The Marketing Plan – Package and Price your product

Pricing your product is one of the most important parts of a successful plan. Remember it is not the best price quality relationship that wins but the best price quality relationship perceived by the client that counts. To know what is important and what is not you must know what characteristics of your product appeal to your clients and what things they would like to have. I have often found that it is possible to put two products together with a significantly higher price than the two pieces separately and the bundled product sells more than the individual products. Perception is reality and you must use this to your advantage.

While the steps are simple, time and attention to detail are extremely important. Several groups will be involved. Your sales manager, your marketing manager, a successful salesman, a customer service manager or representative, one of the technical team, the product manager and two other individuals who have little or no knowledge of the product.

The next step is to identify what the technical, marketing and sales teams feel are the strong and weak points of the product. It should be noted that price is not a factor at this point and should not be part of the equation. They should them describe the competitor’s projects in the same way. Close these reports away in a secure area.

Bring the entire working group together. Give them the product, have them take it home, install it, prepare it for use and then use it. Write down every perception about how this process goes, no matter how stupid it may seem. When I wrote software and thought I had a viable product ready for release I would give the finished product, in the box, to my eight year old daughter and she would then install, configure and start using the product on the home computer.

I followed what she did without ever intervening, simply noting how and what she did. If she ran into a problem I would not help and encourage her to read the manual. I would then continue to document her progress. This saved numerous horrific product launches.

The next step is to do the same thing with competitive products, both above and below the intended price point. It is imperative that the documentation be realistic. It does no good to say the product worked in a way described different from how it actually worked. Ask the group to spend extra time identifying the positive points of the competitive products.

Now comes the fun part. Bring the entire group together. Product by product, go over the things you thought were important and the things that using the products showed were important. Weight each of the identifying features of each product from 1 to 10.

Now separate the characteristics by the price of the product. At this point you may find that the most important features are not necessarily in the most expensive products. It will also allow you to see at what price point the competitor satisfies most of the client’s requirements. You are now ready to make the first attempt at determining your price. Do not be tied down by the current development or packaging of your product. If your initial studies were correct there will be very little to change at this point. It is better to rework the product and sell at an appropriate price than put out a product that cannot be sold without significant discounting.

There are numerous other steps necessary before arriving at the final price, including financial modeling to determine if you can sell the product at a profit, but this is a good first step.

Tags: Small Business Private Equity Business Plans Financial Model Financing Marketing Sales Product Pricing