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The key components of a cost-benefit analysis in product management include the calculation of costs and benefits. Costs may include those associated with hardware, labor, and training required to produce the product or feature. Benefits may include cost savings, improved sales conversions, better customer retention and loyalty, or enhanced productivity and workflow efficiencies. The decision to proceed with a product or feature is based on whether the benefits outweigh the costs by a substantial amount.
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Cost benefits analysis can be used by PMs to determine if a new product or venture is worth the cost of investment. To do a cost-benefit analysis, calculate the costs associated with hardware, labor, and training required to produce the product or feature in question. Then, add up the total potential benefits, either in cost savings, improved sales conversions, better customer retention and loyalty, or enhanced productivity and workflow efficiencies. If the costs outweigh the benefits, definitely don't proceed. But if the benefits outweigh the costs by a substantial amount, then you have a clear path to move forward. (Slide 11)
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How do you take your product management to the next level? Due to popular demand, we've expanded our Product Development Toolkit to include more tools...
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