The document discusses the importance of properly pricing new products. It argues that companies often underestimate what customers are willing to pay by taking an incremental approach and basing prices only on costs. Instead, companies should explore the full range of potential prices by determining both the highest and lowest possible prices. The highest price is based on a thorough understanding of the product's benefits to customers through market research. The lowest price is determined by accurately calculating all development and production costs. Market research is also needed to understand demand at different price points. By fully exploring pricing options, companies can maximize profits from new products.
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Ind...FaHaD .H. NooR
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Industry Types | What Is Industry | Competitor Analysis | Studying Industry Trends |
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Ind...FaHaD .H. NooR
Industry and Competitor Analysis | Five Competitive Forces | Five Primary Industry Types | What Is Industry | Competitor Analysis | Studying Industry Trends |
What does success look like in your industry how do you get topLeul Girma
What does success look like in YOUR industry? How do you get top?
Success is one of the most controversial issues today
Also the concept of industry has become more complex than ever before. Some companies still find it difficult to identify which industry they are in, No matter if you are in one or several industries, you will enjoy this topic.
This video will bring you the most useful tools to analyze your business internal and external environment , then guide you to moving ahead dramatically .After watching this video you will able to know how to lead your business significantly moving forward.
We will discuss deeply how to identify your success factors, in this session will get clear understanding
about industry nature and characteristics very well. Because when you know about the particular city’s road traffic, drivers behavior ,exceptional rule and regulations you will drive greatly. It is very similar with business world
based on industry and company facts we will evaluate your business current position , if is that great you will maintain to being more strong. other ways it motivate you to do something significant action in your business, that could be a milestone to moving ahead dramatically.
CPG-RETAIL COLLABORATION IN EMERGING MARKETSITC Infotech
Collaboration - a systematic and conscious effort between two parties in creating a positive synergy by working towards a predefined goal. In today’s business world, the term ‘Collaboration’ is gaining even more attention. This is because, none of the three bottom lines - Social, Economic & Environmental, can be achieved by any company working in isolation. In this paper, we will highlight how CPG companies and Retailers in emerging markets should work together to create a profitable, sustainable and socially acceptable business environment and in turn, try to reach Nash equilibrium for all the stakeholders.
To download the editable version of this document, go to www.slidebooks.com
Market & competitor analysis template in PPT created by former Deloitte & McKinsey management consultants and talented designers.
I am going to develop a coherent marketing mix for a new product. To do this I will explain what the marketing mix is, the importance of each element, and the detail of the product, the price, the place and the promotion. I will also create my own chocolate bar using the marketing objectives and the laws.
What does success look like in your industry how do you get topLeul Girma
What does success look like in YOUR industry? How do you get top?
Success is one of the most controversial issues today
Also the concept of industry has become more complex than ever before. Some companies still find it difficult to identify which industry they are in, No matter if you are in one or several industries, you will enjoy this topic.
This video will bring you the most useful tools to analyze your business internal and external environment , then guide you to moving ahead dramatically .After watching this video you will able to know how to lead your business significantly moving forward.
We will discuss deeply how to identify your success factors, in this session will get clear understanding
about industry nature and characteristics very well. Because when you know about the particular city’s road traffic, drivers behavior ,exceptional rule and regulations you will drive greatly. It is very similar with business world
based on industry and company facts we will evaluate your business current position , if is that great you will maintain to being more strong. other ways it motivate you to do something significant action in your business, that could be a milestone to moving ahead dramatically.
CPG-RETAIL COLLABORATION IN EMERGING MARKETSITC Infotech
Collaboration - a systematic and conscious effort between two parties in creating a positive synergy by working towards a predefined goal. In today’s business world, the term ‘Collaboration’ is gaining even more attention. This is because, none of the three bottom lines - Social, Economic & Environmental, can be achieved by any company working in isolation. In this paper, we will highlight how CPG companies and Retailers in emerging markets should work together to create a profitable, sustainable and socially acceptable business environment and in turn, try to reach Nash equilibrium for all the stakeholders.
