Refining Products and Price Packages
You have so much to offer the world. How can you possibly streamline all that you do into a finite set of products and services?
The fact is that you have no choice but to focus and figure out how you’re going to price and package your product – otherwise, you'll have trouble scaling and recruiting new customers.
One thing—don’t go freemium. You’ve built a product that’s worth paying for. We’ve learned free users don’t give great feedback.
The process of creating packages and prices is actually pretty hard. It might throw your brain in to somersaults and drive you bananas. But when you're done, you'll have a clearly defined revenue channel.
If it doesn’t work out the first time, be willing to change pricing, offerings, and support, but make sure you’re always committed to your core beliefs.
Roll up your sleeves, whip out your Excel spreadsheets, and lock your team in a room. Here are the steps to refining products and price packages:
Step 1: Resurrect Your Customer Surveys
Remember those feedback surveys you ran? Or those awkward phone conversations that you and your sales reps joked about?
It's time for your customer experiences to make a comeback – in a big way.
Dig deep into your memories (and actual files) to find your most meaningful customer conversations. And if you don't have any? Get on the phone with your most valued customers immediately.
Productization should start with your customers and prospects. What do they love about your business, and what additional options do they need? What are their biggest pain points?
Remember- you don’t have to do everything your customer wants. You just want feedback to figure out how well your product is working for them.
Step 2: Think Bigger – Survey the Whole Market
Sure, five of your customers may want something, but how big is the actual market?
Productization means thinking big. You need to look beyond your existing sphere of influence to understand the potential of what you're doing.
As a small business owner, you probably have an intuitive understanding of what needs to get done. But businesses aren't built on hunches – you need data.
Before productizing your service, you need to build some forecasts to quantify your market. If you don't have access to primary data, rely on what's freely available from organizations like the Pew Center and U.S. Census Bureau. You can also look at secondary sources from market research vendors like Nielsen and Forrester.
Create a blueprint of your market that includes a forecasted dollar value. You're in the best position to decide what mathematical model works best for your business. Feel empowered to make that judgment call.
At this point in the game, it doesn't matter if you're super accurate. Make an educated guess. Stand by it. The goal is to establish direction so that you're not throwing darts in the dark.
Step 3: Brainstorm Until You Collapse
Hopefully your office has a whiteboard – you're about to partake in the biggest brainstorming session of your life. This will be the truest test of your collective bravery.
Make a list of your company's most valuable offerings and strengths – and everything you think you should be doing. At this point, you shouldn't even think about your customers. If you find yourselves heading in that direction, just stop. At this point, you're closed off to the world.
As you brainstorm, remember a few core rules.
- There is no such thing as a wrong answer at this stage in the game. If you think it, spew it. Say it out loud, and word-vomit to your heart's content.
- Nobody is wrong. At all costs, do not shoot anyone down. If you hear something that sounds ridiculous, just keep quiet. The minute you smack talk somebody's idea, the circle of trust will break.
Do whatever it takes to maintain a continuous flow of ideas. Make sure there's plenty of coffee. When it's time to move on, you'll know. The stopping point will feel natural.
Step 4: Play Matchmaker
Take the list you generated in Step 3, and marry it with the inferences you made in Steps 1 and 2.
Here are the steps that you should take:
- Cross out the super-lame, lofty, or ridiculous ideas. It's time to get down to business and refine your focus.
- Create categories based on the customer needs you've identified. Group your brainstormed solutions into these categories.
- Score everything on your list based on revenue and market potential. At this point in the game, you may not have hard data, and that's fine. You know your business and industry well enough to trust your gut.
- Score everything on your list based on ease and cost of implementation. If there's a now-impossible idea that you're extremely passionate about, put it on the back burner for when you have more resources.
- Now it's time to do some math. It's time to create a matrix. Your dimensions will be ease of implementation and market potential. How you create this chart or calculation is up to you, but the idea is simple – the ideas worth pursuing as products and services will be the ones that are easy to implement with high ROI potential.
Focus on a handful of initiatives. Keep it simple.
Step 5: Put Your Sales Hat On
At this point in the game, you probably have a whiteboard with a bunch of chicken scratch for what you think you should do.
Are you ready to get out and sell? Not yet. You'll probably scare people away.
It's time to put a shiny case around the engine you've built. That means defining the value proposition for your core products and service.
With your team in a room, brainstorm a couple of sales pitches. Reiterate your hypothetical customers' problems and how you're solving them. Add a sales-y kick. Share your ideas as a group, be relentlessly critical, and refine until you're happy with what you're pitching.
Step 6: Create Tiers
Your customers fall into different buckets – based on company size, budget, and affordability. Create a clear understanding of what differentiates your customers and their abilities to buy.
- Put options and packages into buckets that you think make the most sense. If you can, create a couple of options, and share them with your prospects and customers. Have them validate your ideas. If you need instant access to people, check out a service like UserTesting that will help you collect instant feedback online.
- Assign dollar values to these buckets. This should be an assessment that factors your development costs, value derived, and pricing for competing products in the market. In other words, don't settle on a number until you've done your 360-degree research.
Step 7: Reduce Your Options to Three (or Four!)
It happens every time you go to the drug store. Your intentions are straightforward enough – you need shampoo. But when you get to the store, you end up lost in an aisle with 300 of the same darn thing. You stand there for a few minutes until you're confused out of your mind.
Eventually, you pick something. You try not to over-think it, but you can't help but wonder whether you've made the wrong decision.
Analysis paralysis is a buzz killer for sales. When productizing and packaging your services, keep the options as simple as you can. You need to be able to explain your packages in one or two short sentences. Even better – they should be able to explain themselves.
We’ve tested to find our perfect number of packages is four:
You're Almost There
Up to this point, you've created the structure. Now it's time to paint your house, decorate, and add the final touches.
Professionalism leaves a lasting impression. Work with a designer to create product kits, pricing tables, and PowerPoints.
A solid framework is only the first step. Make sure that your design communicates your ideas succinctly, efficiently, and effectively.
Finish strong, wow your prospects, and leave a lasting impression.
Ways to A/B Test a Pricing Model
Yay! Now that you’ve set up a structure, you should be thinking about testing. A/B tests allow you to compare two different versions of something to see which performs better – for example, you could A/B test having three price options versus having seven.
You can test a number of different aspects to improve conversation rates and make more moolah:
- Test prices that end in 9 vs whole prices
- Test number of pricing options that you offer
- Test number of features that you list on a page
- Test small increases or decreases in price
- Test content on pricing page
- Test where the pricing page is placed on the website
Be creative. There are tons of different things you can test to make sure your pricing is spot on. Just be careful—screwing around with pricing can be dicey. You might make a change that ends up with a lot more sales, but you also might do something detrimental, which can potentially be catastrophic.
- Additional Resources
- How to Price Your Small Business’ Products and Services | U.S. Small Business Admininistration
- Pricing Guide: How to Price Your Products | Inc.
- Step 3 for a Successful Startup: The Importance of Market Research | Forbes