Step 2: Establish the Pricing Structure

Pricing is a critical function to attract and balance the different catalytic agents.

Successful catalysts set prices according to who needs whom the most and not the typical cost-plus model, or value-added pricing, or penetration pricing as other marketers do.

Catalysts can't insist on making profits from every group. They have to get both sides on their platform and get them on in the right proportions.

• Set separate prices for access and usage
• Set prices to balance demand from two sides
• Price to grow slowly – at first
• Pay customers to belong – sometimes
• Price for long-term profits

» For more on establishing a pricing structure, visit Chapter 4.

MobiTV: Charming the Carriers

When it started in 1999, MobiTV faced a common catalyst problem. The mobile operators would not sign on unless they knew that MobiTV was going to be able to offer significant television content for their subscribers and television channels didn’t want to bother until they knew that MobiTV could actually guarantee distribution. So MobiTV used “contingent contracts” to set the stage for a catalytic reaction. Sprint agreed to offer the service if MobiTV obtained a certain number of distribution agreements with television channels. MSNBC and other television channels agreed to make their broadcasts available if Sprint signed on and if other channels signed on. With these contingent contracts in hand, MobiTV got Sprint to agree, and the channels quickly followed.

Now MobiTV makes its profit from subscription fees and the television channels permit MobiTV to replace a certain number of the advertisements included in their broadcasts with spots for advertisers that MobiTV signs up. MobiTV got its pricing right and, as a result, laid the groundwork for a successful catalyst. As of February 2007, more than two million people around the world were paying more than US$10 a month to watch its television service on mobile phones.