When launching a product, ensure that the pricing is consistent with the positioning. A product's price communicates the value of the product to the customer. Pricing also sets customer expectations regarding the level of service and support as well as the quality of the product. Although a low price can ensure sales, it decreases profitability and can actually keep customers from buying the product. While some customers will look for the lowest-priced product, they will also shy away from one that seems too low in price. Pricing that is too low implies lack of quality and service, causing many customers to look elsewhere.
Manifest Marketing helps you price your product to maximize profitability and sales. Our pricing recommendations are based on a thorough analysis of the market, the competition, and the product's value to the customer.
Problem: A hardware manufacturer was launching a software product that would radically reduce the effort required when field sales people report in to update their headquarters office. The company normally focused on the enterprise, so this software product was unusual in that it was aimed at the small to medium-sized business market. Product pricing presented a challenge because this company lacked sufficient experience in the new target market.
Solution: The pricing was examined from three different perspectives: competitive analysis, value analysis and cost-of-development analysis. The competitive analysis showed that pricing could be very low to match that of the competitors, who were mostly small, independent software developers. The cost-of-development analysis also indicated low pricing, based on sales volume projections. According to the value analysis, however, a much higher price was recommended because the new software product would give small-business owners substantial savings in time and resources. A higher price also provided a consistent message that the larger company would deliver superior levels of quality and support, as compared to its competitors.