Product Manager Tactics: Bringing In A Price Fighter

by drjim on March 18, 2009

A Price Fighter Product Might Be What Product Mangers Need

A Price Fighter Product Might Be What Product Mangers Need

Times are tough. Your product, your baby, is struggling. New competitors are showing up in your market with lower cost alternatives. Try as you might, your sales teams are just not having any luck convincing your customers to shell out the extra bucks for your Cadillac product. What’s a product manger to do?

Lots of product managers attempt to deal with low cost competitors by cutting the price on their product. This can be a big mistake. Rafi Mohammed who wrote The Art of Pricing: How to Find the Hidden Profits to Grow Your Business says that once you start to do this, you’ll end up devaluing your product. Once things get better, you may find that you can’t raise your prices.

How about introducing a new product – a price fighter? Yes, that might seem just a bit counter intuitive right now to launch a new product, but it just might save your bacon. A price fighter product is a low cost version of your standard product. The key is to sell this product under a different name so that your customers don’t get confused.

You are are already aware of lots of other firms that are currently using price fighters:

  • Procter & Gamble: premium product – Pampers, price fighter – Luvs
  • Delta Airlines: premium product – Delta, price fighter – Song
  • Anheuser-Bush: premium product – Budweiser, price fighter – Bush

The list goes on and on (Black & Decker / Dewalt, Sony / Aiwa). Price fighter products do two things: they allow you to preserve the pricing that you use for your premium product (while still allowing the company to make enough money to stay in business), and they take revenue away from your competition.

Reed Holden wrote a book called Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table. He pointed out that if you are planning on introducing a price fighter product, then you need to move quickly. Holden points out that Motorola took their time introducing cheaper cell phones and this allowed Nokia to jump in and own that part of the market.

So what do you think? Would a price fighter product help you to maintain your product’s pricing? How would a price fighter product differ from your existing product? Once things improve, would you discontinue the price fighter or would you keep it around? Leave me a comment and let me know what you are thinking.

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{ 6 comments… read them below or add one }

Jim Holland March 18, 2009 at 11:12 pm

The idea of a “price fighter” may be an option, but is it a quick fix for a product looking for a market, bad messaging and positioning, or lack of really understanding what customers really are asking for?

I believe the minute a product manager admits that “your product, your baby, is struggling” is a sign that person needs a reality check. I’ve liked a lot of products in my career, but none that I’d treat like loved ones.

As we look at the economy, all facets of product success need to be urgently reviewed. Often, its one gap in the defense that will get you knocked out.

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Dr. Jim Anderson March 19, 2009 at 7:42 am

Jim: you bring up a good point – just because your product is struggling doesn’t mean that creating a price fighter will magically solve your problem. A price fighter is a solution to a specific problem – it will only work if you have the right problem.

As far as not loving your product goes, well ok. However, I’m going to push back just a bit here – if ANYONE needs to believe in (sorta like love) your product, it needs to be the product manager. Where you draw the line is a personal call, but you do need to have a healthy relationship with it.

Finally, yes – a product manager needs to be ever vigilant. Even worse than trying to deal with the problems that are facing us is getting surprised by a problem that we didn’t even know existed.

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Sachendra Yadav March 19, 2009 at 12:25 am

What a timely post. I have been struggling with the same problem off late and all the while the solution had been staring me in the face… I own an Aiwa TV 🙂

A price fighter product will definitely help and it can help position the better product more effectively. I wouldn’t want to discontinue it as the low-price game will keep going on with different competitors.

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Dr. Jim Anderson March 19, 2009 at 7:44 am

Sachendra: fantastic – I’m glad that the post helped you out! You bring up a good point about not getting rid of the price fighter later on. It can act as sorta a “guard dog” in your market. A constant reminder to potential competitors that will let them know that you can play in the top and the bottom of the market and that it would be too expensive for them to try to compete with you!

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David Locke March 19, 2009 at 12:30 pm

Price-based competition happens just like clockwork. A category comes out of Moore’s tornado, and surprise, actually, no surprise, it’s your turn. Put this reality into your product roadmap. Know it’s coming, be ready.

Being ready means getting your value messaging out there, changing the sales compensatioin plans to get rid of discounting, not moving up market, and ensuring that the value you deliver hasn’t been eaten into by your competition. There are a ton of things you can do. The above list is just the short list.

Some of these things might seem out of scope for a product manager, but if you are trhe CEO of the product, they aren’t. It might be that all you can do is evangelize the distant elements and find a coallition, so add that work to your plate and hit it everyday.

The only way you should be surprised by the arrival of price-based competition is if you just got the job, or just got dropped into this mess. Congrats!

As for a price fighter, if you love to fight go ahead, just remember that there are competitors down there as well. You might lose the low end of the market, and the noise will be heard upstairs. Your high end customers could buy a few seats of low end in lew of a few seats of high end. Ouch!

Read the book mentioned in the blog. Then, go find where price boundaries exist as the book suggests. Then, you might just raise your price in a few of those markets.

If you think price-based competition is bad, commoditization is just around the corner as well. TKO!

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Dr. Jim Anderson March 21, 2009 at 1:11 pm

David: So you bring up a couple of very good points. Yes, price based competition will always occur no matter what market you choose to play in. However, it doesn’t have to drag you down. Constant innovation is what keeps high end products in the high end segment. The examples are everywhere: Apple, Prada, BMW, Mercedes, etc. You can “own” the high end of the market, but the key is that you can’t own both the high end AND the low end with the same product(s).

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