How Product Managers Can Check The Sofa For Coins

by drjim on September 12, 2016

Sometimes you gotta go looking for your funding…

Sometimes you gotta go looking for your funding…
Image Credit: dotpolka

Have you ever been broke? I mean really, really broke? If you have, then you know what you have to do when you need to buy something. It could be something as simple as toilet paper, or coins to do your laundry. You need money and you have none. When this happens, you go on a search – you turn over everything in your home in order to find those few coins that may have gotten away from you. The sofa is a great place to look – you always know that you’ll find something that has slid between the cushions. As product managers, sometimes there is not enough money to do what we know needs to be done according to our product development definition. When this happens, we’ve got to go and check out the sofa…

Incremental Payments

Once upon a time when I was a product manager at a startup, we ran into a cash flow problem – there simply was not enough cash. This is when everyone got together and tried to come up with ideas for where we might be able to find more money. While this discussion was going on, I sat back and tried to think about how we could get more money from our existing customers.

What I quickly realized is that because the company was a startup and because it was grateful for every customer that it was able to land, it had a pricing model that charged its customers a onetime fee for the product and then charged them every time they needed support. This model was fine, but it lead to uneven income – some months customers didn’t need any support.

I suggested that the firm change the way that it charged for support. Create three different plans (bronze, silver, gold) and offer them to customers. Customer who bought the product had to sign up for bronze, but could upgrade to silver or gold if they wanted to. They would be charged a monthly support fee no matter how much support they used that month. The company was hesitant because they didn’t want to anger any customers and lose them, but they really had no choice (no money!) We went ahead with the plan and it was a big success. The company now had a regular flow of monthly revenue and they could pay their bills and focus on making more sales.

Pay For Everything

Every customer has special requests. If your firm is a small firm, there is a very good chance that every time your customer makes a request, you work very hard to make it happen. This is all well and fine; however, there has to be a point where you take a step back and ask yourself if this is the right business model for you. I’m willing to bet that you are providing all of your customers with access to the special work that you’ve done for just one of them.

What you are going to want to do is to turn all of that hard work that you’ve done to solve very specific customer problems into cash for the company. You are going to have to take a long hard look at the product that you are offering to your customers. What components do they need to solve their specific problem. What extras are you currently bundling with the product that they don’t absolutely need? Remove those extras and place them in a separate package. Come up with a price for that package and then offer it to your most recent customers. You may be surprised at just how much money you can make by doing this and it will be one more thing to add to your product manager resume.

Pay A Fair Price

Pricing is one of the toughest jobs that a product manager has to do. If we price our product too high, we’ll lose customers. If we price it too low, then we’ll be giving money away. Somehow we need to find that perfect price. The one that will make our potential customers willing to buy without causing us to lose any money.

I’m sorry but I don’t have any magic solution to this problem. Instead, what I can suggest is that you keep your eyes open. In my case that’s exactly what I was doing. My firm had a price that we were charging for professional service hours. I happened to attend a product briefing that was put on by one of our competitors and during the briefing they were asked how much they charged for professional services. When they replied that they were charging US$100 more per hour than we were, my jaw hit the floor. We promptly raised our prices and were very happy to see what that did to our bottom line.

What All Of This Means For You

Product managers have a lot of different jobs. We are the ones who are ultimately responsible for the success of our product. There will be times that we know that certain things need to be done in order to make sure that our product will be successful. However, the company may not have the funding that is needed to do these things. When this situation happens, it’s going to be time for you to go check the sofa to see if you can find the coins that you need to save your product…

One of the first things that you can set up is incremental payments. When a customer buys your product, you’d like to have them sign up to send you a check every month for support because this will help your product’s cash flow. Next, you need to make sure that you are not giving too much away. Look at your product and remove any “extras” that can be sold as separate items. Finally, always keep an eye on your prices and if you get a chance, raise them. Taken together, all of these things should be on every product manager’s product manager job description.

At most firms, that sofa is a big thing. There are many different places that you can go to look for additional funding for your product. You know how important many of the things that you want to do are and so it’s going to be worth your time to go searching for the additional funding that you need. Check under all of the cushions, the coins that you need are there somewhere!

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Who will product managers have to work with most closely if they want to change how their product is priced?

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What We’ll Be Talking About Next Time

So you are in the process of starting your brand new product manager job. Congratulations. Now what? What is the first thing that you are going to need to do? As we all know, there are a ton of things that you could do including creating a product development definition, but where to start? I recently had a chance to start a new job as a product manager for a startup that had never had a product manager before. What I did right off the bat might provide you with some answers to this question…

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