To download the editable version of this document, go to www.slidebooks.com
Market & competitor analysis template in PPT created by former Deloitte & McKinsey management consultants and talented designers.
I am going to develop a coherent marketing mix for a new product. To do this I will explain what the marketing mix is, the importance of each element, and the detail of the product, the price, the place and the promotion. I will also create my own chocolate bar using the marketing objectives and the laws.
be checked against norms for the product category to see whether t.docxgarnerangelika
be checked against norms for the product category to see whether the concept appears to be a winner,
a long shot, or a loser. One food manufacturer rejects any concept that draws a definitely-would-buy
score lower than 40 percent.
Conjoint Analysis Consumer preferences for alternative product concepts can be measured
with conjoint analysis, a method for deriving the utility values that consumers attach to varying
levels of a product’s attributes.85 Conjoint analysis has become one of the most popular conceptdevelopment
and testing tools. For example, Marriott used it to design its Courtyard hotel concept.86
With conjoint analysis, respondents see different hypothetical offers formed by combining varying
levels of the attributes and rank them. Management can then identify the most appealing offer and
its estimated market share and profit. In a classic illustration, academic research pioneers Green and
Wind used this approach in connection with developing a new spot-removing, carpet-cleaning agent
for home use.87 Suppose the new-product marketer is considering five design elements:
• Three package designs (A, B, C—see Figure 15.4)
• Three brand names (K2R, Glory, Bissell)
• Three prices ($1.19, $1.39, $1.59)
• A possible Good Housekeeping seal (yes, no)
• A possible money-back guarantee (yes, no)
Although the researcher can form 108 possible product concepts with these five elements (3 × 3 × 3 × 2 × 2), it
would be too much to ask consumers to rank them all from most to least preferred. A sample of, say, 18 contrasting
product concepts is feasible.
The marketer now uses a statistical program to derive the consumer’s utility functions for each of the five attributes
(see Figure 15.5). Utility ranges between zero and one; the higher the utility, the stronger the consumer’s
preference for that level of the attribute. Looking at packaging, package B is the most favored, followed by C and
then A (A has hardly any utility). The preferred names are Bissell, K2R, and Glory in that order. The consumer’s
utility varies inversely with price. A Good Housekeeping seal is preferred, but it does not add that much utility and
may not be worth the effort to obtain it. A money-back guarantee is strongly preferred.
The consumer’s most desired offer is package design B, brand name Bissell, priced at $1.19, with a Good
Housekeeping seal and a money-back guarantee. We can also determine the relative importance to this consumer
of each attribute—the difference between the highest and lowest utility level for that attribute. The greater the
PAGES 475-480
Business-Goods Market Testing Business goods can also benefit from market testing. Expensive
industrial goods and new technologies will normally undergo alpha and beta testing.100 During beta testing, the
company’s technical people observe how customers use the product, a practice that often exposes unanticipated
problems of safety and servicing and alerts the company to customer training and servicing requirements..
This document reviews best practice in pricing processes to provide a reference against which current practices and proposals can be tested. Our objectives have been: to research the attributes of world-class pricing through publications and academic sources; to investigate how these attributes are applied in practice to products and services; to assess pricing processes in successful businesses.
In recent years a new attitude toward pricing has emerged. Deregulation and international free trade agreements have increased competition. Price promotion has eroded the power of brand loyalty. Pricing has assumed greater importance to most businesses.
As markets increasingly assume a global dimension, customers can more easily compare prices between one region or country and another, using the internet or a fax machine. They can often locate the same product, or an
acceptable substitute, from another source. Customers are more demanding and fickle, and their expectations increasingly difficult to fulfil.
Price inflation in western economies is now at its lowest for decades. Price increases are no longer accepted without protest from customers, if at all.
The Chairman of General Electric has predicted the onset of the ‘Value Decade’. Global price competition will strengthen because of: reduced product differentiation; global over-capacity for production; significantly diminished trade barriers; efficient information and distribution systems; providing customers with easy access to the prices of suppliers; a growing lack of customers’ loyalty to individual suppliers. Choice will be increasingly driven by price.
