How do you determine the price of new products?

My manufacturing client was developing a chemical pump based on feedback from Sales that their customers needed this.

Engineering set about designing a great product. Similar competitor pumps were selling for £1,800. They did not believe that they could sell at this price so through cost engineering, they managed to get their COST-PLUS price to £1,500. If required, a discount would be given.

Sound familiar?

There is a different approach, VALUE-BASED pricing. It puts customer needs and value at the heart of all decisions. The MD agreed to try this approach. A cross-functional team was formed and we:

-        Interviewed customers to understand their problems & pain points

-        Evaluated competitor pumps

-        Conducted market research

-        Understood what differentiates our product

The outcome?

1.     Developed a product that solved their target customers’ problems better than competition.

2.     Improved the financial outcome for their customers by £1,200 more than the alternatives, based on 50% more efficiency from their pump

3.     Set a target price of £3,000

Sales found selling on #value easier than selling on price!

How do you set new product prices?