Product Management Tips by Gopal Shenoy

Here are 7 things I have learnt about product pricing.

#1 If price is your ONLY product differentiator, you are selling a commodity. And if your competitor is much larger than you, you may not have a prayer – they can run you out of town by giving the product away for free.

#2 There is nothing called perfect price. You will either overprice or underprice your product. The key is to test quickly to see what the market can bear, quickly iterate and arrive at your final price. Pick test markets, learn and manage, so that if you do not get it right, you do not have a customer backlash to deal with.

#3 Never roll out pricing increase to existing customers all at once. Why? – see #2.

#4 You cannot increase price without adding additional value for your customers. Customers don’t care about your expenses especially when they have choices. Focus on value you bring to the table for the customer, how it solves their pain points, not your expenses.

#5 You do not have to drop prices if your competitors do. If price is all you have to talk about, see #1. Refocus the discussion to customer value you provide and why the value is worth the additional price. If the customer will not, assess if the customer is worth acquiring. Not all customers are.

#6 You do not have to have single pricing. Promotions to attract new customers, rebates for large volume customers are things to consider only if it makes business sense. Don’t do any of this unless you have a sales strategy in place – what is the end goal for promotions and rebates – new customer acquisition? customer retention?

#7 If you want to price products based on value, think about packaging. Car companies do it – EX, LX, RX; consumer products do – large, medium, small; online services do – Basic, Pro, Premium.

What are your learnings about pricing based on your experience? Please share with me and other readers.

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Couple of weeks back, I was invited to write a guest blog post on On Product Management.

My post was titled Awareness, Persuasion and Shelf Life. I hope you enjoy reading it. If you do, please leave comments either on the post there or here.

Susan Oakes of M4BMarketingBlog asked me if I would be willing to write a short tip for her upcoming post on “How to Keep your Customers Loyal”. The post outlining some great tips should be coming out anytime now. Here is what I submitted.

Keep it Human
In the times we live in, customers are bombarded with marketing messages from all over. In this noisy world, companies that stand out are the ones which retain the human touch. The best way to buy customer loyalty is by treating each one of them as a unique human being at every touch point. Buying after all is a human behavior, so make sure you respect the “human” part of it.

Now what does “keep it human” mean? It could mean any or all of the following:

1. An introductory greeting and opening the door to the customer when they walk into your store
2. Helping the customer “buy” the right thing to solve their problem and not just try to “sell” them what you have. In some cases, you may not even have the right thing that the customer wants – recommend where they can “buy” the right thing – it means loss of a sale, but could be earning a longtime “relationship”, people typically don’t forget those who help them.
A thank you card send to the customer after purchase
A follow up phone call to make sure the customer is satisfied a few days after purchase
A website that helps the customer finalize the buying decision and written in a language that the customer understands as opposed to one with marketing gobbledygook where the customer feels stupid
A no questions asked, quality guarantee for all purchases
Reachable customer support and friendly voice of the rep that engages with the customer to solve the problem
A business that the customer would like to associate with and recommend to family/friends thereby putting his/her own reputation on the line

If you think about it, many of the above holds good for local businesses – the mom and pop stores in your neighborhood. The owner knows many of his customers by name, he chit chats with them when they come in, helps them solve their problem (not just sell them what they have). This is a relationship that has been painstakingly built over the years. The value of the relationship is not completely based on how much money you have spent in the store, but being respectful of you as a human being. In the good and bad economic times, one scarce resource is “customer’s attention”. Business that win more of the customer’s “attention” will succeed. Customers tend to give more “attention” to those that respect them and keep it human.

Do you agree? What would your tips be on “How to keep Customers Loyal?”

Image Courtesy of: Montgomery Public Schools

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All companies on their website have an About Us or Contact Us section. However, not all companies provide their phone contact information on their website and instead ask you to fill out a web form or email them if you want to contact them.

This unfortunately sends wrong messages. The message could be construed as any of the following:

1. Sorry, we are too busy that we don’t want you to bother us by calling us.
2. We don’t value direct communication between humans, we want you to write to us even though you may be a prospect with a willingness to buy.
3. You are too many and we don’t have the bandwidth to answer your questions, most of which we could deem to be stupid anyways – so we only want to talk to the serious folks who take the time to write to us though we will not commit if we will ever get back to them either.

In a world where people value authenticity and human touch, you are essentially creating hurdles for people so that they do not communicate with you. In one of my previous posts, I had written about email and 7% – how you lose 93% of your communication power when you use email as the communication channel.

With a web form or email, there is no feedback as to when one will get a reply as opposed to getting to talk to a human being – customers/prospects usually have a question that they want answers for now, not later. Would these companies say this to a prospect in a face-to-face meeting? But unfortunately these companies are sending the wrong message to the millions that are on the internet that they will never have a chance to have a face-to-face conversation with.