This is a challenging scenario that reinforces the need for an integrated strategy and concerted managerial action on pricing.
Pricing processes have lagged behind developments in the market place. They are often characterised by internal conflict between accountants wishing to maximise profit per unit and marketing specialists who seek to maximise
throughput. They are also affected by the potential for strained relations with good customers.
Some companies have downsized their operations to a level where diminishing returns cause them to question the benefits of continuing to focus upon reducing costs. As they switch their attention from cost cutting to adding
value, pricing naturally assumes increased weight in the marketing mix.
We have found many companies reluctant to discuss their own processes.
Some may wish to avoid betraying a lack of sophistication.
Commercial Innovation in US Oilfield: Buyers and Sellers Both Win by Embracin...Hexacom
For many years (too many, perhaps), technological investment in the oilfield has focused uniquely on the products and services used rather than the ways in which buyers connect to them. Rarely have visionary eyes turned towards the business environment within the industry, the ways in which customers and suppliers work together. However, given the right combination of content (e.g., product specifications, supplier details), front-end tools, and an underlying intelligence structure, a lot can be done to democratize and expand oilfield transactions.
Commercial innovation such as this ensures that the oil and gas industry’s ultimate, collective product – the cheap energy that drives civilization’s progress – maintains its competitive place in the global energy mix. Indeed, a drive towards complete efficiency in every facet of the value chain will keep energy from hydrocarbons viable in the long run. And reducing the waste created throughout the buying and selling process is a key aspect of this.
Connecting B2C to B2B: a Top Down Approach for Industrial DistributorsStephane Bratu
In this article, the author discusses the importance for pricers in many industries – and particularly in the distribution industry – of engaging in both business-to-business and business-to-consumer markets. This article focuses on proposing a new way to execute pricing strategies and operations for industrial distribution companies that sell both to other businesses (B2B) and directly to consumers (B2C). This industry specific example provides pricing strategies and analytic approaches that can be applied by pricers in multiple businesses and markets. Dr. Stephane Bratu is Direc- tor of Pricing and Analytics at Arrow Electronics.
Porters 5 forces - a simple explanationBrent Spilkin
Porters Five forces - a simple explanation
Porter five forces analysis is a framework to analyse level of competition within an industry and business strategy development.
It draws upon industrial organisation (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market
Part of the induction course for students undertaking diploma and degree in environmental lab science, pharmacy, public health, Analytical Chemistry, Applied Biology, Medical Lab Sciences and Food Technology.
All of these questions are answered I just need you to read the an.docxnettletondevon
All of these questions are answered I just need you to read the answers, understand them and paraphrase them in your own way with keeping the same idea. Just rewrite it with the same idea but in a different phrase than these.
Essay Questions:
1. Identify and discuss reasons why firms become so infatuated with pricing. Why is pricing given a great deal of attention?
Answer/ ANS:
There is no other component of the marketing program that firms become more infatuated with than pricing. There are at least four reasons for the attention given to pricing. First, the revenue equation is pretty simple: Revenue equals the price times quantity sold. There are only two ways for a firm to grow revenue: increase prices or increase the volume of product sold. Rarely can a firm do both simultaneously. Although there are literally hundreds of ways to increase profit by controlling costs and operating expenses, the revenue side has only two variables—one being price and the other being heavily influenced by price.
A second reason that firms become enamored with pricing is that it is the easiest of all marketing variables to change. Although changing the product and its distribution or promotion can take months or even years, changes in pricing can be executed immediately in real time. Likewise, product, distribution, or promotion changes can also be quite expensive, especially if research and development (R&D) or production must be rescheduled. Conversely, changing prices is a very low-cost option.
The third reason for the importance of pricing is that firms take considerable pains to discover and anticipate the pricing strategies and tactics of other firms. Salespeople learn to read a competitor’s price sheet upside down at a buyer’s desk. Retailers send “secret shoppers” into competitors’ stores to learn what they charge for the same merchandise. In this age of e-commerce, tracking what competitors charge for their goods and services has become so daunting that an entire price-tracking industry has emerged.
