Deciding how to monetize a product and then attaching a price to it can be quite challenging.  This is particularly true if you don't have the inputs that you need to do this effectively.  Over the years of me doing this for multiple products at multiple companies, I've developed the process below for optimum price mechanism and price point setting.  Below the overview picture, I'll break-down each one of these steps for you.

  1. Product Vision – Description of the product, mock-ups, etc.
  2. Market Analysis – Competitors, Trade-Offs, Trends, Other Industry Examples, etc.
  3. Product Positioning – Does it have pre-reqs?  Is it a pre-req?  Are there synergistic/bundle products?  Will it cannibalize other products?  What pillar is it in?  Likely to be packaged or standalone?  Etc.
  4. Product Roadmap – What is planned with this product in terms of value adding features, possible “Plus” versions or price increases, etc.
  5. Operational Impact – How much effort will it cost to make this product and to keep it running?  Including development, servicing, etc.
  6. Value Story – Which customers would want this?  Why would they want it?  Sell quicker?  More per sale?  Etc.  Requires product testing
  7. Monetisation Strategy – What is the best way to make money from this product?
  8. Strawman Price - Rough price point based on initial market research and product plans
  9. Shareholder Impact - “Size of the Prize”, Rough multi-year revenue, volume, cost, forecast.  Also includes revenue and cost recognition plans.
  10. Product Approval – Product Owner presents at the Product Forum to get agreement to progress further
  11. Launch Planning – Separate Stream to ensure adequate preparation happens before the product launches
  12. Value Research - Analysis to calculate the absolute and perceived value of features or products/services
  13. Price Segmentation - Determining if price segmentation makes sense and what the segments should be
  14. Value Staircase – How is this better or worst than competing alternatives?  What about internal alternatives?  Requires product trialling.
  15. Market Strategy – Going for High Price, Low Penetration?  Low Price, High Penetration?  Free?  Packaged?  Etc.
  16. List Pricing – Draft rate card to be approved, for all relevant segments and customer sizes
  17. Propositions – How will be product/service be packaged up?
  18. Discounting Rules – When, if at all, can this product be discounted beyond the rate card?  For any rate card discounts, when can they be applied?
  19. Offers/Promotions – Any proposed offers or promotions to launch with the product, or after the product is in place
  20. Pricing Approval – Pricing Lead presents at Pricing Steering to get agreement to progress further
  21. Launch Approval – Approval from the business to go live with the product and/or proposition
  22. Review – Analysis of product performance, strategy shifts, market shifts, etc and then feeding back through Pricing Steering with any recommend adjustments

Of course, each company might need a tweak here or there to make this fit, but most of these steps are fairly generic and relevant steps in the journey.  Hope you can use this in your company and making product pricing (particularly on new products) more effective!

I'll be writing in much more detail about some of these steps in the future.