I understand the scalability issue, but that is not a prospect’s or a customer’s problem – that is the company’s problem. Airlines list their contact phone numbers, banks do, telephone companies do. But some of these companies have the long phone trees which we all have come to hate so much that websites such as gethuman.com have cropped up. But all of this is better than not providing a contact number for your customers/prospects to reach you. Hiding your phone contact information behind a web form or email is outright insulting to your site visitors.

Now this is applicable not just at the organization level. It is very applicable to us as product managers. Whenever, I talk to my prospects/customers or meet with them, I hand out my business card, my direct number, my email address – if they call me, I want to talk to them. There is nothing more important that I am doing that is more important than talking to customers. I am not saying that I do customer support for them, but I want to hear their concerns, questions etc. and make sure that I get the right person to help them. In 99% of the cases, the caller is happy that I am going to transfer the call to the person best to help them. I thank them for having called me.

Be authentic, be human and more importantly be reachable. If we as consumers get offended by the lack of contact information, I will guarantee you that our customers are as well. There is a lot of downside and no upside for hiding your phone number. After all, our jobs exist only to serve our customers.

Thoughts?

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Image: Courtesy of geekologie.com

Are you a product manager who lives around New York City or will be in NYC during the weekend of July 18? Do you want to learn about product management from other product managers who are walking in your shoes everyday? Look no further, ProductCamp is coming to town on July 18th. I will be traveling all the way from Boston to attend it.

Don’t know what a ProductCamp is?

ProductCampNYC is a free collaborative “unconference” where product managers can discuss the most current topics facing them on a daily basis.Loosely based on the successful BarCamp and Open Space formats, ProductCamp is an intense ad hoc gathering of product mangers and marketers to share, present, network, learn, laugh, and discuss. The agenda is defined by and voted on by attendees the morning of the event, ensuring the participants get the most out of their experience.

Here are the details:

You bike the 180 mile PMC challenge from Sturbridge, MA to Provincetown, one pedal at a time …

You walk the 20 mile Walk for hunger one step at a time …

You run the Boston Marathon one mile at a time …

You process the 100 emails in your inbox one at a time … (unless you choose to mass delete them)

the list could go on.

The point here is that it is important that we leverage the baby steps. In one of my previous jobs, we used to get 100’s of enhancement requests from users every month. By the sheer number, it looked overwhelming. But, if you look at it in terms of the smaller steps, it was not a big volume at all.

I had a team of 8 – the goal set was very simple – each of us would read 10 requests every day spending on an average 2 minutes per request

• that is 20 min/person/day
• that is 80 requests read/day
• that is 400 requests read/week
• that is 1600 requests read/month.

On a different topic, I had set an MBO for all of my direct reports that they had to be out of the building visiting customers one day/month. I really did not care if they were out every month – they had to do 6 per quarter – but one day a month was easier to remember.

So if I had told the team that they had to do 200 customer visits that year, it would have sounded overwhelming – how the heck would we do it? do we have the travel budget? – the whole discussion would have revolved around a large number. We did it very simply by breaking it down -

• 6 visits/person/quarter
• that is 24 visits/person/year
• that is 192 visits for the whole team per year.

Imagine, how much customer capital we had with us when having product discussions with internal stakeholders.

It is all about leverage – it is amazing how much you can get done by using the collective resources at your disposal when each resource expends only a fraction of the time they have. Think leverage.

Thoughts?

Image: Courtesy of zoomstart.com

Which is better? It depends.

1. Southwest Airlines flies only Boeing 737’s to reduce maintenance costs.
2. EMC wants their customers to buy all of the data servers from them.
3. Microsoft wants everyone to use IE.
4. Michelin wants to be the single supplier for all tires for Toyota.
5. Pratt&Whitney wants Airbus to use nothing but their engines for their jets.

But then…

1. Boeing cannot survive just making Boeing 737’s.
2. IT departments don’t want to put all eggs in one basket.
3. World does not trust Microsoft.
4. Toyota does not want to single source to Michelin.
5. Airbus does not want its entire fleet  grounded if P&W engines have a problem.

Isn’t this world so beautiful for the heterogeneity it possesses. So why in business would we ever think we can achieve monopoly? Why do some businesses lull themselves to believe they do not have competition? The question is how much of the pie one can have, you WILL not have the whole pie. Success breeds competition. Otherwise, it may not be a large market after all.

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Image: Courtesy of DragonArtz Designs

1) “What is the problem we are trying to solve?”

Ask the internal stakeholders who are pitching new ideas to you, ask this of customers who are asking for new features and repeatedly ask yourself to make sure you are not deviating from it as you are getting caught up in the weeds.