Finally, pricing is given a great deal of attention because it is considered to be the only real means of differentiation in mature markets plagued by commoditization. When customers see all competing products as offering the same features and benefits, their buying decisions are primarily driven by price.
Having a solid understanding of these issues is important because far too many firms and their managers use a seat-of-the-pants approach to pricing by guessing the best price for their goods and services. Guessing is never a good strategy in marketing; it can be downright deadly when it comes to setting prices.
2. In many (if not most) circumstances, cutting prices to increase sales volume is not a good idea. Explain why this is so. What are some alternatives that are preferable to cutting prices?
Answer/ ANS: All marketers understand the relationship between price and revenue. However, firms cannot charge high prices without goo.
Why is this book so important? One of the biggest lessons I have learned within the startup landscape is that even though pricing, together with the business model, remains by far the lever that most impacts revenue, the subject is a sensitive one.
Pricing is a strong — but often underused — tool available to capture a share of value created for customers
Pricing is one of the biggest challenges that startup face. The book is a practical toolkit that positively influences the pricing strategies of startups. It reveals insights in the different pricing methods and tactics used by successful companies.
A new approach can help CPG companies introduce
products with the right features, price, and packaging.
For more information, visit www.strategy-business.com
1. Price-general price, strategy, what factors contributed to your p.pdfanjandavid
1. Price-general price, strategy, what factors contributed to your price estimation. 2.
Implementation and Evaluation-how will you know whether you are successful or not? Answer
those 2 questions (On indoor go kart racing)
Solution
Pricing is frequently a standout amongst the most troublesome things to get right in business.
There are a few factors a business needs to consider in setting a cost:
• Competitors – an enormous effect on pricing choices. The relative pieces of the pie (or
market quality) of contenders impacts whether a business can set costs autonomously, or whether
it needs to take after the lead appeared by contenders
• Costs – a business can\'t disregard the cost of creation or purchasing an item with
regards to setting an offering cost. In the long haul, a business will come up short in the event
that it offers for not as much as cost, or if its gross net revenue is too low to take care of the
settled expenses of the business.
• The condition of the market for the item – if there is popularity for the item, however a
lack of supply, at that point the business can put costs up.
• The condition of the economy – a few items are more touchy to changes in joblessness
and laborers compensation than others. Creators of extravagance items should drop costs
particularly when the economy is in a downturn.
• The haggling intensity of clients in the objective market – who are the purchasers of the
item? Do they have any dealing control over the value set? An individual shopper has small
dealing control over a grocery store (however they can take their custom somewhere else).
Notwithstanding, a mechanical client that purchases generous amounts of an item from a
business might have the capacity to arrange lower or uncommon costs.
• Other components of the advertising blend – comprehend that costs can\'t be set
without reference to different parts of the promoting blend. The dissemination channels utilized
will influence cost – distinctive costs may be charged for a similar item sold direct to customers
or through middle people. The cost of an item in the decrease phase of its item life-cycle should
be lower than when it was first propelled.
Steps to implementation
Clarity on goals
The initial phase in the effective execution of significant worth based estimating is to
characterize the goal of the organization. As much as enhancing productivity appears a direct
goal, changed organizations may seek after various destinations amid various phases of their own
life cycle.
Development in supreme incomes (instead of development in benefits) is regularly a critical
objective – particularly for items with arrange externalities. At last, the development for
subordinate items (e.g., razors versus sharp edges) might be the fundamental thought behind the
general estimating technique if there should arise an occurrence of interdependencies between
items.
Commonly contradictory objectives of benefit amplification, income augmentation, and the
boost of off.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Personal Brand Statement:
As an Army veteran dedicated to lifelong learning, I bring a disciplined, strategic mindset to my pursuits. I am constantly expanding my knowledge to innovate and lead effectively. My journey is driven by a commitment to excellence, and to make a meaningful impact in the world.
