Approaches to Pricing: Product Management Scenario 2

The Product Management Scenarios Series examines scenarios presented by fellow product practitioners and others interested in the field. The goal is to start a conversation around scenarios — real or imagined.

Read 4 Iterative Practices for Navigating Product Management and Life for essential background on the foundation of my approach.

Scenario 2

While working at Amazon as a Product Manager, they are about to launch a new Kindle Fire HD. How do you price it and why?

Pricing is a complex art. Assuming we’ve been able to validate product-market fit, we need to understand the context in which consumers and businesses perceive cost-value.

We should have a clear understanding prior to investing in new product development that the costs of producing the new Kindle Fire HD are reasonable and that buyer’s are willing to pay at least enough to justify the investment by Amazon’s Product, R&D, and Marketing teams.

We can start with an analysis of similar products (even if we think they’re not really competition, if buyers might compare the two, we need to consider it as a factor).

We need to learn about a user’s or buyer’s mental model to inform the possibilities (and impossibilities) for pricing. We need to hear how prospective buyers would think about the product based on their worldview and…