Pricing strategy can be one of the hardest things for entrepreneurs. How much to charge? How much is too much? Am I selling myself short?
Companies consistently undercharge for products despite significant sums invested in developing them.
You have only one chance to get new product pricing right. Set prices too high and lose valuable market opportunities. Set prices too low and leave money on the table.
Setting prices for new products doesn’t need to be a guessing game. Market intelligence combined with a strong pricing strategy will win every time.
Setting prices for new products is critical, however often, it’s re-pricing established products that often go overlooked when organisations ignore that the market has changed and re-pricing is imperative to stay in the game.
At instinct and reason we are experts in conducting market research that identifies value perceptions and prices that customers are willing to pay. We recommend a price based on optimal market shares, volumes, revenues and profitability.
If you knew exactly how customers value delivery versus product performance versus price, how would it change the way you set prices? When you know precisely how customers value your products and services, you are able to set appropriate prices.
All this needs to be considered in a competitive context. That’s why we always recommend assessing pricing for new or established products with the competition measured too. Understanding the price elasticity of the competitors is just as important in understanding yours, if you are to set your price based on how the market views the world and not how your own organisation views the world – a common pitfall we see time and time again.
What it means for clients
In the end, you will know precisely where to set new product prices, have a pricing strategy over the product life cycle and be prepared to respond to competitive moves.