New product pricing strategies
A client is launching a brand new offering in the experiential/event market. They don’t know what to charge. They asked my advice. Whilst I’m not an expert on new product pricing strategies the following is what I said to them;
When we first launched our business we simply picked a figure. And then, if someone came back to re-book, we put the price up….. and kept doing this until people stopped re-booking. At which point we knew we’d found our market price.
There’s no ‘right’ or ‘wrong’ answer to pricing. It’s an unscientific balance between your costs and how much you can maximise profits.
I suggest one of four options;
1) Add up all your costs and then divide it by the number of guests you’d need as a minimum to make the offering viable. So let’s say all your costs totalled £10k and you’d need say 10 guests to make it work. Your price would be £1000. In that scenario every guest more than 10 is clear profit.
2) As above but add in what you two want to take as a ‘salary’, or fee. So again let’s say £10k costs and you each want to take £1000. Total cost is £12k, again 10 guests minimum, cost of a ticket would be £1200.
3) Have a look around the market and see what other companies are offering for similar experiences (I know there’s nothing exactly the same for you guys). Once you have a feel for the range in prices, from cheap to exclusive, you’ll then have a benchmark to make an informed selection.
4) Pick a number that ‘feels’ right, and that you’d be comfortable selling at.
Each of the four above have a valid reasoning behind them, and none are ‘right’ or ‘wrong’. You may even end up doing a merge of all four…”
7 new product pricing strategies
A couple of days after having sent the above email to my client, I thought I’d research ‘new product pricing strategies’ and this article came up. It basically described 7 new Product pricing strategies as follows;
- Value-based pricing
- Competitive pricing
- Price skimming
- Cost-plus pricing
- Penetration pricing
- Economy pricing
- Dynamic pricing strategies
Let me know what you think about pricing for new products. What do you use? Let me know, or if you have any other suggestions.
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