Daring product management in order to increase sales and profits

Prudent product management

Most companies try to offer a first product and if they achieve a first success, then they add on a second one with a few features or functions more at a slightly higher price in order to cover more of the market.

This is the very prudent product management that can lead to less sales:
If you only offer 2 products it will make your customers hesitate to choose, especially in case if they are very similar with minor differences in price, quality and features or functions. Your leads won’t know what to decide: too difficult.
Thus your sales people will loose time and effort while explaining and trying to sell.
In the end your leads might just turn to a competitor: your company is missing sales and profit.

The 3 products method

Since the early days of trading, vendors have always offered 3 choices:
- The cheap: just plain cheap
- The best: the best offer
- The expensive: just reasonably more expensive
Or
- The cheapest: lowest price for quality
- The best price for quality
- The expensive overpriced for the price / quality
Or
- The lowest price/features
- The best price/features
- The expensive overpriced for the price/features

Hardly anybody will buy the cheap as people will be afraid of the quality, missing features and functions. It is perceived as the wrong choice in the long run.
The high end product will be bought by those (posh) people or companies that want to pay more in order to have the best or what they presume will be the best in the long run.
It is a part of their life style (snob, bragging) or their business rule.

However most decision takers will go for the best offer as it balances price and quality or price and functions or features.

Daring product management

If you have only two very similar products on offer, then:
- Add on a third one that is cheaper having:
    + fewer features or functions
    + less quality.
- Increase the price significantly of your better product
        in order to segregate it from your other product.

At first this seems it will increase costs and decrease sales, thus profits too as adding the low end will increase costs of operation and the high end will sells less than before.

Leads can take their decision easier and better
Now your customers have the possibility to choose from 3 products.
Most will probably go for the best.

Increase sales
The first benefit is that your customers will be more comfortable in selecting their product, thus increasing the sales of this product and also your total revenue.

Improve marketing
Thanks to the clear differentiation; marketing and their advertising can do a better job in positioning the 3 products, whereas before they had problems to do this.

Better margins
Thanks to the increased quantities sold you will be able to have a lower cost of goods sold on this popular product, thus a higher margin.

As you will sell the overpriced high end product too, it will also deliver a high margin as the sales price is way too high.

Decrease operation expenses
As most people or companies buy the same product, your administrative costs will decrease too.
This best product will streamline your operations and company.
The only additional burdens are the additional development costs, industrialization and support for the low end product. As the low end product should be derived form you other products, all should be very similar to your R&D, production and support for your current products.

Results
The little margin, profit or even small loss you will be making on the cheap or low end product is largely covered by the more sales of the popular best product and the higher margins by the two others.

Thus on the whole your sales revenue will increase as people will buy more and your profits will increase.

Would you dare adding a cheap or lesser product and over increase the price of the high end product?