It's been a crazy product development cycle. You've poured your heart and soul into your offering, suffered through all the ups and downs along the critical path and the day has finally arrived.
If you are like most, you immediately begin wondering if all the hard work you have put into the solution will resonate with customers. Will they understand why you did what you did? Will they get it? Most importantly, will they part with their hard earned money and buy it? The good news is if you followed the steps we discussed in our other posts you are well on your way to being successful with this new offering.
Finishing the product is really only part of the story. The other things we need to consider as we prepare to go out into the market are Pricing, Placement and Promotion strategy. Let’s use the rest of this post to touch on these elements of a full product strategy.
Pricing strategy is more than just how much you charge a customer for your product or service. As you come up with your pricing, you need to consider things like the channel margin structure. For a physical product, it’s looking at your retailer and distributor margin; for software it would be how much you being charged by the app store and if it’s a service, it would be how much your service provider needs to make as part of the deal for this to be interesting. Ultimately, the most important thing as part of a pricing strategy is to ensure everyone in the mix is making MORE money with your product than with the competitions. This one tip alone will help demystify why some products win and others lose in the marketplace.
Most commonly, people think of this as how often they put their product on sale and that is just a small part of the equation. When you are thinking about product promotion, you need to consider various elements of promotion through your channel. How much are you going to allocate from your revenue model for things like pricing reductions for customers, online ad placement, physical flyers, point of sale marketing material and cruise packages for the top sales person…yes, those do exist… The key tip to remember as part of any promotion strategy for your product is that promotion dollars are NOT just used to cut the price. Ultimately, promotion dollars are about increasing the sales rate during the promotion period and after as well. If you think of this as an investment in the ongoing and future success of the product line, you will be further ahead than most. Remember, it is not always about cutting the price…
Placement is exactly what it sounds like. You want to be where people are going to find your product. Better yet, you want them to find your product when they are ready to spend money for your solution. This could be an investment in an end cap within a traditional storefront or getting placement on the first page of Amazon.com. One thing to remember, as part of this placement process, is that the company who is going to sell your product for you is typically measured on how much money they can generate on a monthly basis from placement fees. It is in their best interest to maximize your placement budget, regardless of how many units you will actually sell through this investment. Realizing that the other person is actually a sales person, and is therefore measured by gathering promotion dollars, will give you more leverage in the negotiation. It is easy to be overwhelmed by the myriad of opportunities to place your products in front of your customers, just make sure you keep an eye on the business equation. The units you sell in these high traffic areas are going to build your brand, help you get your product to your customers and ultimately lead to further sales down the road. No matter what sales people tell you; if you sell each unit for a net loss you can never make it profitable no matter what the volume…
In summary, we’ve touched on the 3 of the 4P’s of product management aka Product, Pricing, Promotion and Placement. The product piece is one that most SME’s consider the most important and we’ve touched on that in the last posts. Remember that it represents only ¼ of the overall equation. Keep in mind that the most world changing product that is mispriced, can’t be found or is not profitable for everyone in the value chain is going to fail.