- Waiting until launch to price a product is way too late – by then the organization’s price point will likely not match the buyer’s
- This is especially true when buyers are reluctant to pay more for a feature that product leader’s anticipated as a game-changer
- Use these six steps to monetize your new offerings with higher pricing
I am often asked by clients who are nearly ready for product launch, “How should I go about pricing a new innovation or feature/function of my product?”
The problem is, by the time launch rolls around, it’s way too late to price the product.
Waiting until launch to price a product generally leads to a mismatch between the organization’s price expectations and the buyer’s willingness to pay. Product leaders often find in this case that buyers aren’t interested in paying more for a specific feature that was thought to be a game-changer. Here are six steps you can take to ensure you can monetize your new offerings with higher pricing:
1. Understand buyer needs.
Before developing new offerings or features, work with buyers and users to understand what needs are not currently being met and which are more important than others. Focusing development on the most valuable, unfilled needs is the route towards higher pricing and generally, higher profits.
2. Test willingness to pay.
Before developing a new offering or a feature, ask buyers not only if they want the improvement – and usually they say “sure” – but also if they’d pay $50, $100, etc. for the new feature. Use this feedback as part of the business case for the offering.
3. Understand the next-best alternative for your customers.
Can your new feature or product replace a costly manual process or combine two process steps to drive efficiency? Conduct cost of ownership studies through the value chain to quantify those benefits before spending funds on costly development.
4. Understand the importance of the offering category overall.
If the offering is a nice-to-have vs. a need-to-have, it may be more difficult to realize an anticipated price for an offering.
5. Match the offering to the right segment.
Before developing a new offering for a specific group of customers, segment the market to isolate buyers who value the offering the most. Ensure the pricing reflects their greater willingness to pay.
6. Support the offering’s price with a strong value story.
Use value actualization tools, case studies and references to specifically support the value message and to drive home the implicit return on investment.
How do you prepare for pricing a new innovation or product feature? Please take our two-question survey – we’d love to know your thoughts!