Pricing a new product or service requires a dynamic policy that takes into account factors that can influence the sale and interest generated amongst the audience. While it’s nearly impossible to get the numbers right every single time, the release of a product’s price can largely determine the initial success of the product. Here are some ways to create a pricing policy that ensures your product fares well from its first day.
Use Lean Six Sigma
The Lean Six Sigma method can be useful in creating a pricing policy that constantly improves based on the data gathered regarding similar products released by competitors, their sales, and the distinctiveness of the product. The Six Sigma method will also ensure that any errors that you encounter in the pricing policy are fixed for better results.
By having employees with a Six Sigma Certification, you will have the skills needed to make a solid plan of action to grow your business. 6Sigma.us team, under the leadership of Peter Peterka who has extensive experience across various industries as an improvement specialist and engineer, can help you equip your staff with the Six Sigma Training and Certification via classrooms, blended as well as onsite and fully online programs.
Estimated demand of the product
A product’s demand plays a crucial role in determining how high a product can be priced without losing the interest of potential customers. The demand for the product can also depend on the product’s distinctiveness from similar products.
A product with several competitors without any distinctive features will have to rely on a cheaper price-based plan to boost sales. A highly distinctive product, however, comes with the risk of seeming too foreign for customers. If your products are distinctive, attractive, and will appeal to your target audience, then the prices can be increased.
The target audience
The pricing policy will also rely on the target audience of your products. Target groups can vary depending on the amount of money that people are willing to pay for a product. Understanding your target audience and building buyer personas can help understand if your target audience is looking for a practical or luxury product.
A product’s ‘value’ based on the perspective of the buyer persona can help you build a more accurate pricing policy for new products. So you must research the economic value of your products as well as the economic status of your target audience before developing a pricing policy.
Initial competing price
Most companies, while releasing a new product, start with a low-profit margin to penetrate the market. This is often called the penetration price and is done to attract new customers to experiment with their product instead of opting for other established products. Once the product gains confidence and gains credibility in the market, the prices can be increased to further improve profit margins.
Another way to the initial price can be by targeting a small audience with a substantial profit margin and letting the product establish itself through word-of-mouth and exponential marketing strategies. You can create a policy depending on which method you feel would best suit your product.
Promotion of the product
The promotion of a new product is an investment that is added to the cost of making them. If you wish to heavily promote your product, you will have to ensure that your pricing policy provides profit margins that are good enough to allow you to stay and grow in the market.
It is important to focus more on the product quality than on its marketing as the product will only be chosen by more individuals based on how well it can solve their problems. It is thus important to have an idea of promotional costs while building your pricing policy.