Psst – hey product manager, would you like to make some more money with your product? Guess what – you can! All you have to do is to raise your product’s price. Uh oh, does this scare you just a bit? Are you concerned about making your existing and potential customers angry with you? I’ve got some good news – you can raise your price and keep your customers. I’ll show you how…
Things That You Shouldn’t Do When Raising Your Product’s Price
Product managers tend to get a bit nervous when they start to plan to raise their product’s price. This is something that was never a part of their product development definition. Sometimes they think that they can get clever and not change the price of their product, but rather do away with the various promotions and discounts that their customers have been using to buy the product at a lower price. Turns out that this is a bad idea.
You need to give your customers some credit. They have an instinctive feel for when something is a good value. If they have been used to seeing sales, promotions, coupons or other types of discounts associated with your product and then all of a sudden these go away, they’ll know that something’s up. Playing this game will drive away your most price sensitive customers and they may be the ones that you’ve worked the hardest to win over.
Another thought that many product managers have is that they can effectively boost their product’s price by introducing another product and cutting the quality of that product. It turns out that this kind of approach rarely works. What happens all too often is that the lower quality product ends up taking market share away from your primary product. Taking an alternative approach and reducing the amount of product provided to the customer also doesn’t work. It turns out that it’s not the amount of product that is generating your cost, but rather the shipping and packaging.
The Right Way To Raise Your Product’s Price
Given that there are so many wrong ways to go about raising a product’s price, what is the correct way to do this? The first thing that a product manager needs to realize is that you have to tell your customers when you are raising prices – don’t try to hide it. Research has shown that customers will accept higher prices if they seem to be both reasonable and fair. If you can figure out how to increase product prices correctly, then you’ll have something else to add to your product manager resume.
Raising product prices is often all about timing. What this means is that you can raise prices when you introduce a new version of an existing product – customers will expect to pay more to get more. You can also raise your product’s prices when the leader in your market raises their prices. Make sure that you do this quickly!
Not all customers are the same. You need to keep providing your customers with deals. The reason that you are going to want to do this is that your customers who are the most price sensitive won’t buy your product unless you give them the motivation that they are looking for. Take the time to find ways to get your best deals into the hands of the customers who will be most likely to use them.
What All Of This Means For You
Just selling your product is often not enough for most product managers, we want our products to be a financial success. What this often means is that we will find ourselves in a situation where we need to raise the price of our product. This skill is never listed in a product manager job description. The trick is to be able to do this without driving our customers away.
What we don’t want to do is to stop offering our most price sensitive customers product promotions. Additionally, if we decrease the quality of our product there’s a real possibility that our customers may start to feel cheated. Instead, what we need to do is to follow the market leader and raise our prices when they do. We also have to make sure that we continue to offer deals so that our price sensitive customers don’t leave us. Finally, providing different types of the same product can help our customers get the product that they want.
The good news is that it is possible to raise the price of a product that your firm is already offering. You just have to be smart how you go about doing this. Take the time to think about how your customer views both your product and your price and then go about making sure that they view any price increase as being “fair”. Do this right and you’ll see a real benefit to your product’s bottom line.
Question For You: What do you think the best way to get your customer to accept a higher price for your product is?
P.S.: Free subscriptions to The Accidental Product Manager Newsletter are now available. It’s your product – it’s your career. Subscribe now: Click Here!
What We’ll Be Talking About Next Time
You’ve got a great product. In fact, it might even be a revolutionary product. Well, there are at least some features of your product and its product development definition that you are very proud of – nobody else has them. You would sure like to tell your customers about how great your product is, but you don’t want your competition to find out about it. Maybe you should keep all the interesting stuff secret…