Keep your soap and washcloth within arms reach; figuring out the pricing strategy for your new product can be a sticky situation. When your new product is introduced to the market and the price is set too high the product simply won’t sell, but that can be an easy fix by simply lowering the cost. On the contrary if you charge to little for your new product it’ll probably sell, but you run the risk of missing significant revenues and profits and that problem is not so easy to fix. According to the research done from our friends at Inc.com they believe that 80 to 90 percent of all poorly chosen pricing strategies are set far to low and it is difficult if not impossible to raise a price after it has been set.
You want to choose a price that has the greatest long-term profitability, so the question is how do we find the perfect median for pricing our new product?
Here are some quick tips:
Step 1: Understand the Value of Different Product Attributes.
It is critical to understand the value of your product from a customer’s perspective. If you understand the needs of your customer it allows you to answer some of your own questions, such as: which features do customers find most beneficial and why? What are customers willing to pay for each feature? What is the value of our brand versus a competing brand? Also customized pricing strategy allows you too modify the pricing of goods or services based on consumer factors.
Step 2: Establish a Price Ceiling and a Price Floor.
Have a clear understanding of both the highest and the lowest prices your product can be charged. Businesses and private consumers are demanding more for less, so be knowledgeable of competitor prices. By doing price elasticity research you can also figure out, how much a consumer would actually pay for the goods or service and discover any price sensitivities.
Step 3: Use Competitors as Reference Points.
Most companies use existing products as reference points to help them price in competitive market. If there is something similar in the market to your product already then use that competitor’s product pricing as a number to start around.
Step 4: Understand & Predict Customer Choices
By closely observing customers as they select competing options, much can be learned as we learn how they trade-off different features and price points. These observations can be used to create a simulation of the marketplace that can help predict effect of different pricing and product strategies.
There is money to be made in your market so do not sell yourself or your product short. These four easy steps should have you on your way to making the most from your new product.
To learn more about ways SRVG can help your company optimize its pricing strategy.