Creating pricing strategy for new product? Consider these pricing approaches:
One of the most difficult problems both small to large size businesses encounter when launching a new product is setting an appropriate price for it, where consumers can feel comfortable buying it. Getting the price can either make or break your product, it’s a process you have to constantly test and collect data to see where you can set the price to beat your competitors.
You have a lot of different pricing strategies out there that any business can use to their advantage when launching a new product.
Some of the most common pricing strategies for new product you can use are:
Differential pricing
This is when you charge different buyers different prices for your products. A lot of companies use this strategy occasionally when testing out their new products in the market. One of the major benefits is that it helps to segment out the different types of consumers in the market by seeing how they react to the different prices. This can help you to find a balance within your pricing for the product and allow you to set one stable price that all or most of your consumers can agree upon.
Penetration pricing
This is one of the most common and useful strategies. It is when you price the new product cheaply in order to penetrate the market and gain market share over your competitors by generating huge amount of sales. If you are the competitor with the lowest price, that can create a certain barrier in your market because if outside competitors should intervene they would have to match your price or go even lower which can open them up to huge risk if they weren’t comfortable with it from the beginning.
Price bundling
This strategy is used when you group the new product with an existing product and sell them both at a discount. A lot of companies used this strategy and if the existing product was a mega hit it can draw attention to the new product that’s in the package.
Premium pricing
This strategy can be used when the new product you’re promoting is like the premium product for a set of products that you have sold already on the market. You got to make sure that this model of the product provides more value than the rest that you have already sold or else users will not gravitate towards it as much. Phones companies tend to use this technique a lot.
Going rate pricing
Going rate pricing is a strategy that companies usually use to reduce competing on price with other organizations and instead focus on the benefits that customers can get from using the product. So for example you are releasing a new product to the market and you know that you can’t compete with price against your competitors.
The only thing you can do is to create a product that is way better than your competitor’s and provide more value to customers. Look at apple for example their product is one of the more expensive types of smartphones but yet still they own most of the smartphone market because they provide a more superior product.
As stated before getting your product price right can either make or break a product. You don’t want to price a certain product too high to keep away possible consumers and you don’t want to price it too low which is going to make it hard for you to generate enough profit for the long term. If you implement some of these strategies when pricing your next product it will make it easier for your company going forward.