Launched in May 2013, Patreon was the leading subscription-based platform in the online crowdfunding market. For over five years, the company operated successfully and expanded its large base of artists and content providers (known as “creators” on Patreon) and their fans and contributors (known as “patrons” on the platform). Patreon charged its content creators a standard 5 per cent fee, plus transaction costs, offering the artists over 90 per cent of the crowdfunded amounts. However, the founder and chief executive officer of Patreon realized that the company could not survive by maintaining the current uniform pricing and services structure. Patreon had to develop a set of more advanced tools to attract new content creators to the platform and enhance the experience of the contributing patrons. Patreon had to revise its pricing strategy to pay for the development of new services, grow its customer base, and improve the company’s profitability.
Launched in May 2013, Patreon was the leading subscription-based platform in the online crowdfunding market. For over five years, the company operated successfully and expanded its large base of artists and content providers (known as "creators" on Patreon) and their fans and contributors (known as "patrons" on the platform). Patreon charged its content creators a standard 5 per cent fee, plus transaction costs, offering the artists over 90 per cent of the crowdfunded amounts. However, the founder and chief executive officer of Patreon realized that the company could not survive by maintaining the current uniform pricing and services structure. Patreon had to develop a set of more advanced tools to attract new content creators to the platform and enhance the experience of the contributing patrons. Patreon had to revise its pricing strategy to pay for the development of new services, grow its customer base, and improve the company's profitability.
This is an MIT Sloan Management Review article. In recent years, gray markets--in which a firm's products are sold or resold through unauthorized dealers--have become ubiquitous. They exist for tangible products (lumber and electronic components) and intangibles (broadcast signals, IPOs); for massive goods (automobiles and heavy construction equipment) and for light, easily shipped products (watches and cosmetics); for the mundane (health and beauty aids) and the life saving (prescription drugs). Gray markets aren't going away soon. Although they ebb and flow as exchange rates, price differentials, and supply conditions change, surveys confirm the increasing incidence and scope of gray markets. In many situations, their sales outstrip authorized sales. An inability to compete with gray markets can wreak havoc on firms and industries. Unfortunately, because it is so hard to get data on gray market activity and what firms are doing to deal with it, there is little published guidance to help managers. The sale of legitimate products in the wrong place or through the wrong channel poses unique problems to companies. But there are unique solutions that can successfully manage them. Using several examples that show the scope and complexity of the gray market problem, the authors explain how managers can apply a framework based on sensing, speed, and severity to manage it. They also point out scenarios in which gray markets are actually helpful and should be tolerated.
This is an MIT Sloan Management Review article. For too long, people have made unwarranted but detrimental assumptions about pricing. Changing prices, for example, has been looked on as an easy, quick, and reversible process, and new technologies have only reinforced that way of thinking. Similarly, extracting value from a product by pricing it correctly has been seen as relatively uncomplicated; the hard part is creating the valuable product in the first place. But these dismissive attitudes toward pricing miss the mark. Pricing is complex, and it's only growing more so as new tools and techniques become available. The ability to set the right price at the right time, any time--the very definition of a pricing capability--is also becoming increasingly important. In fact, in the course of working with dozens of companies in the past couple of years, the authors have spoken with several executives who believe that developing a pricing capability is essential to their business' survival. And they are backing up their views by investing in three areas: human capital, systems capital, and social capital. The authors explain the nature of these investments and how they come together to form a pricing capability that competitors will have a hard time imitating. Building such a capability requires an effort that some companies may not be in a position to undertake. Those that do take a comprehensive approach, however, can make superior pricing decisions that fit with their positioning, customers, suppliers, and evolving market conditions for years to come.