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
Know more: https://www.synapseindia.com/technology/mean-stack-development-company.html
[Note: This is a partial preview. To download this presentation, visit:
https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Unveiling the Secrets How Does Generative AI Work.pdfSam H
At its core, generative artificial intelligence relies on the concept of generative models, which serve as engines that churn out entirely new data resembling their training data. It is like a sculptor who has studied so many forms found in nature and then uses this knowledge to create sculptures from his imagination that have never been seen before anywhere else. If taken to cyberspace, gans work almost the same way.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
India Orthopedic Devices Market: Unlocking Growth Secrets, Trends and Develop...Kumar Satyam
According to TechSci Research report, “India Orthopedic Devices Market -Industry Size, Share, Trends, Competition Forecast & Opportunities, 2030”, the India Orthopedic Devices Market stood at USD 1,280.54 Million in 2024 and is anticipated to grow with a CAGR of 7.84% in the forecast period, 2026-2030F. The India Orthopedic Devices Market is being driven by several factors. The most prominent ones include an increase in the elderly population, who are more prone to orthopedic conditions such as osteoporosis and arthritis. Moreover, the rise in sports injuries and road accidents are also contributing to the demand for orthopedic devices. Advances in technology and the introduction of innovative implants and prosthetics have further propelled the market growth. Additionally, government initiatives aimed at improving healthcare infrastructure and the increasing prevalence of lifestyle diseases have led to an upward trend in orthopedic surgeries, thereby fueling the market demand for these devices.
Remote sensing and monitoring are changing the mining industry for the better. These are providing innovative solutions to long-standing challenges. Those related to exploration, extraction, and overall environmental management by mining technology companies Odisha. These technologies make use of satellite imaging, aerial photography and sensors to collect data that might be inaccessible or from hazardous locations. With the use of this technology, mining operations are becoming increasingly efficient. Let us gain more insight into the key aspects associated with remote sensing and monitoring when it comes to mining.
RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
Sports events - Golf competitions/billiards competitions/company sports events: dynamic and challenging
⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
➢ 2024 BAEKHYUN [Lonsdaleite] IN HO CHI MINH
➢ SUPER JUNIOR-L.S.S. THE SHOW : Th3ee Guys in HO CHI MINH
➢FreenBecky 1st Fan Meeting in Vietnam
➢CHILDREN ART EXHIBITION 2024: BEYOND BARRIERS
➢ WOW K-Music Festival 2023
➢ Winner [CROSS] Tour in HCM
➢ Super Show 9 in HCM with Super Junior
➢ HCMC - Gyeongsangbuk-do Culture and Tourism Festival
➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
Improving profitability for small businessBen Wann
In this comprehensive presentation, we will explore strategies and practical tips for enhancing profitability in small businesses. Tailored to meet the unique challenges faced by small enterprises, this session covers various aspects that directly impact the bottom line. Attendees will learn how to optimize operational efficiency, manage expenses, and increase revenue through innovative marketing and customer engagement techniques.
1. By Michael V. Marn, Eric V. Roegner, and Craig C. Zawada | Jul 1, 2003
Pricing New Products
How much should you charge for a new product? Charge too much and it won't sell -- a
problem that can be fixed relatively easily by reducing the price. Charging too little is far
more dangerous: a company not only forgoes significant revenues and profits but also fixes
the product's market value position at a low level. And as companies have found time and
again, once prices hit the market it is difficult, even impossible, to raise them. In our
experience, 80 to 90 percent of all poorly chosen prices are too low.
Companies consistently undercharge for products despite spending millions or even billions
of dollars to develop or acquire them. It is true that businesses and private consumers alike are
demanding more for less; the prices of personal computers, for example, have been pushed
downward despite their higher processor speeds and additional memory. Global competition,
increased pricing transparency, and lower barriers to entry in many of the most attractive
industries have contributed to the trend. But these are not the only problems. Many companies
want to make a quick grab for market share or return on investment, and with high prices both
objectives can be harder to achieve.
These concerns encourage companies to take an incremental approach to pricing: they use
existing products as their reference point. If a new offering costs 15 percent more to build
than the older version does, for instance, they charge about 15 percent more for it. Particularly
in consumer markets, they might set the price slightly higher or lower than that of their main
competitor.
