The thorny issue of pricing

The thorny issue of pricing

Ah, pricing. Always a thorny topic for product managers as it’s one of those more subjective areas of the job. I’d love to have some kind of oracular spreadsheet that foresees how much customers would be willing to pay for my new product. Ironically, I would pay good money for such a thing…

Andrew Dickenson writes in his article, “Take control of pricing“, that product managers allow themselves to become disconnected from pricing decisions.  This reinforces my view that (alert: wild generalisation follows) product managers spend the majority of the time looking inside their own organisation rather than focusing on really getting to know their market and its problems.

The thing is that pricing is very tricky to do well without a good understanding of how valuable the problem you’re solving is for the customer. I often use the example of the glass of tap water: in normal day-to-day life, nobody would consider paying for the water; if the same person were dying of thirst in the Sahara, they’d probably value the water a great deal more.

Pricing is very tricky without understanding how valuable the problem you’re solving is for the customer

There’s always the danger that product managers price their product purely to cover their costs. ‘Cost to us’ does not equal ‘value to customer’. As always, the answers are out there in the market, not inside your organisation.

Further reading #

  1. Take control of pricing – Andrew Dickenson, Product Focus Soapbox
  2. Pricing – Chris Steele, Effectivus Product Management

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Read more from Jock

The Practitioner's Guide to Product Management book cover

The Practitioner’s Guide to Product Management
by Jock Busuttil

“I wish this book was published when I started out in product management”

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Jock is a freelance head of product, author and conference speaker. He has spent nearly two decades working with technology companies to improve their product management practices, from startups to multinationals. His clients include the BBC, University of Cambridge, and the UK's Ministry of Justice and Government Digital Service (GDS).In 2012 Jock founded Product People Limited, a product management consultancy and training company. He is also the author of the popular book The Practitioner's Guide to Product Management and the blog I Manage Products.

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