Making pricing decisions requires insights into what customer’s value in your proposition and an understanding of costs, competitor offers and company strategy.
These are all areas that are fundamental to the product management and product marketing roles.
Why then do so many product managers shy away from active and regular engagement in pricing discussions?
As you can see below the average product manager spends less than 20% of their time on pricing.
Source: Product Focus Product Management Survey 2009/10
Why are Pricing Decisions Often Controversial?
One reason may be that pricing decisions are often contentious – it’s a little like branding and design questions – these are highly visible areas in which everyone has an opinion (though few have the skills & experience to make sound judgements). But, pricing decisions are doubly pressurised because changing a price has a quick, direct and tangible impact, positively or negatively on sales and profitability – and also on sales bonuses and commissions.
Product managers should not allow themselves to become disconnected from front-end pricing decisions. In fact, as a product managers or product marketer you should embrace pricing issues: it’s a core element of your proposition and who else in the company has the market insight, balanced perspective and long term view needed to be able to set prices?
From your viewpoint it’s also a great way to engage with customers and the front end to gain more insight. If sales channels are unable to stop discounting find out why and explore options for improvement. Would a focus on the value of your proposition help sustain higher prices? Is it a signal that your marketing is poorly targeted and attracting the wrong customers or an early warning that your proposition is failing to deliver the value envisaged?
Every product manager should understand why customers buy, what they value and what objections they raise. You cannot always resolve pricing objections but you should know what they are, be able to argue for the pricing you’ve established and equip your sales channels to do the same.
You might spend a lot of time deciding on the features of a multi-zillion pound product – do you put enough time into thinking about its price?
Director, Product Focus