If you have ever worked at a small company interested in becoming more profitable, you've surely faced the difficulties of pricing your product. Many product manager typically fall into the trap of pricing by taking the product's cost to deploy (including a corporate overhead) and adding a markup. There are several reasons why this type of pricing is typically the easiest to rely on:
- It's the easiest to determine since costs can easily be determined.
- It requires the least amount of effort. See Reason #1
- It's supposed to lead to profitability
While this may work, it is clearly not the most ideal way to price your product. There are also a lot of factors in pricing such as goals (market share vs. profitability) and also your product's strength in the market.
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