You're launching a new product. How do you set the perfect pricing strategy to boost profits?

Considering the production costs, including materials, labor, and overhead expenses, is vital in determining the minimum price that covers all expenses. By setting a price above the breakeven point, the product can generate profit. Additionally, implementing pricing tactics such as discounts, bundles, or premium pricing can influence consumer behavior and increase sales volume.

Other than understanding the cost and establishing a floor price, what's really important is to understand what the organisation is hoping to achieve. Are we looking at testing product/ market fit, are positioning this as a premium or entry-level product etc.?

The value proposition is key to the success of any product and pricing should reflect the perceive value of the product or service. Always consider other factors beyond competitor pricing when you're establishing the price of the product or solution.

Conjoint and pricing analyses are great tools to create a pricing strategy that is related to your value prop. But for a new product, it's not easily feasible. Instead, for new products, I go for value-based pricing. I usually calculate how much value the benefits will bring and divide by 10 to get the price.

Consider the unique value your product offers to customers. How does it solve their problems or improve their lives? Pricing should reflect the value and benefits your product delivers. A strong value proposition can justify a higher price point.

Lots of companies entering an established market either align their pricing on competitors or try to do it cheaper. It's okay if you don't have unique benefits, but if you do, I would advise against it. With unique benefits, you should start by aligning pricing on non-unique features and then add the value of unique benefits into the mix.

Analyze your competitors' pricing strategies. Understand where your product fits within the market. Are you offering premium features, or are you positioning your product as a cost-effective alternative? Competitive analysis helps you position your pricing strategically.

Indeed, continuously monitoring the market dynamics, consumer preferences, and competitors' pricing strategies is key to adjusting the pricing strategy accordingly. Regularly evaluating the product's performance in the market and gathering feedback from customers can help in fine-tuning the pricing strategy for optimal results. Adapting to changing market conditions and consumer behavior ensures the pricing strategy remains competitive and profitable in the long term.

Besides of everything shared above, one thing which needs to be considered is once you launch the product at X price. You have to keep in mind. How would you manage the cash flow because If your company is ready to burn you can build a GTM approach, which is eating from the top because of the money power, example Jio in telecom.

Setting the perfect pricing strategy for a new product is crucial for maximizing profits. Conducting market research to understand competitors' pricing, target audience's willingness to pay, and overall market demand is essential. By analyzing these factors, a competitive pricing strategy can be developed to attract customers while ensuring profitability