Monetizing Innovation summary

by Madhavan Ramanujam and Georg Tacke · 2016 · 7 key ideas · 16-minute read

Most new products fail because companies design them first and think about price last; this book shows how to design the product around what customers will pay.

Why read it

For founders, product managers and anyone launching something new. It turns pricing from a last-minute guess into the starting point of product design.

Monetizing Innovation in brief

Ramanujam and Tacke argue that a large share of new products fail to make money, not because the ideas are bad, but because companies follow the wrong order. They build the product, then market it, then finally ask what to charge. By then it is too late to fix a product that customers do not value enough.

Their alternative is to design the product around the price. Talk to customers about willingness to pay early, before the product is built. Use those conversations to decide which features to include, which customers to target and how to package the offer.

The book then covers the main decisions: segmenting customers by what they value, bundling features into good, better and best options, choosing a pricing model (how you charge, not just how much), and picking a pricing strategy for launch.

Throughout, the authors draw on cases from their consulting work, such as Porsche testing what customers would pay before designing the Cayenne, and Michelin charging truck fleets by the distance driven. The message is simple: price is not a number you add at the end. It is a design decision you make first.

The 7 key ideas

1. Four ways new products fail

Bad launches usually start by building before asking.

2. Have the price talk early

Talk price before you build, not after.

3. Segment by what people value

Segment by value, not by profile.

4. Leaders, fillers and killers

Lead with what they pay for. Lose what puts them off.

5. How you charge can matter more than how much

Change how you charge before changing what you charge.

6. Choose a launch strategy

Pick your pricing strategy on purpose, not by habit.

7. Explain the value, not the features

Sell the result, not the specifications.

Key takeaways

• Talk to customers about price before you build.
• Segment customers by what they value, not who they are.
• Sort features into leaders, fillers and killers, and bundle on purpose.
• Consider changing how you charge, not just how much.
• Choose a launch pricing strategy deliberately.
• Describe outcomes, not features, in your messages.

Our take

The book makes a strong, practical case that pricing should shape products from the start, and its frameworks, like leaders, fillers and killers, are easy to remember and use. Its cases come largely from the authors' own consulting firm, so it can read in places like a showcase for their methods. Stated willingness to pay is also an imperfect guide to real behaviour, and smaller start-ups may lack the budget for the kind of research described. Even so, the core idea, talk about price early and design around value, is useful at any size.

About Madhavan Ramanujam and Georg Tacke

Madhavan Ramanujam and Georg Tacke are partners at Simon-Kucher & Partners, a consultancy that specialises in pricing and growth strategy.

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