That's a great book too - I like Seth's writing style. I believe he calls this "finding a edge".
TSATOP is different because teaches you to actually quantify the value delivered to the customers. i.e., how much, in real dollars, is 100% uptime going to save us over 99.99%?
It seems like a small difference, but its not: 100% uptime unlocks new business models that don't work with "only" 99.99% uptime (e.g., banking software or API companies). That's what TSATOP really explains - how to quantify the seemingly minute differences in your offering, and how to communicate that value to the customer so that you can charge accordingly.
To use an example actually from the book, how much money will a DNA testing kit that requires 10% less sample material be worth to a customer?
Well, first that depends on who the customer is - its a lot more valuable to a pharma company than a university, for example. But how much more? The book would do something like calculate the number of new drugs the pharma company can release each year based on having this better DNA testing kit, and calculate how that affects the customer's bottom line. Eventually this would result in something like: every time you use our product instead of our closest competitor, it puts $50 in your pocket.
Seth Godin's writing is awesome for motivation and to get your brain moving, but this book really drills down on the nuts and bolts of pricing, and provides templates and worksheets for performing your own Economic Value Estimation of your product. Both are really useful, but this one is more like a textbook, whereas Seth's is more like a (very) motivational speech.
Nice, I'll definitely go through this. For a typical freemium product, do you see it as being most useful when one is ready to start building out monetizable features, or do you see it as being essential for building an mvp and finding the most basic level of product-market fit? (Given that understanding the implications of pricing would probably be useful immediately, but learning it would also take time away from building the product.)
I think pricing is the very first thing you should think about, before features. Once you know what's actually valuable to your customers, it'll be easy to figure out what features to build to deliver it.
This book probably isn't an excellent fit for freemium pricing models. Its more about pricing B2B products, instead of consumer products. But you should still read the book anyway, because it teaches you to understand your customers' problems (and the value of solving those problems) at such a deep level that you would never be willing to part with that much value again for free.
Furthermore, and this is the big takeaway from the book, you're[1] looking at the problem backwards. The question is not, "can I find someone to whom my product is worth at least X" - that's flawed from the start.
The correct process is this:
1) Find a customer with a problem
2) Figure out how much its worth to the customer to have that problem solved ($X)
3) See if you can design and a product for less than $X
For example:
1) The local cab company wants to grow its business
2) It is currently making $300,000 per year. A 50% increase would be worth $150,000 (naively)
3) Could you create a white label Uber that would increase ridership by 50% for less than $150,000?
Thinking about it that way, there's no room for freemium. If you're thinking about freemium, you should find a new customer base or a new problem to solve.
(BTW, I love talking about pricing. Please shoot me an email any time if you'd like to talk more. I have a new SaaS that I would love feedback on, and I would be happy to offer my feedback on yours as well.)
TSATOP is different because teaches you to actually quantify the value delivered to the customers. i.e., how much, in real dollars, is 100% uptime going to save us over 99.99%?
It seems like a small difference, but its not: 100% uptime unlocks new business models that don't work with "only" 99.99% uptime (e.g., banking software or API companies). That's what TSATOP really explains - how to quantify the seemingly minute differences in your offering, and how to communicate that value to the customer so that you can charge accordingly.
To use an example actually from the book, how much money will a DNA testing kit that requires 10% less sample material be worth to a customer?
Well, first that depends on who the customer is - its a lot more valuable to a pharma company than a university, for example. But how much more? The book would do something like calculate the number of new drugs the pharma company can release each year based on having this better DNA testing kit, and calculate how that affects the customer's bottom line. Eventually this would result in something like: every time you use our product instead of our closest competitor, it puts $50 in your pocket.
Seth Godin's writing is awesome for motivation and to get your brain moving, but this book really drills down on the nuts and bolts of pricing, and provides templates and worksheets for performing your own Economic Value Estimation of your product. Both are really useful, but this one is more like a textbook, whereas Seth's is more like a (very) motivational speech.