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Pricing New Products

How would you answer the following questions about your pricing?

• Do you price new products to value or cost?
• Do you understand your short- and long-term costs well enough to know what minimum price you can set?
• Have you calculated how much money your new product will save your customers or how much it will impact their profits?
• Will your prices allow you to make a profit on new products?
• Does management "give away" all the value when challenged on price?
• Are you pricing for overall market penetration or to appeal to market segments that value your new product the most?

Pricing New Products is ...

About your competitive strategy and using price to establish competitive advantage. It's all about profitability. Set your prices too low on your new products and you never make money. Smarter pricing strategy asks what your products and services are worth to each customer and how you can communicate that value. Price is strategic as well as tactical. Knowing which segments really value what you do lets you approach them with value in mind, not just cost.

Benefits of Proper New Product Pricing

• Increases profitability of the new product from day one
• Creates closer link between price paid and value received
• Sends a strong message to the market that you believe in the product
• Energizes your people by instilling confidence in the new products' value
• Keeps management on board through understanding the real value to the customer of what you have

How can Phase 3 help me implement better New Product Pricing?

We help you evaluate your current new product pricing, starting with cost assumptions. We help you determine fixed and variable costs of each new product and service to assess the "inherent" profitability of each. We help you discover the real value of your product by helping you see how customers will use your product as well as those of your competitors. Understanding how customers choose between alternatives is a big piece of knowing value. We work with management and sales to understand that value. That provides the ammunition you need to counter the "your price is too high" argument and resist the urge to lower price at the first sign of trouble.