Pricing a new product is key in communicating its worth to target customers. Companies and individuals launching a new product have one chance to pick the right price for a new product before its launch. Whether the product is priced correctly or not can have a direct impact on sales and the success of the product launch.
Here are a few mistakes to avoid when pricing a new product.
Pricing a Product Too High or Too Low
This is a pretty obvious mistake. If you price your new product too high, you would most likely lose a lot of sales and hurt your bottom line. If you price the product too low, on the other hand, you might boost the number of sales but hurt your profit margins significantly. Thus, it is important to do your market research thoroughly and communicate with your target audience before picking a price too high or too low.
Considering Only the Marketplace
As a follow-up to the above point of doing thorough market research, it is important to pick a price that is not simply based on what similar or competing products are priced at in the current market. Doing so would constrain your product within a specific price that might reflect the value of other products more accurately than the value of your new product. New features or aspects of your product that your specific target customers value a lot should be reflected in your price more accurately.
Not Doing Segmentation
When doing thorough market research it is also important to segment your target audience and truly research your niche market in a greater detail. Knowing exactly why a specific target audience might value your product much more than competing products can help you make a more informed decision about your product pricing. Thus, it is important to communicate with your target customers on a regular basis to identify the perceived value that they see in your product.
Pricing a product is one of the most important steps before its launch. Do not pick a price randomly or based on what similar products are priced in the market lace. Do thorough market research and follow a concrete pricing strategy to avoid pricing your product too high or too low, while segmenting your target market and communicating with your niche audience on a regular basis.