Of all the chapters in this book, this one might surprise you the most. In it, we will explain why you absolutely must discuss pricing at the beginning of a new product development initiative, not at the end. As mentioned in Chapter 1, when we say price we mean it to be an indication of what customers value and a measure of how much they are willing to pay for that value. To build a product around a price, you must engage in deep discussions with potential customers before you design and develop it.
Your dialogue must be specifically about their willingness to pay for the product you have in mind. The term “willingness to pay” is so important for us, and our clients, we refer to it by the acronym WTP.
Before we show why having the WTP talk is so important, we'll let a real story do some explaining. It's the story of Gillette's new razor for the Indian market.
How an Early Willingness-to-Pay Talk Propelled Gillette
A unit of consumer products powerhouse Procter & Gamble, Gillette is the king of the U.S. razor blade industry. Gillette razor brands account for more than 60 percent of the $3 billion U.S. retail market for razors and blades. But in India, a market with the potential to be four times bigger than America's for shaving products, Gillette had only a 22 percent share in 2009. Why? Price. The Gillette Mach 3, a U.S. product, was 100 rupees in India, or $2.24 in U.S. currency. For the majority ...