82. How to Use Passion Marketing and Value-Based Pricing to Monetize a Business (Episode 1 of 2 with Jim Sterne)

Jim Sterne is a digital marketing and analytics expert with 35 years of experience. He is the author of Social Media Metrics, and a dozen books on advertising, marketing, customer service, email marketing, and web analytics. 

He is the founder of the Marketing Analytics Summit, the co-founder of the Digital Analytics Association, and the creator of the Analytics Cohort Mutual Mentorship Program. 

In today’s episode, we’ll discuss passion marketing and learn Jim’s number one monetization strategy: value-based pricing. 

Jim Sterne’s Story: Understanding Customers 

Jim’s first job out of college was in customer service. “My exposure to the world of business was being an advocate for the customer. It was my job to take the customer’s calls and figure out what went wrong and make it right. That sort of defined how I view the world,” he said.  

From the beginning, Jim understood the value of the customer. Building a business isn’t about us. It’s about the customer’s wants and needs. 

From working in customer service, Jim moved to sales where he sold software development tools into enterprise businesses and government organizations. After a while working with the company, he became frustrated with the company’s marketing materials and took the initiative to create his own. He went to his boss and asked to take over marketing. This ended up providing him with enough success and resources to buy his first home in Santa Barbara. 

Then, in 1993, he tripped over the internet. “I went into teaching mode, and I became a public speaker, an author, and a consultant on how the Internet was going to change the world,” he said. “That was my consultancy—how do we make our website better? Well, better at what? What are you trying to accomplish? Why do you have a website? And that question opens up a whole can of worms: who are we selling to, what are we selling, what is our business model, and what are the politics?”

Once he discovered analytics, he was able to prove what worked and didn’t work on a website with data. It led him to start a conference on web analytics, which became the Marketing Analytics Summit and the Digital Analytics Association with about 6,000 members and 100 companies. 

“The foundation underneath all of that is the view of the customer first,” Jim said. “And all sales and all marketing are about what the customer needs. I don’t care who you are or how long you’ve been in the business, you are not the target audience; your customer is, and that’s my religion.” 

3 Key Points

While customers are central to monetization, there are two other supporting parts. Jim gave three key points for improving marketing and increasing sales and growth.

1. People

2. Process

3. Technology 

“There are three legs of the stool: people, process, and technology,” Jim said. “The technology is cool when it works, but without the people and process, it’s just an expensive piece of software. I am passionate about aligning people to sales and marketing to work with data to improve what they’re trying to accomplish.”

Passion Marketing: People

Understanding the importance of the customer can often fall into the tectonic shift of passion marketing—connecting with customers through their level-10 passions.

Passion-driven marketing is where we focus on what our customers are passionate about and connect with our customers through those passions. It’s all about what our customer needs and helping solve their problems so we become a priority. We are not the target audience, our customers are.

In Jim’s conferences, he focuses on building relationships. He implements passion marketing by really getting to know what his customers want. He shakes their hands, gets to know their names, and connects with them.

When hosting conferences, Jim follows two strategies for putting on and effectively monetizing live events. He says to use sponsors and webinars. 

Being a sponsor means money. “Whether it’s an online event, or an in-person event doesn’t matter. Be a sponsor and get your logo in front of the right audience,” he said. 

The second strategy is to put on our own webinar. What do we do better than anyone else? We need to show our audience we have what they need and can help them get it. 

“What is the biggest benefit you offer? What is your proposition?” he explained. “A webinar says, ‘This is what you need, and we can help you.’ And only the people who need what you offer will show up . . . now [you] have increased your prospect list, and you have permission to talk to them and to email them and to follow up. If you do this on a regular basis, maybe every couple of months, you will create a pipeline.”

Hosting a successful webinar and becoming a sponsor is one strategy to help increase our success rates. It helps us learn what type of people want the products and services we offer. It helps us get to our customer’s level and determine their passions.

Value-Based Pricing: Process 

Passion marketing works hand-in-hand with value-based pricing. So, what is value-based pricing? 

The value-based pricing strategy determines prices based on how much a customer believes our product or service is worth. Instead of factoring in the costs of production, value-based pricing focuses on the output—what the value is. 

For example, a tax attorney can save individual thousands of dollars in taxes in a few hours. Instead of charging the client for our time (the price of what the service is worth), we can charge the client for the value we are providing (saving them thousands of dollars). 

When I asked Jim what his best monetization strategy and process is, he told me it was value-based pricing. 

Jim said it means not talking about features and only talking about the benefits. “It’s explaining what you get out the other end, the things that you have that you cannot put a price tag on. And if you are selling business consulting, you’re talking about not just increased revenue, but an increase in profit share, increase in employee satisfaction, increase in customer satisfaction, increase in the cultural perception of being able to work in such a company—all of these intangible things that will make a company grow like crazy.” 

Instead of setting prices based on time or cost, he sets prices based on the value the customer receives. The value might be expanding a network, increasing employee satisfaction, learning new strategies, building reach and influence, increasing credibility, and more. 

“You go to a conference to meet people and grow your professional network,” Jim said. “That’s the value. It’s the ability to, five years from now, reach out and say, ‘Hey, we met at that conference, and I have a question,’ or ‘I’m recruiting for a role’ or ‘I’m looking for a role,’ and making that reconnection to somebody that you have met before. That’s a career-maker.” 

One way to help determine our customer’s perceived value is by conducting surveys. It is essential to take the time to dive deep into what our consumers want. How often do we get follow-up emails after completing a service? Whether it’s the dentist or our auto insurance, they frequently ask us to rate our experience. 

This method of value-based pricing typically works better with companies that provide highly valuable and unique products than with companies that sell commoditized products (Source: Investopedia). 

Machine Learning: Technology

The final key point to creating a successful business is technology. 

Jim is the author of Artificial Intelligence for Marketing: Practical Applications. While people and processes are crucial in building a successful business, he also recognizes the large part technology and data play. Technology and data can help us process the information we get about our consumers. 

He told a success story of a business working with AI. The company wanted to find patterns in behavior when people came to look at their website. They had a machine look at social media campaigns, email campaigns, subject lines, a variety of photographs, and more. After analyzing the data, it came up with 10 micro-segments, showing the company what types of people they should send their message to. This caused their sales to go through the roof. 

While the starting entrepreneur won’t have enough of their own data to fully take advantage of AI and machine learning, there is data out there that can be used. “For most entrepreneurs, an Excel spreadsheet is awesome,” he said. “But if you do have a lot of data, and a very complex question, machine learning is something that we just haven’t had before, and it’s very powerful.”

Key Takeaways

Thank you so much Jim for sharing your stories and knowledge with us today. Here are some of my key takeaways from this episode:

1. The customer’s needs must come first.

2. We must connect with our customers and can do this through implementing passion marketing.

3. Value-based pricing determines prices based on the value a customer receives from our product or service.

4. Machine learning and AI can help process relevant data to help us understand our customers.

5. Hosting a successful webinar and becoming a sponsor of industry events may be good ways to increase our success rates.

Connect with Jim

If you enjoyed this interview and want to learn more about Jim or connect with him you can find him on LinkedIn and his website, targeting.com. You can also watch, listen, or read episode two for more stories and secrets Jim shared in his interview. 

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