+

NEW PRODUCT
PRICING STRATEGIES

HOW MUCH SHOULD YOU

CHARGE FOR A NEW
PRODUCT?

 Set prices too high

and lose valuable
market opportunities.

+ Set prices too low

and leave money on
the table.

U
O
Y
O
D
T
A
H
W
TOO MUCH
= IT WONT
SELL
( product
still hasnt
proven
anything)

?
N
A
ME

TOO LITTLE =
COMPANY
WONT
BECOME
SUSTAINABLE

But how do you price new

products.

You have to keep in

mind these concepts
The different types of
demand.

* Elastic Demand*

- Price increases = Consumer

can do without or less.
- Has Alternatives.
*Inelastic Demand*
-Price Increases= Consumers
still buy.
-More on Necessities.

On Demand for
Products

Derived Demand - relationship between factors

of production and the finished service or
product
Composite demand - refers to a product that
has multiple uses and purposes
Competitive demand - is a term that refers to
the products that compete for sale
Complementary demand - occurs when more
than one product is needed to meet a single
demand

Different ways of
Pricing New Products

1. Cost based pricing

-involves setting a price by adding

a fixed amount or percentage to
the cost of making or buying the
product.
Cost-plus (or "mark-up") pricing
ex.
Unit cost 100
Mark-up 50%
Selling price 150

2. Customer-based
Penetration
pricing pricing

-the pricing technique of setting a

relatively low initial entry price, usually
lower than the intended established
price, to attract new customers.
- Intended just to establish in the market.
Price

skimming

-involves setting a high price before other

competitors come into the market.
- Launch of a product with no competition.

+
Loss

leaders

-a product priced below cost-price in

order to attract consumers into a shop or
online store
Short term tactic for sales promotion.
Psychological pricing
-to make the customer believe the
product is cheaper than it really is
Gives the customers more sense of value
in terms of product.

3. Competitor-based
pricing
Going-rate

pricing

-setting a price that is in line with the

prices charged by direct competitors
-Many rivals in product offering = businesses
become price takers
-Price increase is typically uncommon
because of other alternative brands
-They can distinguish themselves in terms of
good customer service and quality .

REMEMBER THE FOLLOWING

CUSTOMERS DONT THINK
ABOUT THE COST OF MAKING
THE PRODUCT , THEY WANT
VALUE IN IT.

+
REFERENCES:
http://
beta.tutor2u.net/business/reference/pricing-strategiesgcse
http://pricepointpartners.com/new-product-pricing
https://www.boundless.com/marketing/textbooks/boundless
-marketing-textbook/pricing-8/specific-pricing-strategi
es-63/new-product-pricing-314-7597
/
http://
www.mckinsey.com/insights/marketing_sales/pricing_n
ew_products