive edge.

Deep understanding (+1, +2, +3): Green Clean’s pricing highlights the value of its unique features, such as non-toxic ingredients and zero-waste packaging, while aligning with customer WTP. By offering subscription discounts and promoting refillable packaging, the brand encourages sustainable behavior. This strategy reinforces its eco-friendly positioning, builds customer loyalty, and ensures profitability.

Conclusion

The Pricing sub-dimension is a strategic tool for aligning your value proposition with customer expectations, brand positioning, and sustainability goals. By creating value beyond cost, basing pricing on WTP, and incentivizing sustainable choices, businesses can enhance their competitive edge, foster customer loyalty, and achieve long-term success.

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Sources

1. Market and Economic Value, Laurent Bouty, https://laurentbouty.com/blog/2019/marketing-canvas-market-and-economic-value

2. Neil Patel - 5 Psychological Studies on Pricing That You Absolutely MUST Read, https://neilpatel.com/blog/5-psychological-studies/

3. The Ultimate Guide to Pricing Strategies, https://blog.hubspot.com/sales/pricing-strategy

4. Replyco, 23 Pricing Strategies Any eCommerce Seller Can Use to Increase Sales, https://replyco.com/brainery/23-pricing-strategies-for-ecommerce-sellers/

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Marketing Canvas by Laurent Bouty