The incremental approach often underestimates the value of new products for customers. One
of the first makers of portable bar code readers, for example, calculated how much more
quickly its customers would be able to assemble their own products if they used portable
readers. The company then took the price of the older, stationary readers and raised it
proportionally, solely to account for the time savings. This strategy also fit in with the
company's desire to penetrate the market quickly.
But by using an existing product as the reference point, the company undervalued a
revolutionary product. The portable reader not only improved existing processes but also
enabled companies to redesign their supply chains. Portability and instant access to
information prepared the way for real-time inventory control, vastly improved logistics
planning, and just-in-time deliveries, thus eliminating the need for large inventories. Buyers
quickly recognized a bargain and flocked to the low-priced product. The company, which
couldn't keep up with demand, not only failed to capture the full value of its reader but also
set the market's price expectations at a very low level. A single bad decision easily erased $1
billion or more in potential profits for the industry.
Analyses based on cost differences and process improvements are parts of the puzzle, and so
is an understanding of the competitive landscape. But good pricing decisions are based on an
2. expansive rather than an incremental approach. Before zeroing in on a price that promises the
greatest long-term profitability, companies must know both the highest and the lowest prices
they could charge. Price-benefit analysis should begin early in the development cycle, when
the market is first being probed, for it not only shows companies whether price barriers might
make products unfeasible but can also guide their development by indicating which attributes
customers are most willing to pay for.
Exploring the full range of pricing options
For products that replicate others on the market ("me-too" products) or that offer small
improvements (evolutionary products), the room to maneuver is relatively narrow, and
incremental approaches may come close to the optimal price (see sidebar "Launch position ").
Even then, however, a lot of money can be left on the table. Charging just 1 percent less than
the optimal price for a product can mean forfeiting about 8 percent of its potential operating
profit.1 And the more novel a product may be, the more important it is for companies to take a
broader view of the pricing possibilities.
The highest price
Since incremental approaches tend to focus on the lower end of the price range, companies
should start by defining the opposite end of the spectrum. Such a price ceiling, based on a
product's benefits, may ultimately prove to be unrealistic: there may not be a sufficient market
at that level, it may leave too much room for competitors, or customers may be strong enough
to demand a greater share of the value the product creates.2 But establishing this ceiling will
ensure that each and every potential price point is brought up for discussion.
To establish a price ceiling, a clear understanding of a product's benefits for its customers is
essential. The value of some benefits, such as savings on raw materials, can be measured
easily. But others, particularly process and relationship benefits such as on-line purchasing
options or brand reputation, must be evaluated through market research.
Advanced marketing tools -- for instance, conjoint analysis and perceptual mapping3 -- can
assess how much value each benefit offers to customers. But companies must see to it that
their research does more than make comparisons with known reference points. Many
suppliers rely too heavily on their internal perceptions, which sometimes unintentionally skew
their efforts to probe the market. While formulating the research and writing the questions for
a market test, a company should therefore ensure that they cover a broad range of
possibilities; otherwise the work may serve merely to confirm the benefits claimed by the
product's developers or anecdotal information brought back by the sales force.
To take an accurate measure of the benefits a product offers -- and thereby find its true price
ceiling -- market research must be designed to elicit more open-ended feedback than can
usually be acquired through multiple-choice questionnaires or trade-off techniques, both of
which can limit responses. For example, a controls maker's revolutionary high-pressure steam
valve for nuclear power plants significantly increased the reliability and reduced the
complexity of their water-management systems. At first, trade-off techniques were used to
3. research the market: the company described the technical benefits of the new valve and tried
to find out how much customers would pay by comparing it with a valve for another
application. Most of them felt that a 20 to 25 percent premium was justified.
