Tag Archives: pricing
One of my favorite events every year is Sales Kick Off (SKO). SKO provides a great forum for sales enablement but it should be happening throughout the year and certainly with every product or significant feature launch. Let’s explore the key elements for successful sales enablement.
- Use cases– this cannot be overstated. Product Management needs to provide Sales with scenarios or use cases where the product will solve a real business problem. These use cases need to be simple to understand and easy to remember. The use cases used in Sales Enablement do NOT have to be exhaustive as that would be difficult and too much for sales to digest. They need to be simple and educational. With a proper grounding in ways the product could be used, the Sales force is armed to go out in the marketplace and find similar instances or even more complex scenarios. Product Management needs to provide Sales with simple examples so they stay engaged, pay attention and remember the products capabilities when they are in front of that sales opportunity.
This is the second in a series on “What does it take to launch a product?” This blog is about pricing which is a critical exercise in the process of launching a product. The observations shared here are focused solely on B-to-B sales (business to business, not business to consumer which has many different nuances.)
Golden Rule #1: Sales cannot set standard pricing
Every once in a while, I will hear from someone that their executive team wants sales to set the pricing because they are most aware of the marketplace and the competitive pressure. And while I agree that Sales should have a tremendous amount of input in the pricing process, they shouldn’t have the final say in setting *standard* pricing. It is a bit like having the fox watch the henhouse. Anyone with a quota has different incentives with regards to pricing than someone who is objectively trying to express the business value of a product. Once Standard pricing is set by Product Management (PM), then Sales will have an active role in deals-based pricing or ICB pricing. But Standard pricing must be owned by an organization without a quota.
Golden Rule #2: PM (or Finance) should define both Published Pricing and the floor
In the b-to-b world, like most other markets, pricing is negotiated. It is often the case that you want to publish your standard pricing which is the price that you would love to get, but you understand that there needs to be some wiggle room for the Sales force to negotiate. Our experience has been that when PM sets the standard and the floor, Sales has clear boundaries that they can move within. Some skeptics will say that Sales will always go straight to the floor and that may be true but it depends on a number of factors – namely their comp plan. If good salespeople will make more money by pricing closer to the standard/published pricing, then they will. Less experienced sales people or folks who are compensated on volume and not margin will likely go straight to floor pricing. But if PM defines it, the company should still be confident that adequate margins are maintained, even at floor pricing.
Today starts a series of blogs on launching a product. If you have heard me speak or been around me for 10 minutes, then you have heard me say that we recently launched 6 products in less than 3 years. I talk about it so much because I am so proud of this organization for accomplishing such an awesome feat. What does it take to launch a product? You have to define it. That sounds pretty basic, huh? Who would have a product that they couldn’t define? But the devil is in the details and there are several ways that products need to be defined. Let’s look at the nuances to better understand why this is harder than it looks.
Define for IT (Engineering)
You have to articulate each feature in detail so IT (Engineering) knows what to build. This could be a prioritized list of 10-15 things or perhaps 100 small features. The point is that Product and IT need to be on the same page as to the critical features, and what are the nice additions to be added, time and resources permitting. But for product management, the product definition doesn’t end there.
It may sound odd that you need to consider pricing when sunsetting a product or platform but you do – at least in some form. This is the final installment in a series on decommissioning or sunsetting a product. First you must get data to know exactly what the situation is; second, you must craft your communication plan, and finally, you need to consider the financial implications.
If you are truly turning a service off, or ‘going dark’, you may have to consider whether refunds will be required for your existing customers. If your business model is one of pre-payment, then you need to look into contractual obligations, notice periods and financial true-ups. The potential impact of refunds may even dictate your sunsetting strategy, so you can minimize pay outs.
Let’s consider an example. The company charges annually for the following year. For example, on November 1st, you are charged for November 1st to October 31st of the following year. The company will need to research the month with the highest number of renewals and you might base your decommissioning date based on that information to minimize the refunds. If sunsetting this product is a large and complex effort, you might consider a rolling project where customers are moved off of the product or platform as their services expire contractually. This approach can take up to a year to complete, but that might be ideal in certain circumstances.
Product Management is an unknown discipline to many people and it is so necessary that we must spread the word. There are visionaries and entrepreneurs out there who are coming up with wonderful ideas and then spending precious time and resources pursuing these ideas without considering some basic information first. This blog is designed to showcase a handful of questions that Product Management asks before you commit to building the “next big thing.”
1. What is the business problem you are trying to solve?
This question is usually answered by most idea people. They see a pain point and they want to address it. Awesome. As long as you can clearly articulate what you are trying to achieve, you are headed in the right directio
2. Who are we trying to solve it for?
Here is where things start to get a bit murky. Do you want to cross-sell this new product to existing customers? Or do you want to attract new customers? Do you see this product being purchased by the masses? Exactly what you build, the complexity of the product and the required feature set will all be shaped by knowing exactly who your target market is. And if you say “all consumers in the US,” you might need some refinement to your strategy.
Product Management roles are challenging and fun and I am a self-professed Product Management geek. One of the critical responsibilities for a product manager is to successfully launch new products that are built in concert with the IT and Operations teams. In my experience, there are several key steps in the launch process that must be considered. Here are five posts that walk through these steps.
What does it take to launch a product?
Making Hard Choices
Developing a Communication Plan
I hope you find this information helpful and interesting. If there is anything that was missed, please let me know. Happy Launching!