Now I am a big fan of constant change, I just felt that developers were being given tasks that (despite being scoped user stories) still contained a large number of unknowns. I didn’t know if I trusted them to call me in when they got stuck, rather than finding the quickest route themselves. Additionally the roles of Project Manager, Product Manager and Development Manager were stepping on each other’s toes. Normally I am happy to write the requirements up front and then manage the project. Now there were no complete signed off requirements documents, project management was on a wall and the development team was in control. What am I meant to be doing? I am not someone who likes to sit back and wait to be called upon! I eventually found the following presentation, which was literally one of the only sources I can find about how Agile development management is meant to work:

Even though I am only just beginning with Agile I felt the presentation gave me a good sense of where I fit. What are your experiences in Agile management outside the development team?

What did I like?

This book gets straight to the point, there is no bullshit whatsoever and it makes no apologies for that. Equally there is no room for bullshit in the product; decide a goal, keep the budgets tight, keep the team tighter, listen to the customer (at least when they bang down the door) and just execute the hell out of what you are doing.

This book is a reminder that building a product is not just about technically executing. Many usability, sales, HR and marketing issues must be addressed to deliver a successful, well-rounded product. You need to reflect this well-rounded nature too, everyone should take support calls, think of usability, write blog posts etc.

What didn’t I like?

There are however some minor things I don’t agree with. I think exit surveys are valuable, there should be a formal suggestion gathering and prioritisation process and there is a limit to how much information you should place online. If you have a mass appeal, generic app then I think these rules are a little different to someone developing a niche app for a specific market. Apart from these few items, I was nodding the whole way through the book.

Conclusion

This book embodies the entrepreneurial spirit of today’s web app developers. Put your heart into the app, and then put your app out for everyone to see. If you are a motivated person who wants to focus your vision and energy, then this book is for you.

 The key point to realise is that pricing is all based on the classic supply and demand curve. This has two huge impacts:

1. Pricing needs to take into account both supply (competitors) and demand (consumers)

Supply & Demand Meet at Your Price

Spend some time doing research on your competitors. Get their rate cards, not just word of mouth evidence. Your sales people will often be given rate cards by prospective customers, there is no vendor loyalty when a customer is negotiating hard and you should benefit from that where you can.  If it is a new product and you don’t think you have competitors, think again. You actually need a competitor. Humans decision making is an extremely relative process, so it is important to establish in the consumers mind who your competitors are and why they should change their mind. Take this TIVO example. There were no competitors when TIVO came on the market. The closest two existing products were a $100 VCR and a $1000+ computer. No prizes for guessing which device they compared themselves to.

Sometimes it takes a bit of trickery to associate your new product with the desired pricing benchmark. The most infamous case is cited in the book Predictably Irrational. James Assael was the “Product Manager” for Black Pearls, a product were not only completely unknown, but also proved unwanted. So what to do? 

 James Assael could have dropped the black pearls altogether or sold them at a low price to a discount store. He could have tried to push them to consumers by bundling them together with a few white pearls. But instead Assael waited a year … and then brought them to an old friend, Harry Winston, the legendary gemstone dealer. Winston agreed to put them in the window of his store on Fifth Avenue, with an outrageously high price tag attached. Assael, meanwhile, commissioned a full-page advertisement that ran in the glossiest of magazines. There, a string of Tahitian black pearls glowed, set among a spray of diamonds, rubies, and emeralds.

“The pearls, which had shortly before been the private business of a cluster of black-lipped oysters, hanging on a rope in the Polynesian sea, were soon parading through Manhattan on the arched necks of the city’s most prosperous divas. Assael had taken something of dubious worth and made it fabulously fine.”

Today this happens all the time. Apple introduced the iPhone at $599, then only 2 months after launch they cut the price by a massive $200 to $399. They set their price benchmark, and then slash the price to rapidly accelerate sales volumes with a heavily “discounted” offering. This brings me to my second point.

2. Pricing is not a straight line, linear pricing models do not work with scale

iPhone Price Cut! (?)

Apple also slashed  the iPhone price after only 2 months to drive those critical initial sales volumes as early as possible. As your production scales your costs are exponentially falling, especially when a product is being brought to market for the first time. This also reinforces why cost plus pricing is an impossible task, to be accurate your price would need to be different for each individual unit you sell. 

This scaling effect will also cause problems on the demand side. Put simply, cost plus pricing will cause you to over-price your product when there is a weak market and will cause you to under-price your product when there is a strong market. Again this is due to the curved nature of the demand curve, a straight line simply doesn’t fit.

Prices represent single points on a graph, so how do you create points that form a curve? You need an end-to-end product portfolio.

Conclusion: Plan an end-to-end Product Portfolio

The first key is to segment your target markets. You then need to set a goal for what you would like to achieve in that market (low end market share, diversify customer profile, leverage brand etc.) and scope a product to suit both. If you understand your target market you are understanding the demand curve, by figuring out what you have to offer you can determine the supply side of the curve. Add-ons are a great example of being able to target different markets without straying too far from your core focus.

How many add-ons should you have? The paradox of choice suggests that 3 to 6 choices is about the right number, otherwise the customer starts to get overwhelmed with the sheer number of comparison decisions being made.

37Signals Basecamp Account Choices

You can make things even easier for the customer. 37Signals recently blogged how a simple (and not so subtle) change of their account selection screen to promote a particular product from their range greatly helped people make a quick no-fuss decision.  Even the order of the pricing can have a big effect, so don’t start thinking that once you have a price that you are finished!

In the end your rate card need to be treated just like your product itself, you need to keep testing it against the market and making sure you are still fitting the curve. Simple delivery and accounting practices help here, so don’t overcomplicate things.