Introducing new products creates an exciting opportunity to attract new customers and reinforce your presence in the market. At the same time, defining your new product pricing strategy is exciting for a very different reason. With so many options to choose from and with so little historical data to support your choice, how do you make the right decision? These ten leading pricing strategies for new products can get you started. (And with the help of retail pricing software, you can find the optimal strategy for your business.)
Why is new product pricing so challenging?The pricing strategy you choose for a new product has enduring ramifications. This is the only chance you have to create a first impression with your customers. Setting initial pricing high may discourage customers or may create the impression of premium quality. Low prices, while more accessible, could permanently mark the product as a commodity. Discover how top retailers are increasing their margins by up to 60% Pricing determines your long-term profitability. Low prices leave little room for promotions or end-of-lifecycle markdowns. High prices generate higher per-unit margins but may constrain top-line revenue. The challenge many retailers face with new product pricing is the lack of actionable information. Without the right tools, looking at your historical sales may not give you any insight into the optimal new product pricing strategies.
New product pricing strategies should be tailored to your unique businessAdding to the complexity is how context-sensitive pricing strategies are. No two markets are alike. No two retailers are alike. Pricing strategies that work for one product will be inappropriate for another product. You have to balance many constraints and limitations to choose the right approach, among them:
- Production and distribution costs
- Positioning strategies
- Target customer base