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PRICER'S POINTS: Minimum Viable Product vs. Product - The Profit Factor | Rags Srinivasan

If a business has not figured out how to make and get it into the hands of customers at a cost lower than what the customers are willing to pay for, it is not a product yet. If you insist on calling it a product you are not running a business but practicing a hobby.

That stricter definition of adding profit criterion does not and should not apply to a MVP. This is because the primary goal of a MVP is not a defensible business case with profit from each sale but  to drive most learnings. Learnings about the specific needs, customer behavior, buying patterns, value perception and price points. If the first iteration does not serve this purpose, we pivot and test other variations. The pivots are part of the learning process not profit maximization process.

If you build the MVP  to generate profit you lost all learning opportunities it is meant to deliver. If you build a business case with positive NPV just based on MVP, you do not understand MVP.

Only after  we define customer needs and price points with a MVP we productize it at a cost that delivers profit. Note how price comes first then cost and not the other way.

"We first reduce the price to a point where we believe more sales will result. Then we go ahead and try to make the price."
- Henry Ford.

 

Read complete article here:

Minimum Viable Product vs. Product - The Profit Factor | LinkedIn.

 

Rags Srinivasan

Business Leader: Vertical Markets, IoT, Video Surveillance, Seagate Technology