It helps companies raise more money and grab market share. It also confirms that your marketing is effective, word-of-mouth uptake is happening, and you’re beating out competitors for new customers.Ĭompounding growth rates and rapid acquisition of users is validating. Showing a rapid increase in usage proves that there’s a sizable addressable market and that you’ve established product-market fit. When a tech company is still in startup mode, growth is pretty much all that matters. It’s also what makes venture capitalists reach for checkbooks. The potential for rapid exponential growth is what gets entrepreneurs out of bed in the morning. We’ve all seen the hockey stick growth chart in slide decks. You can figure out which pricing strategy aligns best with those goals by considering the pros and cons of each approach. Whether you’re angling pricing for growth or profitability should be informed by organizational objectives and where you are on your path to achieving them. Just like goals drive roadmaps, they should also be driving pricing. Letting Long-Term Goals Drive Pricing Strategy It also creates preconceptions about the value the product will provide and its overall quality. It will impact your total addressable market (since fewer people will pay the money for a more expensive offering). The sticker price on your product is no different. Pay $50 per entree, and you’re expecting one of the tastiest meals of your life. Throwdown $5 for a value meal, and you’ve set the bar low. What you pay sets your expectations for the experience. How a product is marketed, priced, positioned, and packaged is intrinsically linked to the overall experience. So, what the company charges for it has nothing to do with how great the product is, right? The job of a product manager is to bring a great product to market that meets customer needs, has a high-value proposition, and continues to delight and satisfy users. Myth #3: Pricing isn’t part of the product strategy Alignment around pricing is just as important as any other aspect of the product. What kind of margins and revenues the company expects for the product.Budgetary constraints of target customers.How competitors position their solutions.These other departments will provide many insights: In particular, marketing, sales, and finance. It requires participation from other stakeholders. Even when product management technically “owns” pricing, product managers are not doing it in a vacuum. Just like product strategy and roadmapping, pricing should be a collaborative effort. The leadership team will have expectations and assumptions that may not line up with what the “CEO of the product” would prefer. Product managers must get clarity on what leeway they have when it comes to setting and adjusting prices. But this aspect of the product is sometimes elevated to higher levels of management. They should, at a minimum, be one of the key players involved in defining how much to charge. Sometimes product managers do own the pricing of their products, but this isn’t often the case. Myth #1: Product management owns the pricing strategy Demystifying Product Management’s Role in Pricing Strategyīefore going any further, let’s tackle some misconceptions about pricing that many product managers (or aspiring PMs) may hold. Let’s dive into this complex conundrum while taking a product management lens to the pricing strategy problem. Packaging, bundling, and discounting have plenty of nuances. When there’s no traditional cost of goods sold (COGS) to recoup, the pricing strategy for a SaaS product can go in a lot of different directions.ĭo you give the product away and try to monetize traffic and users through other channels? Should you offer bargain basement prices to capture as many users as possible? Or do you position your product as a premium good, with a high enough price tag to return a tidy profit on every sale?Įven after you’ve chosen a lane, there are still myriad details to consider. Technology pricing can be tricky, particularly for software and services.
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