The company later redid its research to broaden the outlook, this time asking more open-
ended questions to establish how much value the valve would deliver to the business systems
of its customers. Instead of first asking them to compare the new valve with an existing one,
the company now sought to evaluate the cost of planned maintenance shutdowns and the role
the new valve could play in reducing their number. Now that the company had a fuller picture
of the new benefits -- a picture based on its customers' economics -- it asked how much
customers would be willing to pay for them. This time, the customers gave a figure that was
several times the price of the existing valve. The supplier had a more accurate picture of its
pricing options.
The floor
Cost-plus pricing is often derided as weak, but it plays an essential role in setting the floor for
a company's pricing options. An accurate analysis of costs per unit, plus a margin representing
a minimally acceptable return on investment, reveals a new product's lowest reasonable price
level. If the market can't bear it, the company must rethink the product's viability.
Although the cost-plus model is well-known, companies often trip up in two areas when they
use it to analyze their costs. First, surprisingly, they don't account for all costs that should be
allocated to products; there is a tendency, for example, to overlook R&D expenses associated
with a product category (including expenses for incomplete projects) and goodwill linked to
acquisitions that lead directly to new products. As a necessary part of any development
program, these are legitimate items to bring into the cost calculation. Second, overly
optimistic market projections can create false estimates of costs, particularly fixed ones.4
The range of pricing options is usually smallest for me-too products. Companies using them
to play catch-up must therefore be particularly careful to assess their costs correctly and to
understand the assumptions underlying these calculations; a small error can permanently
prevent products from becoming profitable. If a product's viability relies on cost savings
generated by economies of scale, for instance, a false estimate of the size of the market or of a
customer segment would be disastrous.
The size of the market
Similar research is needed to gauge the size of the market or market segments for various
prices at and below the ceiling. Instinct might suggest that the lower the price, the higher the
demand, but that isn't always true. Midrange prices, for instance, might put a product in the
dead zone -- too cheap for quality-conscious customers and too expensive for bargain hunters.
One company, for example, offered a new data-management system that it claimed could save
large companies hundreds of millions of dollars a year. But to penetrate the market quickly, it
released the core software with an enterprise license fee of less than $100,000.5 Potential
4. customers wouldn't take the company's claims seriously; if the claims were true, the software
should have been priced in the same range as other enterprise-resource-planning (ERP)
packages, which cost $1 million or more.
Estimating the size of a market at various price points clarifies the range of pricing options,
suggests which price models to use at any price and volume point, and increases the accuracy
of estimates of profitability along the spectrum and of the unit-cost calculations needed to
define the price floor.
Setting the release price
After a company has determined the full range of its pricing options and the market's size at
various points within that range, it is ready to formulate the release price. Targeting the largest
market segment within the range might be tempting, but maximizing volume doesn't
necessarily maximize profits (see sidebar "Penetration pricing "). In particular, four aspects of
new-product pricing may counsel against targeting the largest market, especially if doing so
means setting the price low.
Reference price
The release price minus any discounts or other incentives establishes the market's first
reference point for the product's true value as judged by its maker. More than any press
release, sales pitch, or catalog description, the reference price tells the market what a company
really thinks a new product is worth. An excessively low reference price can handicap its
long-term profitability -- the low price might hasten its penetration of the market, but the
resulting lower margins forgo the future profits a higher price would have captured once a
customer base had been established. A low reference price is particularly damaging if it
conflicts with the value position the company is trying to establish or if market demand has
been underestimated.
Competitors' reactions
Especially for evolutionary products, a low price that noticeably shifts market share will
probably trigger a destructive price war: competitors usually can't react immediately by
improving the benefits of their own products, so they often cut prices instead.6 A higher
reference price, by contrast, suggests that a company is targeting profits rather than market
share and might therefore generate few if any immediate reactions from competitors.
Life cycle strategy
If an early-adopter segment is willing to pay a premium for a product, the company that
makes it may wish to consider a high release price to capture the extra value, with planned
reductions down the road to attract latecomers. Along with capturing more revenue over the
life of a product, this strategy can also help companies match demand to production capacity
for a new product.
