Product Collective - Take the dread out of product pricing

How to take the dread out of product pricing

Setting the price for your product is a delicate balancing act. Set it too low or too high and your bottom line takes a hit. The fear of not finding the right price may cause you to dread having to set a price for your product. Fear not, here are some techniques you can use to have a bit more confidence when searching for just the right price.

In product news, data security wins out over public safety, AI may not be your product team’s best developer, and TikTok’s metrics send a mixed message.

How Can You Test a Customer’s Willingness to Pay? Assessing a customer’s willingness to pay is a critical discovery activity that directly ties to your viability assumptions. But Teresa Torres suggests that asking customers about what they might do in the future leads to unreliable feedback. Instead, you should ask about past behavior, or better yet ask them to pay right now.

The art of product pricing: A guide for product managers. Navigating the intricacies of product pricing, especially for software and services, can be a challenging feat. Unlike traditional products with a tangible cost of goods sold, determining the right pricing strategy for a SaaS product involves a myriad of considerations. Seyifunmi Olafioye explores fundamental pricing concepts and strategies and highlights effective practices that provide you with the insight you need to navigate the complexities of pricing.

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Prices increase on March 1st!

The New York Product Conference returns to the Times Center in Manhattan on April 18th for a packed day of:

• Keynote talks on product leadership, AI, product positioning, and more.
• Interactive working sessions on AI for PMs and Customer Research.
• Small group discussions, networking, an end-of-day reception, and more!
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BONUS: Purchase a Plus Pass or Superpass, and get access to a half-day workshop on April 17th (Influencing Without Authority) and/or access to online training programs.

This Week’s Video

Mastering SaaS Pricing: From MVP to IPO. Building great products is hard enough — but pricing them can be just as tricky. Pricing and packaging are one of the most powerful, yet overlooked, levers to drive growth in a SaaS business. In this talk, Kyle Poyar, Senior Director of Market Strategy at OpenView Partners explains how to approach pricing & packaging in a data-driven matter, describes the best monetization strategies for each stage of your company’s growth, and shares case studies on the dramatic impact of pricing & packaging from leading SaaS companies.

This video, and many more just like it, are available on our Member Hub. If you don’t have access to the Member Hub already, you can join the community today for free.

Unity changes pricing; backlash ensues

For tech products – pricing is far more than a mere number. It’s a pivotal element of your product strategy that can significantly impact your product's success and market positioning.

​Take Unity's recent pricing model changes, for instance. The gaming industry giant shifted to a per-install charge, sparking considerable backlash from the developer community. There were even death threats to the company because of this pricing change. (Seriously, people – are we really going there?) This scenario underscores a critical lesson: pricing changes, particularly those perceived as abrupt or not in tune with user expectations, can have profound implications. They not only affect revenue streams but also, and perhaps more importantly, trust and loyalty among your user base. In this case, the anger that the changes seemed to cause were, in part, because indie game developer margins are already so thin. This change would seem to crunch the “little guys” even more.

Earlier this week, I took a deep dive into product pricing in this essay, and one of the common pitfalls I referenced was ignoring market dynamics. I’m sure that Unity put a lot of thought into making this giant change. But it’s worth spending as much time as possible with the different segments of customers that will be affected to address these issues well before… well… there are literally news articles about how disappointed and angry they are.

Unity's recent challenges with pricing changes provide a valuable lesson for all of us in product leadership. For us Product Managers and Leaders, this serves as a stark reminder of the importance of integrating pricing strategy into the product development and management process from the outset. It's not just about finding the right price point but also about ensuring that pricing changes are managed as part of the overall product experience.

Do you have a warrant for that Ring video? Amazon’s Ring is discontinuing the voluntary “Request for Assistance” tool in its Neighbors app. That feature allowed police to request and receive videos from users’ Ring devices. Now, police and fire departments will need a warrant to request footage from Ring users, unless they can show it’s an emergency. Yet another product team has to choose between public safety and privacy. Faster, better, cheaper - AI won’t give you all three. A new study by GitClear, a developer analytics tool built in Seattle, found that while AI boosts production, it could also be detrimental to overall code quality. The study analyzed 153 million changed lines of code comparing changes done in 2023 (where AI was available) versus prior years (when it wasn’t). It found the percentage of lines of code thrown out less than two weeks after being authored is on the rise and expected to double this year. In addition, the percentage of copied/pasted code is increasing faster than updated, deleted, or moved code. Both trends could lead to more bugs finding their way into production. The conclusion? AI code assistants are very good at adding code, but they can cause tech debt. TikTok is becoming one big virtual department store. TikTok is testing a new feature that will automatically identify products in videos and allow users to click into a page that displays similar items for sale. The feature is part of TikTok Shop, the app’s e-commerce platform that launched last year. It intends to combine the ease of shopping on a platform like Amazon with recommendations from TikTok influencers. However, the increased focus on shopping may slow user growth. It will be interesting to see TikTok’s upcoming actions to see if it’s targeting monetization over growth. User growth isn’t everything. While TikTok’s user growth may be slowing, the kids aged 4 - 18 who are there use it quite a bit. A new study of children’s online habits found children ages 4 through 18 spent a global average of 112 minutes daily on TikTok’s short video app in 2023, an increase from 107 minutes the year prior. And although YouTube remains the world’s biggest streaming app among this demographic, kids spent 60% more time on TikTok last year. When considered with the story above, goes to show that one metric doesn’t always tell the entire story.

The product pricing strategy guide: 5 Popular monetization models explained. At last, you can finally release your product for the world to try. But what should you charge for it? This is the million-dollar question you need to answer by choosing and exercising a product pricing strategy. Suren Karapetyan, MBA offers a selection of different pricing strategies, along with their most appropriate use cases. If you're stressed about deterring users or possibly leaving money on the table, check out this resource! (via The Product Manager )

How to Price a Product in 5 Steps. How to price a product is one of the most challenging and complex tasks a product manager faces. Of course, there are obvious concerns, such as pricing goods too high and turning off buyers. But then, psychological factors also come into play. For example, people place more value on a higher-priced product. The folks from ProductPlan explain how you should price your SaaS product and outline a process to help your team find the ideal prices for your products.

Resources and news curated by Kent J. McDonald.

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