I found this on “http://www.theaccidentalpm.com” one of my favourite blogs.
You would think that simply by setting the price of your product and then telling the world about it would wrap up that part of being a Product Manager, right? Well guess what, in this era of the Internet everything having to do with product pricing has become more complicated. What you need is a new set of tools that will help you to lock-down your product’s pricing…
Ban Your Customers
Product managers know that not all customers are the same. The rise of the Internet and its ability to provide customers with a virtually unlimited view of your product’s pricing has created a new type of customer – the returner.
This type of customer is obsessed with getting the lowest priceon your product. That means that they’ll search for the lowest price and buy your product through that channel and start to use it. However, even after they buy your product they will continue to search for lower prices. If they find a lower price, then they’ll buy the product through the lower price channel and then turn around and return the unused product to the channel that they originally bought it from to get the higher price refunded.
You don’t need this kind of customer. What product managers need to do is to carefully watch your customers purchasing and returning behavior. You’re going to want to spot names, addresses, and credit cards that keep showing up that are part of this kind of cycle. Once you know who they are, you’re going to be better off refusing to sell to them in the future – it’s just not worth it.
Eliminate Surplus Supplies (and Pricing!)
Depending on what kind of product you are managing, you may occasionally run into the situation in which you have too much of an older version of your product. The question of how to get rid of these products is always a difficult one to solve.
Lots of times product managers will sell off their remaining stock of product to discount channels. This used to be a good strategywhen those channels operated in geographically diverse locations that didn’t overlap with your product’s primary channels.
Now that the Internet has information on everything, your discount resellers have the ability to show up right next to your primary channels when a customer goes searching for your product. This can quickly cause problems if their price for your previous product is much less than the price of the current model.
Product managers in this situation often find that they need toremove the lower cost versions of their product from the market. This can be as simple as buying them back from the resellers and then either destroying them or selling them in different countries where they won’t compete with your primary channels.
Don’t Promote Your Brand – Hide It!
Generally speaking, product managers work very hard to get their product’s brand out in front of their customers as often as possible. However, when we find ourselves in a situation where we need to get rid of an older or overstocked product, the opposite is true.
In these situations we need to hide our brand from our customers. It no longer matters the high quality of our product – we just want people to buy it so that we can clear out the shelves. When we use middlemen to get rid of these products, product managers need to make special requests.
Stripping the product name and the company’s name from the product that is being sold can help. What we want to avoid islowering the perceived value of the product (or version) that we are currently offering. Making sure that the discounted product does not confuse customers is one way to do this.
Play The (Internet) Search Game
Let’s face it – your potential customers are smart. They spend a lot of time on the Internet and on your company’s web site studying how to get the best deal on your product.
You may be surprised at how resourceful they are. Often times customers will use your pricing and promotions schemes against you. This can be as simple as trolling your web site to find out where you offer the same product at the lowest price or by combining different discounts in order to get the lowest price.
What this means for product managers is that we have to always be on the lookout for the prices that our web sites are offering. When we start to see a flurry of orders coming in via the web site at a low price, it is well worth our time to check out just exactly what is going on.
What All Of This Means For You
The arrival of the Internet has changed the way that Product Managers can price their products. Gone are the days that we could charge one customer one price and then turn around and charge another customer a different price. The Internet has made it all too easy for our potential customers to compare prices.
In order to take back some of the control over what people pay for our products, product managers need to change the way that they allow their products to be sold. This includes dropping some customers, eliminating discounted products, hiding their brands, and managing the role that Internet search engines can play.
One of the reasons that we chose the product management profession is because it is so dynamic. The Internet’s impact on how we price our products is a great example of this. Instead of throwing our hands up and giving up, we product managers need to understand the changes that we’re facing and adapt. Those of us who do this well will become even more successful product managers.