How Do You Establish Price Points in a Competitive Market?
Posted February 28, 2020 in Articles
Whether you plan to compete on price or you plan to draw in clients or customers through other means, pricing is important. Set the right price, and you can attract the exact customer base you are targeting. Set the wrong price, and not only will your product or service launch fall flat, but you could find your business struggling to recoup the time (and investment) it lost as a result of pursuing the wrong pricing strategy.
5 Pricing Considerations When Launching a New Product or Service
So, how do you establish price points in a competitive market? Here are five non-exclusive considerations for pricing a new product or service:
First, what is the cost to put your product on retail shelves or to deliver your service to clients or customers? When calculating cost for purposes of calculating price, you need to consider all cost factors, not just manufacturing costs or your employees’ hourly rates. Depending on the nature of your product or service and your company’s operations, you may also need to factor in costs such as:
- Research and development
- Liability insurance
- Prospective warranty liability
- Administrative costs
- Advertising and marketing costs
- Overhead expenses
- Travel and other expenses
What are your competitors charging for their similar products or services? Even if you are not focused on setting your price to meet (or undercut) your competition, you will still want to have a grasp of your competitors’ pricing strategies. When evaluating your competitors’ pricing strategies, you need to have a clear understanding of how their offerings differ from yours as well.
Quality is a key differentiator when it comes to pricing strategy, and you will need to decide if your company is going to be competing on price, quality or both. Not only will this inform your pricing, but it will be key to developing your marketing strategy for the product or service as well.
How should your company’s reputation affect its pricing strategy for a new product or service? It depends? If your company has a reputation for quality, then you may have less difficulty justifying a higher price than those charged by your competitors. On the other hand, if your company’s reputation has suffered recently due to negative publicity or other factors, then you might need to consider reducing your profit margin in order to regain some of your company’s lost market traction.
5. Brand Positioning
Finally, what is the brand positioning for this particular product or service? Are you targeting the luxury market or offering exclusivity? Are you offering a premium service that needs to be priced accordingly in order to attract the right clientele? Combined with the factors listed above (among others), this will be a key consideration for pricing your new company’s product or service.
Speak with a Business Strategy Consultant at Mithras Investments
Do you need help pricing a new product or service? If so, we encourage you to get in touch. To speak with one of our business strategy consultants in confidence, call 305-517-7911 or inquire online today.