Price Considerations for a Product Launch by Microsoft Group PM, Sri Nair
Why is Pricing Important?
A good price for your product will get you more customers/sales and help you make more profit immediately or eventually.
Factors deciding the final price of your product:
Customer Value
If you are able to clearly articulate that the customer will benefit from your product, then there is nothing else that can convince the customer to buy the product, no matter the price.Cost per unit
Basically whatever you're selling - how much does it cost you to produce that product or provide that service.Business Model/Strategy
This will be the main factor that will affect the final price of your product.
Customer Value
Value delivered to customer when they use your product/features
Tangible and measurable benefit for the customer while using your product, for e.g.
“SaveMyBills” helps analyze customer's cloud subscriptions and cleans up unused resources saving you up to 10% of total cloud spend.
“ServiceHero” helps customers to create support tickets automatically from an email or phone call, saving time to resolve their customer issues by 15%
Cost per unit (Typical SaaS product)
Cost of Goods Sold (COGS) – anything that is directly influenced when your customer count increases.
What are the cost components to be considered?
Should be accounted for, if your product ships devices to customer
Cost of device sold to customer
Will change as you sell more units
Cost of Storage
Cost of Compute
UI Apps + other cloud services
May change depending on your product/services/ Org practices
Dev Ops & other engineering tools
People/Engineer salary expenses
Shouldn't be accounted for in product unit cost ideally!
Sales & Marketing
Product Pricing
Business Model/Strategy
To Summarize
Ideally try to get more users since that represents
Customer appreciates the value
More sales and revenue in future
However, COGS is also a good lever to improve your margins
Review your cloud spend and drive efficiency by optimizing the architecture
For e.g., identify areas of the product that are not being used by customers
Do the new features add additional value for which customer might be ready to pay more?