5. Cannibalization
Companies must also carefully consider how new wares will affect their current ones. If an
older product remains viable, a company might try to manage the cannibalization problem by
giving its new product a higher release price targeting a smaller segment of customers. By
contrast, if a product line is being retired, a lower release price for a new offering may be
appropriate to shift customers to it as quickly as possible.
Going to market
Presenting a price to the market requires both astute communication with it and patience. It
can be especially hard to explain the value and benefits of revolutionary products to often-
skeptical buyers, but whatever conditions a new product may face, a faulty pricing strategy
shouldn't be allowed to undermine its value message.
A product's fortunes during the first six months to a year after it hits the market have a critical
influence on its value position. Especially during this period, companies must keep firm
control of their pricing operations, all the way down to individual transactions. For instance,
discounting, which could be routine for continuing product lines, might sabotage a new
product's reference price.
If managers must push a product quickly, however, they can do so without sacrificing its
reference price or the market's perception of its value. One common technique is to offer
consumers free samples or to give the product to small groups of customers with a high
profile or significant market influence. Another is to offer it to customers for a free-trial
period. Both approaches speed up the market penetration of the product without cutting the
reference price. Standard discounts or rebates are usually a mistake, however, since they do
cut it and also provoke doubts about the product's benefits.
The answers to questions about the price of new products can't wait for the end of the
development cycle; the questions are an intricate part of the process of developing them, and
the answers are needed to assess their ultimate profitability. At present, companies routinely
overlook the higher reaches of their pricing potential. Basing release prices on credible market
research and cost analysis can give managers the confidence to ride out the initial turbulence
that usually surrounds new products and to claim their true value.
Sidebar: Launch position
A critical step -- and often the first stumbling block -- in releasing a new product is to
understand its true nature. Whatever its price category, it hits the market in one of three
positions.
Revolutionary : A product is so new that it creates its own market. Quantifying and
explaining such a product's benefits to an untested market takes skill.
6. Evolutionary : Upgrades and enhancements to existing products are evolutionary in
nature. If the new product provides too many new benefits at too low a price, a price
war can ensue.
Me-too : Painstaking cost analysis and a clear set of target customers are needed to
avoid catastrophe with me-too products, which bring a company into line with the rest
of the market without adding new benefits.
Too often, companies overplay the benefits of their new products, touting as revolutionary
what is at best evolutionary and rarely acknowledging that they are really playing catch-up.
But it is important to make an honest internal assessment of a product's position, since
different pricing strategies are appropriate for each of the three possibilities.
Sidebar: Penetration pricing
With every new product, companies feel tempted to build market share quickly through
aggressively low prices -- a tactic known as penetration pricing. But a fixation on volume
usually sacrifices profitability and may ignite a price war. As a result, it is generally better to
keep upward pressure on prices and to promote good industry pricing behavior. On rare
occasions, however, the price lever may be the right tool to undercut competition.
High customer value, elasticity
The first kind of legitimate occasion for penetration pricing involves new or underdeveloped
markets in which the benefits offered by a new product are high and customers are
particularly price sensitive. If a supplier can build a presence in such markets quickly, ahead
of the competition, it can disproportionately tap into latent demand, expand its share, and
establish itself as the market leader. Price can be the best mechanism for implementing this
strategy, especially in a market with high switching costs and no established product
standards; AOL, for example, started out with very low prices and raised them over time.
This strategy can be risky, however. If consumer choice is influenced primarily by benefits
rather than price, penetration pricing can only be destructive. The media, high-tech, and
pharmaceutical industries provide many examples of new offerings and technologies priced
aggressively to build share, which was then lost when competitors released newer and slightly
better products. In markets focused on technical efficacy, these suppliers needlessly pushed
price expectations lower and thus forfeited profits.
Cost-to-serve advances
Another possible occasion for penetration pricing comes when a supplier's cost to serve will
decline sharply and rapidly -- often because of economies of scale or a learning-curve effect --
as volume expands and fixed and variable costs per unit drop. If costs fall faster than prices,
margins should rise over time.
But as the market share of a company grows, its competitors often react quickly, using low
prices to minimize their market loss or to enter the market. The result can be constant