Amazing insight from our CEO! AI companies, are you leveraging your pricing to capture your unique value and reach your customers? If you're struggling with #ValueCreation, or just have more questions, get in touch with our expert team here: https://lnkd.in/gvribXgE
Entrepreneur | Executive | Pricing & Value Creation Expert | Building the Future of #ValueCreation in Entrepreneurship
"Race to the bottom". This is how Marc Andreessen, general partner at a16z and investor in OpenAI, recently talking about AI and the current state of LLMs development. His comparison of LLMs to “selling rice” paints a clear picture of what happens when a market faces low barriers to entry, limited product differentiation, and eroding pricing power. In other words, when a product becomes commoditized, price competition intensifies, and value creation becomes harder to achieve. But does this mean that LLMs are destined to become commodities? It’s increasingly looking like this could be the case for some LLM players unless they have significant capital to fuel growth and create differentiation. Without this, companies risk falling into the trap of undifferentiated products and a shrinking ability to increase willingness-to-pay. Much like the search engine wars in the early 2000s, we’ll likely see a small set of winners emerge, consolidating the market and building strong monetization moats. These winners will dominate, leaving little room for those who fail to carve out their own niche. However, this doesn’t have to be the only story for AI companies. At a recent HelloAdvisr event, we explored how AI companies can avoid the race to the bottom through strategic pricing and packaging. The key lies in understanding where your company stands in its journey. Are you trying to achieve product-market fit (PMF)? Are you navigating the challenging phase of traction and securing the resources needed to grow? Or are you looking to scale and unlock new growth opportunities? For each of these stages, there are pricing strategies that can help you differentiate and avoid commoditization. Identifying and targeting the right customer segments, uncovering their willingness to pay, and being agile in your approach will be crucial. By doing so, you can create value in ways that go beyond price, ensuring that your product stands out in a crowded market. The AI space is still young, and there is room for companies to carve out a differentiated position. The winners will be those who understand how to create and capture value through pricing, packaging, and customer alignment, rather than competing solely on price. #valuecreation #ai #pricing
