Last Thursday, Greg Alexander – CEO of SBI, walked you through the SBI’s 4-step product strategy methodology at a high level. Today I’d like to discuss Business Planning at length. This is the step of the methodology where you test your ideas.
Business planning is where you validate your investment decisions. A product may look good on the road map, but that doesn’t guarantee success. If it can’t be priced attractively, it shouldn’t be pursued. Same goes for if it can’t be sold at a profit.
Winning product teams treat each product investment as a business. If a product can’t support a business plan, it likely won’t produce sales revenue.
Follow these three steps to create a profitable product road map.Winning product teams treat each product investment as a business.
Step 1: Product Profitability
The first step is to monitor KPIs to determine how a product is performing.
How profitable is the product? Don’t just look at the difference between cost and market price. Think about the cost to:
Also consider what other products this product enables you to sell. If it’s unprofitable, is it a strategic loss leader?
Do this for each of the products on your road map. Focus on products that are profitable and fix/kill the ones that are not.
Step 2: Business Planning
Manage each of your products as a business. Create a business plan for each of your products. Include in the plan:
- Market opportunity
- What market problems does this product solve?
- What is the competitive landscape?
- Justification for investment
- What is the customer impact of this product?
- What are your financial objectives?
- Assessment of risk
- How feasible is it that you can build/support/market this product?
- What are the risks associated?
You may identify risks that prevent the product from being successful in the market. The best product ideas sometimes falter when subjected to a business plan.
A business plan for each product will increase your chances of success overall.
Step 3: Pricing
The final step in the product strategy Business Planning phase is pricing the products. You will determine the price the market is willing to pay for each product.
Cost-plus pricing doesn’t work. The marketplace doesn’t value your costs. It values the impact your product makes on them.
Cost only matters when deciding if a product is worth pursuing.
Base your pricing on market impact.
- What price will the market actually pay for this product?
- How is the competition priced?
- Can you make use of good/better/best pricing or bundles?
Now That Your Investment Decisions Are Made:
Now you have completed the Business Planning phase of the product strategy methodology. From here, you’ll move on to building and launching your selected products.
Ready to learn more? Register for the “How to Make Your NUmber in 2016” workshop with one of our SBI strategists. You’ll learn how top performers are doing things differently. And you’ll learn how to create a product strategy that hits the number.