How to Price Your Product: A Look at Bots & Integrated Applications
February 17, 2017
Editor’s Note: This is part two of a two part article on how to price apps for Slack and other platforms and marketplaces. You can read Part I here.
So you’ve built a bot for Slack or Facebook or Salesforce.com or email (or maybe all four). Or maybe your bot lives out in the wild and people interact with it in all sorts of unexpected places. Perhaps you’ve embedded it deep in your own application to provide user support or in order to drive engagement. No matter where your bot lives or how users interact with it, you need to extract some money for the value you are providing in order to continue to invest in improving the product.
So how should you go about monetizing your investment? In this post, we’ll work through a series of questions to help you frame your choices so you can ultimately set an appropriate pricing strategy.
Before working through each of these questions, let’s look at how one company has done this. Zoom.ai is a digital assistant that listens in on your conversations and helps you with the kind of repetitive task that assistants used to do back when people had assistants. It works with Slack and with many other messaging platforms. When I reached out to Zoom’s CEO Roy Pereira to ask him about his approach to pricing Slack bots it was his assistant ‘Dennis Zoom’ that found us a time for the call.
The key thing to note here is that Zoom works on multiple messaging platforms. That frees it from getting referenced to the price of any one platform and allows Roy to set a price based on value. He calculated this value by estimating the value of the time saved. He could have added in the value of not missing critical opportunities. The price for Zoom’s assistant is $25 per month. The competitive alternatives here are an actual assistant (way too expensive for most of us), one of those executive services that seem to charge anywhere from $3-5 per hour at the low end to $20 for a professional service where the person providing the service is based in the US. There are also other scheduling bots, like x.ai where Amy or Andrew Ingram will help you for $39 per month ($59 for the business version). Zoom and x.ai are both many times more expensive than Slack at $6 per month.
Aside: Note that both Zoom and x.ai gave their bots personalized names. This is quite common. These bots are becoming so popular that there are even issues with sexual harassment! (See this intriguing article on Quartz for more on this.)
Now that we have some frame of reference for how pricing a bot might look, let’s ask some basic questions:
- Does your bot collect data?
- Does your bot enhance the core functions of the platform?
- Does your bot use the platform as a channel?
- Does your bot aggregate eyeballs?
- Is your bot is an enhancement to your core application?
Your pricing strategy falls out of the answers to these questions.
1. Does your bot collect data?
If your bot collects data can you extract valuable insights? Who are these insights valuable to? If they are valuable to the users of the app consider an offer that charges users to access the insights. When the data from having multiple users increases the value for any one user then consider a freemium model where the basic app is free and people pay for insights. If the insights are valuable to third parties that is what you should monetize, provided that you protect the rights of your users and disclose the intended use.
2. Does your bot enhance the core functions of the platform?
This is where the reference effect of the platform’s price becomes a real concern. If your app provides a better version of things the platform already does, or provides functionality directly dependent on the platform’s core functionality you are probably going to have to price at 10% to 30% of the platform’s base price. You are also at risk of having the platform learn from your hard work and offer similar functionality in a future release. Developers for Windows are all too familiar with this. There used to be a big market for spam blocking services for your email or even faxing services.
3. Does your bot use the platform as a channel?
If your bot treats the platform as a communication or delivery channel you can prevent the platform from acting as an anchor or reference price. There are two key ways to do this (and you have to do both). First, make sure your bot is available across multiple platforms. Second, provide some unique value that is independent of the platform. Ideally, this value cannot be provided by accessing only one platform. The scheduling bots from Zoom.ai and x.ai are good examples of this. Schedulers need to act across multiple platforms and integrate with other applications like calendars.
4. Does your bot aggregate eyeballs?
Some bots will be able to attract a lot of people and monopolize their attention. Advertising models are the preferred monetization strategy in this case, especially if you can learn a lot about users and what they are interested in. Today though, most of the messaging platforms do not support advertising and I kind of hope it stays that way. In this case, you are back to the data path. If you are attracting a lot of people and getting them to interact with each other and your app in ways that you can track you probably have some valuable data from which you can generate insights.
5. Is your bot is an enhancement to your core application?
Many companies, from Salesforce to Quip, are using apps and bots to extend their own applications. In some cases they will want to charge extra for this, but buyers are likely to push back as apps and bots come to be seen as a standard part of functionality. For many companies providing bots will become table stakes, basic functionality they need in order to be competitive. Other more creative companies will be able to drive differentiation with bots, but in this case they will be most successful in capturing this value as part of their standard pricing.
The bot economy is just getting started and many more monetization models are likely to emerge. As with games, in-bot purchases of other goods and services is one promising possibility. In some cases the bot will do the buying for you and could take a commission as a purchasing agent. Platforms like Slack do not yet have a robust payment system, where they handle payments for transactions made on their platform, but you can bet they are working on it.
Bots can act as agents for the company. Some consulting companies are using bots to provide simple business advice, and are gaining value by using the bots as data collectors and for lead generation. This data does not have to be used internally but could be sold on in a data monetization strategy.
We are just at the beginning of the bot economy. A day will soon come when there are more bots out there than people. Once this happens most of the interactions will be between bots. My scheduling bot will negotiate with your scheduling bot to see if and when we should actually talk. They may be able to exchange enough information to make the conversation optional. Monetizing all these transactions is the future of pricing and revenue management. It is also a big opportunity for platforms like Slack where many of these bots will live. How will Slack try to make money from the bots communicating on its platform? That is a critical question as Slack’s decisions here will have a big impact on business models. Expect some surprises here as Slack experiments to figure this out.