Are You Pricing New Innovations to Capture Their True Value?

Manufacturers invest millions in innovation, yet many fail to price new products for profit. The result? Lost revenue, eroded margins, and undervalued breakthroughs. Why? Because value and pricing is often treated as an afterthought. Innovation is at the heart of manufacturing growth. Companies invest millions in New Product Development (NPD) to solve customer problems, meet evolving customer needs, stay ahead of competitors, and drive growth and profitability.

But the challenge is that most manufacturers focus on cost and features, and not on value when pricing new innovations.

✅ You invest in R&D

✅ You create something better, faster, or more efficient

✅ You bring it to market… but is your pricing strategy maximising its true worth?

Too often, manufacturers fall into cost-plus pricing or apply a one-size-fits-all approach, leaving significant money on the table.

Hence many manufacturers fail to monetise their innovations effectively.

Why?

Because pricing is often treated as an afterthought.

✔️ Teams prioritise technical features without fully understanding customer needs.

✔️ They overlook competitive alternatives that set market expectations.

✔️ They default to cost-plus pricing, ignoring the economic value created for customers.

As a result, groundbreaking products either struggle to gain traction or are significantly underpriced, leaving huge profit opportunities untapped.

How Manufacturers Should Approach Pricing in NPD

Many manufacturers struggle to price new products beyond a simple cost-plus markup. But pricing should reflect the real value your product delivers. A smarter pricing strategy starts long before launch, it’s built into the product development process itself.

Here’s how:

1️⃣ Start with Customer Needs, Not Features

Too many innovations start with what a company can build rather than what the customer truly values.

Whilst developing a new product, manufacturers must ask:

• What specific problem does this solve for the customer?

• How is the customer currently addressing this problem?

• What pain points does the current solution create?

Understanding these needs helps prioritise features that drive real value, rather than just adding cost. These features then need to be translated into customer benefits.

2️⃣ Evaluate Competitive Alternatives

Customers always compare new products to what’s already available. If your innovation doesn’t clearly outperform alternatives in a meaningful way, it will struggle to command a premium price.

Key questions to assess competitive positioning:

• How do customers perceive the current solutions?

• What are they paying for alternative options?

• Where does your product provide superior performance, efficiency, or cost savings?

If your pricing doesn’t reflect these competitive insights, you risk either pricing too high (and losing sales) or too low (and eroding margins).

3️⃣ Translate Benefits into Economic Value

To price effectively, manufacturers must quantify the financial impact of their innovation on the customer’s business.

Let’s take an example

A specialty food ingredients supplier develops a new ingredient that extends the shelf life of ready meals by an additional 3 days. Their customer, a ready meal manufacturer, sells to supermarkets.

Why This Matters to the Ready Meal Manufacturer:

✔️ Less waste = fewer write-offs and lower waste costs.

✔️ Better on-shelf availability = more sales, more shelf space and fewer missed opportunities.

✔️ Improved sustainability metrics = stronger appeal to supermarkets with ESG targets.

Quantifying the Monetary Value

📌 Before: 2% of ready meals expired before being sold.

📌 After: Waste drops to 0.5%, leading to higher retailer confidence and increased shelf space resulting in new orders.

Monetary Value to Your Customer:

• For every £1M ready meals sold, reducing waste from 2% to 0.5% could save the manufacturer £X per year in waste reduction alone.

• Securing additional shelf space could drive an estimated X% increase in revenue and Y% increase in profit.

By pricing based on financial impact and not just ingredient cost, the supplier can capture a fair share of the additional profit they generate for customers.

4️⃣ Price for Profitability, Not Just Market Acceptance

Too many manufacturers set launch prices too low, thinking they need to attract buyers first and increase prices later. The problem? That increase rarely happens.

Instead, pricing should be structured to:

✅ Align with customer value from Day 1: don’t leave all the money on the table.

✅ Segment pricing based on different customer needs.

✅ Ensure margins support long-term growth: sustainable pricing is not just about volume, it’s about profitability.

Final Takeaway: Pricing Is Part of Innovation, Not Just an Afterthought

Smart manufacturers don’t wait until a new product is ready to launch and then “figure out” the pricing. No, not at all! They embed value pricing into the NPD process, from understanding customer needs to evaluating competition and quantifying financial impact.

By doing this, manufacturers can:

✔️ Strengthen customer partnerships by proving commercial benefits.

✔️ Capture higher profits from innovations that truly create value.

Are you pricing your new products based on cost, or the real value they deliver? Are your new products priced for maximum profitability, or are you leaving money on the table? Let’s talk about how to capture more value without losing customers.