3 minute read
Product pricing strategy expert Jon Gatrell explains the importance of having a dedicated team to oversee product pricing in any organization.
In theory, setting a product pricing strategy should be simple. You look at your product, compare it to your competitors, and set a price. Easy, right? In reality, product pricing is much more complicated. Companies should consider internal and external factors when deciding a product’s price.
Beyond that, deciding who is responsible for product pricing is critical to a strong pricing strategy. Product management and pricing expert Jon Gatrell shares why companies should have a designated owner overseeing product pricing strategy.
Read on to learn more, or use the links below to jump to the section that interests you:
Defining Product Pricing
Simply put, product pricing is the process of setting a price for a product or service. A product pricing strategy should consider the product itself, competitors’ products and pricing, market conditions, and the customer’s willingness to pay. By balancing these factors, companies can set product prices that are accurate, fair, and ideally ethical.
Designating Ownership
Product teams typically have responsibility for product pricing. Product managers may set product pricing or collaborate with other teams to align on product pricing. Teams with a say in product pricing often include Sales, Marketing, or higher-level teams and stakeholders. These teams should consider how external factors such as market conditions, competitor pricing, production costs, and government regulations affect product pricing strategy.
It’s not enough to decide who oversees product pricing. Knowing that someone truly owns it from the beginning of the process to the end is essential. Having a dedicated product pricing strategy owner ensures that there will always be someone to follow up with and hold accountable. Having a single owner, however, is aspirational at best. Setting price is just one part of the process: it’s not the finish line. Pricing is about setting a strategy based on understanding the market and your competitors and developing policies and processes to govern and monitor pricing. Product teams, executive teams, and operational groups must all participate if your pricing strategy is to be successful.
Setting Product Pricing Strategy
There are as many approaches to pricing as there are companies. A lot of it has to do with an organization’s size, maturity, and strategic approach. In all cases, one of the first steps is to map out pricing methodologies and models. The business plan typically outlines what packaging, pricing, and business models the company will use to achieve the forecasted results and support corporate goals.
Product Pricing Factors to Consider
Equally important is understanding the buyers’ problems we’re solving. Delivering a market-viable price point and approach requires insight and confirmation from the market. Product teams are often best equipped to provide pricing insights through market validation and iterative interactions. However, that product team may not determine the price. A committee, finance department, or even sales team may ultimately be the final decider.
Pricing is a team sport. It requires involving executives in strategy, product teams in business planning and opportunity analysis, development in problem-solving, and sales in engaging buyers. Although the product team should be centrally involved in mapping the first steps—and perhaps own one or more steps in the process—the continuum from strategy to execution creates complexity that is managed best with a team approach.
A Final Word
Remember, no matter who owns pricing, systems, processes, and metrics, they are needed to monitor and gauge effectiveness. Your product’s perceived value can change based on where the market is in adoption, the influence of competitors, and the dynamics of an evolving product. Monitoring helps you understand the value you deliver to the market; everyone must own that.
