What product manager really likes to tackle the pricing beast? I’m willing to bet that this part of the job is pretty low on your list of product development definition things that you like to do. However, that’s a shame. It turns out that setting the right price for your product is what is going to have the greatest influence on making your product a success. Get it right and you’ll have something else to add to your product manager resume. Would you like to know how to do that?
What Makes A Price “Right”?
One of the biggest challenges that product managers face when it comes to pricing is trying to determine just exactly what price is going to be “right” for their customers. Sure, there’s a price that the company wants to sell the product at; however, that price could be either too high or too low for your prospective customers.
What a product manager needs to do is some homework. What you are going to be looking for is a price that is both fair to your customers (they get to decide this) while at the same time generating a reasonable profit for your company. This may seem simple to understand; however, it can be tricky to get right.
The good news is that you probably already have all of the data that you need in order to determine what this price is. You’ve used different prices for your product in the past and you have the sales data that that price generated. With just a bit of analytical software, you can determine what set of prices your customers are going to be willing to live with.
It’s All About The “Human Factor”
I think that taking the time to perform analytics on your stored data is a great idea. However, product managers need to keep in mind that the answers that pop out of such an analysis may not be the right answers. There is always the “human factor” that needs to be considered.
Other product managers have run into problems along the way when they’ve just done what their pricing research told them to do. Cases of this include a soft drink company which got into trouble when they announced a program to raise vending machine prices as the weather got warmer and an energy company who started to charge more for energy when consumers crossed over a threshold.
What this all comes down to is the simple lesson that a product manager’s judgment still matters. As much as is possible, product managers want to go out into the field and spend time with their customers. What you need to be looking for is how they are behaving and why they are making the product decisions that they are making. It’s only by understanding these factors that you’ll be able to pick the right price to charge them for your product.
What All Of This Means For You
Getting the price of your product correct is one of the most important jobs that a product manager can do. This should be a part of every product manager job description. However, exactly how to pick the right price is something that can appear to be more of an art than a science at times.
Product managers need to take the time to discover just how elastic the price for their type of product can be. Prices are not fixed – you need to create a plan to raise your prices over time. You also have to account for the human factor and understand how your customers are going to perceive your prices.
Let’s face it – pricing your product correctly is not an easy task to do. However, it is well worth the effort that goes into it because if you get it right, you can boost your product’s chances of generating a profit. Take the time to understand what goes into a good 21st Century price and you’ll have set the stage for your product to be a success.
Question For You: How often do you think that you should change your product’s price?
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What We’ll Be Talking About Next Time
Your job title is “product manager”, just exactly how much of that management stuff do you do? For that matter, have you ever been taught how to do it? Since so much of what a product manager has to do involves getting other people at your company to do things for you (above and beyond all of that product development definition stuff), being a good manager is critical to your long term career success. Let’s take a look at the three things that you need to be able to do in order to get things done.