Winning Product teams treat each product investment like a business. After all, a product may sound good on paper, but if it can’t support a business plan and be priced well for the market, it isn’t worth the capital.
As SBI found, with help from Market Research, the Product Team can more effectively make decisions about which products to invest in and how to price them for consumers.
Before each new year, top-performing companies outline their Product Strategies with the goal of solving market problems that buyers are willing to pay to fix. In other words, they have to identify products that are in high demand and smartly price them for a target audience.
Here’s how they do it.
Are you incorporating market value into your prices? Understand the Outline of Your Product Strategy
The Product Strategy is composed of four key steps:
- Focus product efforts on the market segments that lead to a product road map with the greatest potential for your company.
- Develop business plans that help make product investment decisions.
- Build products and product packages that will be in high demand in the marketplace.
- Ensure the entire organization is prepared and able to launch new products in the market.
The second step unfolds across three phases:
- Monitoring KPIs to understand how a product is performing
- Assessing the opportunity and risk for each new product idea
- Determining the price the market is willing to pay for a given product.
That third phase is where the Product Team is called on to place a certain cost on products. Here’s what you need to know to make sure you’re identifying the true value of each solution.
Identify the Smartest Price For Your Product
Many companies resort to cost-plus pricing because it’s the easy way to set prices. But here’s the hard truth: It doesn’t work.
The marketplace doesn’t value your costs; they value the impact your product makes on them. Therefore, prices should be set based on this market impact.
Your cost prices do matter, but only when it comes time for you to decide if a product is one that should be pursued or not.
To be sure you’re incorporating the market value in your pricing strategy, outline the answers to these questions:
- What price will the market pay for this product?
- Is this purchase decision highly competitive?
- How is the competition priced for this product?
- How much will a buyer be willing to pay for our product relative to the alternatives?
- How can we make use of good, better, best pricing of our products?
- How can we use bundles to maximize the price we can charge?
- How do we use our internal cost to decide if a product is worth investing in?
Once the Product Team has effectively identified the best prices for its marketplace, they can be sure the Marketing and Sales teams are armed with the tools they need to make the number in 2016.
If your organization is ready to align its strategies for a successful year ahead, register for SBI’s “How To Make Your Number in 2016” workshop. We’ll send a strategist to your office and apply the industry’s best practices in the way that’s most profitable for your organization.