The Price Determinant
Given a chance, am sure everyone would love to own a Maybach, Roll Royce, Lamborghini, Bugatti based on their taste & class. Then what's it that stops 99.9% of people from owning them? Price?
The Background
Assume you’ve joined an early stage startup as a product manager and it has hardly been 2 weeks now. You are just about in the process of meeting, interfacing with multiple people in the teams, stakeholders, members whilst you are also in the process of carving out your 60-90.
So, given this scenario now, your leadership ropes you in for a discussion in 2 days’ time. You look for additional info for some clarity on the topic and you see the title of the discussion and it reads “Product Pricing Plans” with almost all stakeholders invited.
And, now as much as you are startled hearing that they are inviting all internal stakeholders at this stage to brainstorm over what ought to be the best price point(s) to front the product as relevant to the user group(s), you seem to have butterflies in your tummy.
When one part of you seems to think that you ought to get down to some real hardcore market research over your competitors operating in the space, the other part of you is screaming over why they are holding the pricing discussion this late!!
Nonetheless you will now have to face the situation. But, what’d be your plan?
That’s a million-dollar question for someone who hails from the product domain and how the pricing is arrived at, isn’t it?
The reason I say that is because of the whole wide spectrum of things one needs to consider before building something that could be called a tangible entity of a product and bringing all the understanding over factors that could influence pricing decisions.
Price Influencers
A pricing discussion at a corporate level could end up looking like a dive into basic economics but that’s pretty much what the whole exercise entails and is the right way forward as well.
There are a standard set of factors that one needs to consider like:
There could many other influencing factors specific to your product which merits a brainstorming session with the stakeholders who matter and use that insight to build clarity over how to arrive at the final price(s).
Case Study:
Consider a case where an FMCG organization is bringing out a new type of milkshake which is vegan.
On the face of it, this isn’t a niche market to say in the least as there have been many organizations who have been working on products in this space and boast of giant market shares whilst also strategically releasing new ones to keep the market captivated over what’s lined up next.
The Price Determinant
Ok, all this is fair enough, you say.
With all this information on hand now, I still am at square one and don’t seem to have budged from there.
How do I actually decide on the pricing of my product?
Moreover, how do I know whether the price is right for my product?
That’s where something like the Price Determinant could come in handy.
Let’s see how that works stepwise.
