Product Pricing Strategy

Problem

A leading global provider of application server software was preparing to introduce a new portal product. The company’s strategy was to sell the new portal product through its existing channels to customers in its installed base. This approach would put the new product immediately into the hands of the more than 6,000 partners currently representing the company in the marketplace.

The client’s management expected the new product to extend the company’s presence in the enterprise market. To meet the product’s sales expectations, the product development group had to make certain that all components of its go-to-market strategy were properly aligned to ensure a successful product launch.The product development group employed Go To Market Partners (GTMP) to help test, validate, and refine a pricing strategy in time for a planned product unveiling at an upcoming convention of key channel partners.

Action

Having just completed a project to a) verify the portal product’s market validity, b) acquaint the client with the enterprise-level customer, and c) create a channel strategy for the new product, Go To Market Partners was uniquely familiar with the various aspects of the product launch initiative for the new portal product.

As the product was competing in a crowded marketplace, it was critical that the pricing aligned the product’s value propositions with customers’ expectations. Pricing the product too high would lead to lower sales, while pricing too low would lead to reduced margins and would position the offering as a low-end (i.e., inferior) product.

Working within an accelerated 3-week timeframe, GTMP worked very closely with the client, sharing knowledge and expertise as it was uncovered. The client played an intimate role in the demonstration and surveying of the customers and channel partners.

To verify the intended price point, GTMP demonstrated the product’s capabilities via an online presentation for key customers and channel partners. Following the demonstration, customers were asked to provide feedback that would ultimately determine what the optimal price range would be for the new portal product. In addition, the client’s channel partners asked to validate the proposed price range based on their experience with similar competing products as well as their knowledge of customers’ buying behaviors.

Understanding the two-year revenue goal of $100 million dollars for this new portal product, GTMP studied the price sensitivity of the market in regards to portal products. By surveying channel partners who dealt with similar portal products, GTMP and the client were able to extrapolate customer buying patterns for the lifecycle of the new product.

As a by-product of these customer and channel partner interviews, GTMP generated a pool of interested customers. Several of these interested parties subsequently participated in a beta testing of the product.

Result

The client was able to determine a specific price point that was based on interviews with actual customers and channel partners. In addition to the pricing, GTMP assessed price elasticity to help the client understand the demand impact of adjusting the price higher or lower. Research further uncovered a strong relationship between price and speed of purchase. Articulating these price sensitivities allowed the client to make educated decisions on revenue forecasting. Finally, the customer interviews provided the client with a number of qualified leads, creating immediate sales opportunities for the client. By tying the customer and client together, Go To Market Partners was able to minimize uncertainty in pricing decisions, while aligning the product specifications to market expectations.