When you’re developing a new product, is pricing the last step on your to-do list?

When it comes to pricing, there is a misconception that pricing is simply about raising prices or just setting the right price to achieve a certain margin expectation.

All customer needs are not equal and different customers will have different needs from your product and service.

There is a misconception that product commercialisation will automatically lead to monetisation. Many organisations assume that once they launch their new product, revenue generation will naturally follow.

Very often, when we speak about pricing especially within NPD, most people think that price is just a number, and they will typically focus on price setting days before launching their product. The truth is that very few businesses have a process in place to set and manage pricing.

Pricing is the most powerful profit lever a business has. It has the power to drive or destroy margins in your business very quickly. Yet, it is overlooked and undervalued by most businesses. Studies show that companies are spending less than 10 hours a year on their pricing!

In the changing landscape of modern manufacturing, navigating challenges like the pandemic, supply chain headwinds, cost pressures and inflation can be daunting. To stay ahead, businesses must uncover the hidden potential within their profit margins.

In the fiercely competitive world of manufacturing, where every penny counts, the art of Price Management holds the keys to unparalleled benefits. Imagine maximising your profitability, gaining a decisive edge over competitors and swiftly adapting to ever-shifting market dynamics.

Have you ever stopped to reflect on what pricing means in your business? For some it may just be a number generated in a spreadsheet based on costs but it means SO much more.

Price is value. Price encompasses so many opportunities to drive success and create value.

Have you launched a new product only to later realise that you under-priced it hugely and left significant money on the table? This happens a lot and to many businesses.

All customer needs are not equal and different customers will have different needs from your products and services. Geographically, prices will vary too depending on market dynamics and competitor landscape.

Very few businesses understand how much value their products create for their target customers.

VALUE CREATION is the foundation of any pricing strategy and requires a deep understanding of how products and services create value for your customers. Understanding value created by a product requires intimate knowledge of your customers’ needs. This deep understanding of customers’ needs translates your product’s FEATURE into a customer BENEFIT which then can be translated into a VALUE DRIVER.

“We really like your product, but it is too expensive. We have had quotes that are 15% to 20% cheaper. If you can match this, we would be interested in placing the order.”

This was the feedback our manufacturing client received from their customer and the customer was ready to show the quotes from other suppliers. One option could have been to go down the price discussion and price discounting route, but they didn’t have to.

When developing a new product, do you link product features to customer benefits and then do you estimate the economic value that your customer will receive?

You maybe wondering what this has got to do with pricing.

This is a very powerful approach that creates a line of sight between your product features and the $ economic impact on your target customers’ business.

How do you Estimate the price of new product and services?

The truth is that very few businesses have a process in place to set and manage pricing.

The 4Ps of marketing are widely known by lots of people in business. How much attention are you paying to the most powerful P – PRICE?

We are facing the worst levels of inflation in 40 years. Raw material costs are rapidly increasing as are energy costs and supply chain costs.

Input cost inflation is at the worst we have ever seen. Prices are changing the fastest most of us have ever seen. Is your Business equipped to deal with rapidly changing prices?

What factors do you consider when setting the price for your new product?

We are working with a client who is constantly receiving feedback that they are too expensive and that competition is selling at a cheaper price.