Pricing the product

Product managers are usually require to evaluate costs of multiple options/solutions while building their product. Or they need to decide cost of their product offerings. Either ways below mentioned strategies help to understand the pricing concepts that help with day to day execution.

Strategies to Pricing the product

Cost-Plus Pricing:

1. Identify the type of product: Online or Physical
2. Identify the cost of the product: Base price and all the indirect price like marketing, customer acquisition, etc
3. Once you have a rough idea of the product pricing then price is above the cost price so that you can generate some profit out of it.
4. Final goal should be: Generate profit from the selling the product or acquire a customer who will buy another product if you sell them this one for free.

Value based pricing:

Identify what value is the product providing to the customer. If it is of high value then high price can be added. For ex: If a meditation app helps someone to avoid a doctor in the long run then you can price it as $7/month or $60/year.

Competitive pricing:

Pricing the product similar to the competitor. If a competitor lowers than price then you should also consider it.

1. However don’t lower it below your cost price to avoid incurring losses.
2. Don’t lower it very much as customers will doubt the product quality.

Experimental pricing:

Start with lower price and go higher if the demand is higher. Even while starting with lower price cover your base costs to incur the profit.

1. If the demand is not high then don’t be afraid to lower your prices.
2. Find the soft spot where customers are willing to pay for your product without you incurring any losses.
   

Pricing models

Free, Ad-Supported:

You can launch your app for free. Or put content on websites for free.

1. You cover the operating costs by running ads on it.

Pros

1. You don’t need to worry about integrating with payment systems as you are not selling anything on the site/app.
   

Cons:

1. Your business pretty much is in hands of ad providers(direct or indirect)
2. High valued Customers might not like your site due to ads. 
3. If by mistake inappropriate ads are shown on your site then your app/website loses reputation.
   

Freemium:

1. Basic version is free.
2. Advanced features can be unlocked upon payment.
3. If there are a lot of basic version users then your operating costs are going to be higher.
4. You should strive for conversion from free to paid users.
   

Tiered:

1. Multiple tiers for different volumes and features. For ex:
1. $1000/month for upto 10k transactions
2. $10k/month for upto 1.5M transactions

Subscription:

1. Charge the user monthly/yearly.
2. Many online services do this like Netflix charges per month. Amazon charges monthly and yearly.

Free trial: 

Provides users with free trial to attract them into becoming paid customers.

Razor-Blade model: 

Sell a component for a lower price and ensure customers buy add-ons at market or higher price thereby covering the costs.

Design a mobile social app for a chain of local orthodontist offices.

Situation:

1. Mobile app for patients of local dentists: Yes.
2. Are these dentists related by chain: No
3. Is it just one city for now and planning to  expand it later: Yes
4. Do we need to integrate with insurance providers also so that patients can easy insure that their doctors pays up via insurance. Yes
5. Ok so we need a mobile app for patients of local dentists to book appointments, look up dentists, their profiles, reviews, hours, integration with insurance providers.

Personas:

1. Dentists
2. Patients

Use-Cases:
Patients

• Create profile, Add insurance, book appointments, pay bills, file claims, write review.

Doctors:

• Create profile, list accepted insurance, accept insurance, accept payments, file claims, write review for patients.

Solutions:

1. Profile creation, update, and delete ability for both personas.
2. Integrate with insurance:

• Go with a 3rd party integration or integrate with each one of them 1-1.
• File claims.
• Process claims.

1. Integrate with the payments:

• Ability to pay via CC and Google pay and bank
• Ability to accept payment via all methods.

1. Reviews: Both users should be able to write the review.
2. Where patients can ask questions and other patients/doctors will answer it.

Prioritization:

1. We’ll use metric based prioritization. Metric is functional app for the user with the convenience of insurance intelligence and payment within it.
2. So features A, B, C will be part of MVP or version 1.
3. In version 2, we’ll introduce the features of reviews/Q&A. This will create an ecosystem for the users so they will not leave the app. Moreover, it will be a motivating factor for new users to join the app.

Product manager design question #2

How would you implement Google Chrome for Kids navigation.

As usual we will tackle this design question with keeping Goal in mind. We will then list out the personas, their use-cases, features, metrics to track, and prioritization.

Goal: Safe browsing for kids.

Personas:

1. Toddler
2. Young kids
3. Teenagers

Use-cases:

1. Education
2. Browsing
3. Entertainment

Solutions/Features

1. Profiling: While setting up the browser the parent/authority will set the profile in a manner so that safe browsing is always enabled. Payments are automatically disabled in this profile.
1. Pros: Serves the purpose
2. Cons: Extra setup and some technical expertise.
2. API call:
1. When call is initiated from the safe profile then safe results are surfaced.
2. Payment fails if the call is initiated from the safe profile. This ensures that child doesn't order digital products by mistake.
3. Pros: Serves the purpose.
4. Cons: Requires expertise as to which content makes sense v/s which does not.
3. Notification: If weird/questionable content is requested then notification is sent to the authorities for review.
1. Pros: Proactive notifications ensure parents are on top of their kids searches.
2. Cons: Chances of false positive. If kids is required to do some weird searches for their biology class then it will result into false positives.
4. Override for parent functionality wherein they can use the same browser for their use.
1. Pros: Convenience. No need of second browser on same machine.
2. Cons: Chances are kid could learn how to override defeating the whole idea.
5. Reporting a summary of their kids searches.
6. Mature APIs based on search results and customer satisfaction.

Metric:

1. Customer satisfaction: Need to ensure that parents are satisfied with the product. And children are able to use it with ease.
2. Implementation complexity: Based on customer satisfaction, we will prioritize features based on implementation complexity. High complexity features can start earlier. Features on which a lot of other features are dependent can start earlier.

Prioritization:

1. Profiling as it a basic feature & API call as its part of the basic feature as must haves in MVP.
2. Override is also MVP as otherwise the browser will be unusable for the parents.
3. Notification, Reporting, Mature APIs can be part second release.