2) Is this going to move the “needle”?

What is the measurable impact solving the problem has and by how much? Which “needle” is this going to move  – sales “needle”? customer satisfaction “needle”? customer support cost “needle”? marketing “needle”?, engineering “needle”? If it is not going to move anything significantly, then it is nothing but a “nice to have” and probably is not worth spending time on. Don’t forget about the opportunity costs when you are pursuing something that is nice to have.

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Image: Courtesy of Winston Motor sports

It is very easy to identify problems. What is difficult is figuring out how to solve them? Ones who do the latter are valued and get ahead. Sounds like cliche? Absolutely. But it still surprises me when I run into “messengers” of problems. Many want to bring a slew of problems to their bosses – this is not working, it is not efficient, we are understaffed etc. I am sure your boss probably knows about these issues as well. Sometimes, he may not. But if all you are doing is taking a problem to him/her, you are slowing becoming another problem for him/her.

Let us consider a different scenario of a person who identifies the problem, prioritizes the problem, thinks of possible solutions and then approaches his boss stating the problem and his/her recommended solutions. Valuable? Of course. Put yourselves in your bosses shoes. What would you do to solve the problem if you had the authority to fix it? Would you prioritize it to get it fixed? Would you spend political capital on it to get it fixed? If the answer is No, don’t be the messenger of the problem.

Those that are valued are the messengers of recommended solutions to identified problems. No one will stop you from making something better, more efficient, less costly, work faster. But no one wants to hear that something is broken, they want to know how to get it fixed and that yo are willing to take charge to get it fixed.

If you as a software product manager is arming your sales force with detailed information on all of the features in your product(s), you are arming them with information to fail. If your sales team is engaging in a “feature war” with your competitors, you are bound to lose to the competitor who is smart enough to engage the customer in a discussion on their needs and how their product(s) solves these problems and how it would help the customer achieve their goals.

What exactly is a “Feature war?” – software vendors trying to outdo each other on who has more features than the other. You cannot win this war – any product is going to have a feature that another one does not and vice versa. Engaging in a “feature war” is death knell for two reasons:
1) You are losing focus on the fact that the customer is looking for a solution to their problems and not for a product with features. They want to know how your product (as a whole, not individual features) benefits them, solves their problem(s) and achieve their goals.
2) If you get caught up in the features (weeds), your driving force is going to be add more features and create a very complex product – a “Frankenstein”.

Mature products have feature bloat – they have more features than one would ever want to use. Take the example of MS Office. I would still be happy with MS Office 97 because I still use maybe 2% of the functionality that is there. I would bet there is a large majority of users are like me. But software vendors often have to keep adding features just to put out a new release to feed the subscription “engine” (often a large “revenue” stream and only “profit” generator) and and also to create momentum for their sales force. This is fine if the new release solves problems for new market segments or problems previously not solved for existing customers. But often times, it is not. It is change for the sake of change.

You should rather be spending time on solving the customer’s problem(s) better – understand it better, solve it better than anyone does today. Then make sure your sales force is armed with information on how your product(s) solves the customer problems better than your competitors. Make sure they start the discussion at a very high level, thoroughly understand the problems faced by the customer and then convince the customer on how your product(s) provide the best possible solution and if needed the features that make it work.

When you are training your sales force, make sure you are educating them on the customer benefits of using your product(s), what problems it solves and how the individual features contribute to solving the problems. Package it for your sales force so that it is easy for them to grasp than them getting caught up in the weeds.

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Image: Courtesy of filesanywhere.com (the use of this image does not indicate in any way that filesanywhere.com is engaged in feature wars or has feature bloat. The image is for illustration purpose only. In fact they have a very good website that clearly explains customer benefits of using their product using words that I as a customer would use. Please check them out.)

If you the product manager is thinking:

1) We are the market leaders and the well known brand and we set the tone in this market or

2) I fully understand the market segment that will be interested in buying this product or

3) We have the marketing muscle to push new products out  or

4) We have the best feature set in the industry

then you must read the latest Wired Magazine’s article on how cheap little laptops hit the big time NOW – not tomorrow, not later, but NOW. And then recalibrate your thinking.

Here are my key takeaways:

1) Customers (especially the vociferous ones) could ask for more, but a vast majority of them actually want less.

2) Your product can open up new markets and market segments that you did not even dream off. Be ready to be suprised. No focus group or research is going to reveal this because you tend to do these with the potential market segment you have in mind. Do you think the netbook folks would have interviewed middle class consumers about their laptop needs?

3) Beware of the Davids, not the Goliaths. You will not see their attacks coming. It is easy to pooh pooh them.

4) Beware of the ecosystem changes happening in your industry – it is not usually one thing that upends an industry, it is the combination of things that create the perfect storm.