The product launch worked so well last time so why not do the same exact things again? There is just this one, small, really important detail. Do you know why it worked so well?
Maybe it was the right product at the right time that solved the right problem.
Maybe it was really good execution.
Maybe it was dumb luck.
Maybe it was something else.
It’s easy to repeat what you’ve done before but hard to replicate the success. It takes work, a good strategy, and knowledge of the market.
Hubris runs rampant when the first product launch succeeds. You feel invincible; anything you do from here forward is going to be a winner.
And then the second launch flops. You convince yourself it must be a fluke, an anomaly, an outlier. It could happen to anyone. You shrug it off and move on.
And the third launch flops. Hmmm. It can’t be the product or the strategy. Must be the execution. Identify and punish the guilty.
After the next flop the blame storming meetings consume the agenda.
Know the market. Understand the problem. Solve it. Launch with the right strategy for the right reasons. Define the parameters of a successful launch. Execute and measure.
Annually, Pragmatic Marketing surveys the market and this year, I was allowed to study the data.
The data I used was from the 842 respondents who completed the survey. Since Pragmatic Marketing targets product teams, you can consider that’s the population from which this data is drawn.
In the analysis below, the dependent variable I used was the answer to the question: “Which of the following business activities are your responsibility? Check all that apply.” I specifically analyzed the results to one of the possible responses: “Setting and maintaining pricing.” In essence, we are about to look at what characteristics of product people are different between those who price and those who don’t.
Experience – Product people with more experience are more likely to have pricing responsibility. Specifically, the dramatic cutoff was at about 6 years of experience. 31% of respondents with 5 or less years of product experience set or maintained prices, while 43% of those with 6 years or more had that responsibility.
Age is correlated with experience, but not perfectly. The age group with the most pricing responsibility, 37%, was 35-54. Over 54 and the number dropped to 25%. Under 35 and the number was only 19%.
Technical ability is a good predictor of pricing role. Respondents self reported as either highly technical, somewhat technical or not technical. In order, these groups had pricing responsibilities of 42%, 37% and 32%. The more technical, the more likely someone prices.
Profitability – 67% of those who said they are responsible for the profitability of their product also claimed to set or maintain prices. This contrasts with only 24% of those who aren’t responsible for profitability. Although this feels right, I feel sorry for the 33% of people who have responsibility for profits without any pricing authority.
Type of product – 57% of hardware product people have pricing responsibility. Followed by 41% of professional services product people, then 38% of software and 37% of cloud services product people. Although there is no additional evidence supporting this claim, it appears the higher the variable costs, the more likely the product people manage prices.
Hours worked per week is also an indicator of pricing role. 49% of people who work more than 50 hours per week have pricing responsibility while 29% of those who work 40-49 hours per week set or maintain prices.
Time spent in strategic roles is another predictor. 49% of those who spend more than 50% of their time in a strategic role do pricing while only 39% of the rest do.
Department – Turns out that 48-49% of people who report being in Product Marketing or report directly to the president/CEO/Managing Director have pricing responsibility. While all other departments (product management, marketing, sales, engineering, support, services or training) are well under 40%. I’m very surprised that product management is on the low list. Aren’t they the ones who best understand the value of the product? According to the data, it is more likely that product marketers are involved in pricing than product managers.
Salary – The one you really want to know. 44% of product people who make more than $140,000 per year have pricing responsibility. Only 36% of those who make less than $140K set or maintain prices.
The data are all interesting on their own (at least to us geeks), but still, here is my interpretation.
It is impossible to know causation. For example, do people work long hours because they have to do pricing or do they get the responsibility and trust of doing pricing because they are hard workers? Although I can’t prove it, my interpretation is the latter. Variables like experience, profitability, and salary indicate to me that pricing authority is bestowed upon the best performers, probably not as a reward, but as an indicator that leadership trusts these people with these most important decisions.
After all, pricing is the most powerful marketing variable, it only makes sense that companies only give that authority to people in positions of trust.
Late in 2015, Pragmatic Marketing will do another survey. What would you like to know when it comes to pricing? Maybe we can add a few additional questions to test some interesting hypotheses. Let me know.
Discover tips and tools for becoming a leader, managing product portfolios, sunsetting products and more in the winter issue of Pragmatic Marketer.
• Why speaking skills are critical if you want to advance to a leadership position
• How one man ignited his passion for all things product and evolved into a successful
• How to leverage practical tools to create high-value, high-impact product portfolios
• How to modify product-launch tools to successfully sunset products
Read Pragmatic Marketer today to discover how you can emerge from the shadows and into the spotlight.
Isn’t it great being in a relationship? I’ve been married over 25 years and still love spending time with my wife. We entertain each other. We help each other. We console each other. We advise each other. We stretch each other. We root for each other. We trust each other. We have common goals.
Buyers and sellers are in a similar relationship (but maybe not as fun). They both want a successful implementation. They both want the most value possible out of the product. They both want the buyer to look good. They have common goals … except for pricing. Pricing is the one time in the relationship between buyers and sellers where their goals are not aligned. The more one side wins, the more the other loses. Each wants to win at the expense of the other.
Just like pricing, there are some things in our relationships where we “negotiate” who does what. Who does the dishes? Who cleans up after the dog? Who fixes the computers? Neither person enjoys doing them, but someone has to. The more one person does, the less the other has to. It’s a zero-sum game. (Unless we both agree to live in a dirty house.)
OK, this is interesting, but what pricing lesson can we learn? Answer: Let’s talk about price with our buyers at the right time. Not too early. We need to build a relationship with our buyers. Create an attitude of trust. Demonstrate our true desire that our buyer succeeds. Then we can talk about price.
Think about your first date with someone with which you’ve had a relationship. If you wanted a second date, you didn’t talk about your negatives, or anything that might be deemed controversial. In fact, I’ll bet that if you do talk about these items on the first date, you’ve probably been wondering why you don’t get many second dates.
By the way, wouldn’t you love it if, on your first date, your date would confess to all of his or her bad habits? That way you can quickly weed out the bad ones in search for ones that better meet your needs.
Similarly, your buyers often want to know your price on the first meeting. They are looking for reasons to disqualify you early. When they ask the price question directly, you have to give some reasonable answer. Here are some bad answers:
“I’ll tell you that after our third meeting.”
“I can’t answer until I know more about your requirements.”
“We don’t give that out this early in the sales process.”
Each of these answers looks non-responsive and makes it look like you’re playing games. They make it less likely you will get the second meeting.
Here’s an answer I like:
“Most of our customers spend between $xxx and $xxxx, depending on their requirements. As I learn your needs and you discover our capabilities, we will be able to narrow that range down for your situation.”
This answer looks as responsive as possible given the amount of information each side has.
What other answers have you seen work?
Pricing is a taboo topic early on. It’s the 800 pound gorilla in the room. Everybody is thinking about it, but we have to manage the conversation carefully. Bring it up too early and we may never get to the second date, (i.e. have a chance to build the relationship).
Speaking of relationships, Happy Valentines Day (belated). Oh, and if you didn’t get your significant other anything on Valentine’s day, do something nice for him or her now. It will come as a big surprise and you won’t have to spend as much.
Respondents to our survey said they spend just two hours per month on win/loss. And just 31 percent of those who responded to the 15th Annual Product Management and Marketing Survey said that performing win/loss was their responsibility. That’s a big missed opportunity, as win/loss is not only a great way to learn from the market about how both your products and your company are doing, but it’s a way to potentially earn more money. Our survey showed that those who spent more time in this area earned $11,250 more on average.
To read more about these and other insights—including the one thing respondents would change to make their companies better—view our full survey.