Entries Tagged 'Pricing' ↓

November… already? And Random Bits

Next thing you know it has been 23 days since your last post. Oddly my subscribers have risen. Thanks for reading! There is lots going on in my life and reading and writing has sadly slipped below my capacity to process. I am hopeful that will change in November, but my travel schedule for the month is already pretty full. We shall see. Generally when I am lost for blog ideas I have a book review to do, but the current book (How We Decide by Jonah Lehrer) is a bit heavy and proving to be a slow read. The upside, I am learning lots about brain activity.

Random Bits:

1. I want to acknowledge a conversation I had a couple of weeks ago about authority vs. influence. His premise was that authority doesn’t exist. Authority alone is not enough to lead and that even in a position of leadership influence will still rule the day. I agree.

2. Regarding personas, I continue to see them not being used. You will lose the battle without them. Also try your best to ignore this post, except for the comments.

3. Regarding vision, I continue to see either no vision or poorly defined visions. You will lose the battle without a vision, largely because it is the key component to strategy. No vision, no strategy. Here is a good blog on product visions.

4. The price of your product is determined by the value it provides, not the cost.

5. Please visit my list of product management events. It is the most comprehensive list of events targeted towards product managers anywhere.

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10 Secrets to GREAT Product Management

Source: SlideShare Inc.This past weekend (and back in May for ProductCamp RTP) I had the honour of having my proposed session selected by my peers at Product Camp Atlanta. The discussion that the topics generate is what lifts the value of the session. I have posted my slides on slideshare.net (slideshare is youtube for product management) so you can access the resources embedded.

Image Source: SlideShare Inc.

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Pricing Strategy, Worthy of a Thought?

Source: Startup StudentsHad a great conversation this week with Larry McKeogh and Scott Sehlhorst that was directly about Predictably Irrational a book by Dan Ariely. Indirectly, the conversation centered on pricing.

After, I was left wondering about developing a pricing strategy. Apparently there are at least 17 different pricing strategies including cost-plus, premium, target and loss leader. Pick one and win right?

Not so fast. Your pricing strategy is a subset of your product strategy which is a subset of the corporate strategy. Therefore your pricing strategy needs to be aligned with your product strategy.

Let’s assume you have a product strategy to grow your user-base to one million users by December. What sort of pricing strategy do you need to achieve that? Maybe your product is free under a market penetration pricing strategy. Now assume you are looking to break-even this year as well as reach one million users. Maybe a cost-plus strategy is the right strategy, where plus equals zero to maintain a low price?

This is where it gets tricky. December isn’t really considered a long-term strategy. Add in another layer to the scenario by stating in year two (i.e. next year, which is always a lot closer than you think) that you want to achieve $1 million in profit. Now you need to determine whether your users will tolerate a price increase.

Your current pricing strategy has to support your mission. You have to be mindful that the price you start with may prohibit future price changes and will handcuff your longer-term product strategies. The rational (or irrational) behavior of people may prohibit price increases because they already have slotted your product into a value threshold.

I know what you are thinking, more features equals more value to the user therefore I am entitled to increase the price to reflect this. Think about that. Perhaps, they are expecting more features for the price they are paying today. Software as a service customer inherently expect free upgrades.

The other factor to consider is your technology. For example, are you able to slice your product into a tiered offering. Will it be easy enough for people to upgrade themselves to the pricier… I mean enhanced versions? Will it be compelling enough for people to upgrade themselves? My vision here, a situation where you have a free version today and a not-free version tomorrow. Your longer-term strategy may depend on people moving to the not-free version but your free version may prohibit that just because it is free. Does your product architecture support your pricing strategy?

No question, there is a science to deciding what the price is today. But equally important, is deciding what the price is today, that doesn’t preclude you from your mission. Think this through. Strategy alignment.

The Accidental Product Manager provides another perspective on pricing with the context of the same book. Read the post here: How Product Managers Price Products For Irrational Customers.

Image source: Startup Students

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