I started out my career as a design engineer blissfully shielded from the reality of product portfolio management, cannibalization of higher priced products, value-based pricing and the concept of “good enough.” My design team was happy adding as many cool features as possible and pushing the performance envelope where we could. The marketing and sales teams thought it was great until they found they couldn’t keep raising prices forever.
I recently took on the role of project manager on a design team in addition to my normal marketing and pricing functions. I saw the engineers doing the same thing I used to do – pushing the design limits and adding new features because that’s what they do best. For this current project to be successful – it had to hit a price point within a product portfolio.
The solution was to sit down with the design team and review the market/pricing analysis that was done before ever starting on the engineering design specification. We went through the marketing requirements document focusing on key features to include and which features were non-value-added for different markets. Finally we reviewed the company’s product portfolio and roadmap showing where this particular product fit in the overall scheme.
Here are the top three pricing related development questions/issues that we addressed:
Issue #1: Adding features that aren’t valued.
Product Team: “We should just add this feature – we know the customers will love it.”
Pricing Team: “Yes – some of our customers want that feature – but understand that our competitors offer it as part of a premium product. The product we are building now is not a premium offering and the customer may not be willing to pay a higher price for something they don’t need or value.
Issue #2: Feature creep.
Product Team: “I know this particular functionality is meant for future releases but it’s done. Why don’t we just add it into this release?”
Pricing Team: “That functionality has customer value and we were planning to charge them for it. That future release will be branded as premium and priced accordingly. It’s great that you’ve been able to do the engineering already; we’ll be able to come out with multiple versions that much sooner.”
Issue #3: Choosing elegant design processes over pragmatism.
Product Team: “Why are we going with off-the-shelf components? It’s going to be harder to develop, and we won’t have the key features we used to deliver.”
Pricing Team: “Our market and competitive analysis indicates that there is a demand for a medium priced product. If we developed it the way the rest of our products were designed, we won’t take advantage of that niche market opportunity.”
The time invested in these discussions paid off. The design team went back to work with renewed enthusiasm and we developed a great product that was priced right for the market. Plus we now have a set of new features ready to launch for the premium version of the product.