Truth be told, many B2B suppliers guess the price for their new products. If they guess too high, their customers let them know by refusing to buy. What if they price too low? Well, those customers hate to nitpick. They will overlook the mistake and let it go this time. Some suppliers don’t realise how underpriced they are until they try to rationalise products and find customers willing to pay much, much more.
How do you price new – not existing – products? Since our work involves strictly on new product development, we have enough firsthand knowledge on this. We think it’s a crime to optimise pricing after years of giving away value. Why not enjoy great margins from the very beginning, for the entire product life?
Customers will help you set prices before – but not after — you launch your new product. No need to raise eyebrows. Customers want you to develop innovative new products that deliver value to them. So they’ll give you insights early on to make this happen. If you’re clever about it, these same insights allow you to establish optimal pricing. But once your new product is launched, the pricing insight window usually closes.
We are talking about customer-focused pricing, and not supplier-focused or competitor-focused pricing. Supplier-focused pricing is often called cost-plus pricing. Any correlation between cost-plus pricing and optimal pricing is purely coincidental. It’s like using your birthdate to pick lottery numbers: convenient but rarely correct.
Competitor-focused pricing puts the emphasis on unit — rupees per kg or per litre — not on value created. It’s useful only for me-too and incremental new products. Hopefully, your ne