Marketing a new product is a diverse process, with hundreds of big and small decisions poured into the best possible launch. Many things can frustrate a product’s journey to market, from the difficulties associated with research, development, and quality assurance to the management of roadblocks in supply and manufacture.
This journey to get right is the price. Pricing is everything when introducing a product to a market, especially an established one with pre-existing competition. Pricing is about balancing costs against profits. What considerations should you make when deciding on the retail price for a new product?
Market and competitor research
Before taking any specific approaches to price your new product, you should understand well the market into which you will be selling. Without properly casing the market, any attempts to price your product could be easily undermined by the informed pricing of competition – leading to uncompetitive sales and a premature end to your business’ financial solvency.
While pricing is not a race to the bottom, it’s essential to research your core demographics and the performance of equivalent products in key areas. Evaluating your product can help you create a nuanced approach to pricing your product.
Value-based pricing
The above investigations form a crucial underpinning of what is widely considered to be the best tactic for product pricing: value-based pricing. This approach centers on the ‘value’ of a product to a customer, as opposed to the objective values attached to the product’s manufacture.
This approach needs to go hand-in-hand with effective marketing, to adequately demonstrate to the customer exactly what value they will receive from your product over your competitor’s. But, by the same virtue, it also unmoors you from the prospect of pricing your product around your competitors.
Competitor matching
This approach is not necessarily bad news for new businesses regarding pricing around competitors. Indeed, in more mature markets with stable industry numbers, matching with competitors can ensure the industry remains stable and that your proportion of sales remains tenable.
Where competitors are well-established and you are a smaller business, matching to just below your competitor’s price can open consumers up to your offering without completely destabilizing the market or flooding your business with short-term, irreplaceable sales.
