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When releasing a new product there are many things that you have to decide upon, including price. Although your product has to be priced to reflect its value, price will not give you a long term advantage over your competitors. Despite that, you still need to study your competitor’s product and price when you are determining your own.
When you are determining a price for your product, you need to know your products target market and what position you plan on taking in the market. If you’re going into a “niche” market, your price is going to differ as opposed to entering other markets. There needs to be a sensible relationship between the value of your product and the price you’re offering the customer. Overall, your price should reflect your products value.
If your price doesn’t fit the range, then you need to make adjustments. Value engineering can help by finding simple ways to reduce the actual costs it takes to produce a product. A solid cast-iron cover could be replaced with a plastic molding to not only make the product cheaper, but also lighter.
Although some would think that low-balling would be the best strategy for a company to take, it’s not. It is the easiest, but actually product advantage can take years to match. Low-balling is just a temporary fix, any price advantage usually is. All another company has to do to compete with your low price is send an e-mail announcing a price cut and with the click of a button you don’t hold that competitive advantage anymore. That is why low price and success aren’t related. You need more than price to gain market share.
So price isn’t the main factor in determining whether a product can succeed or not. Reliability, location and product differentiation can all help lock a competitive advantage. You need to assess the strengths of your main competitors to beat them at their own game. You need to sell in a location where price and quality requirements can be met. When dealing with product differentiation you can get more creative in deciding on the packaging of your product. The above factors are extremely important since we are dealing with a low innovation market and they are all sustainable competitive advantages.
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