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How to price your product right for the market

Date: Nov 05 2018
How to price your product right for the market

Before launching your latest invention into the marketplace, it’s important that you take some time to figure out how you will position your product, in terms of price.

This is a big decision, not only because it will have an immediate impact on your gross margins, but also because you are laying out the road map for your product brand and the price points for future launches.

How you price your product will also have huge implications for whether you have a viable business or not. Think of it this way – if it costs £10 to produce your product, but the nature of your target market means that you will only ever find someone willing to pay a maximum of £8, then you don’t have a viable business model.

Picking a number out of the air simply doesn’t work. You need to know what your production costs will be and what your target market is likely to be willing to pay, before launching. And your decision needs to be based on up to date and accurate research.

Positioning your product within the market

  • Low price high volume

Some consumer brands will choose to position themselves as a value proposition, i.e. they go in cheaper than the competition, secure shelf space in mass retail, and aim to shift a large volume of goods in as short a time as possible.

In this strategy your gross margins run the risk of being squeezed when the volumes pick up, so you need strong relationships with your own supply chains to be able to pass on those costing pressures. Having the production capacity needed to handle high volumes is also vital to success here, as there is no point having a pile of un-fulfilled orders, which later get cancelled as you have missed your delivery deadlines.

  • High price low volume

Other brands will choose to pitch themselves at the higher end of the product category price range. This can be the case, even when the underlying product may not differ that much from its lower priced competitors.

It will often be the result of detailed market research that has identified a gap in the market for a premium range, with branding and messaging tailored to suit a more considered purchase.

Typically, this kind of positioning strategy is about setting the brand apart from the rest of the noise and making it desirable. Possibly even by limiting supply.

So how do you go about figuring out how your product brand should position and price itself?

The answer is a simple one – you need to know your market inside and out and to be carrying out continuous and rigorous market research.

Never view research as a ‘one-off’ activity. By gathering as much market intelligence as you can and keeping this data up to date – along with sharing it with the rest of your team and engaging them in the process – you will improve you chances of spotting gaps and trends in the market and better stay ahead of the competition.

Top tips for gathering market intelligence:

  1. Comp shop – Know what your competitors are doing. Get out there and photograph competitor products. Take note of price points, pick up products and look on the bottom and back of the packaging to see who has distributed the product and who has designed it. Each month your marketing, sales and design teams should go out together to comp shop. If you can afford it, then get everyone in the office involved too, as the more people the better!
  2. Make an insight wall– Everyone in your company should be encouraged to share any findings they make and to stick them on an insight wall in your office. This may include printing out photos, writing down lists of new competitors, or buying interesting products that have been well packaged. Clear an area of the office where everyone will see the findings. Encourage people from different departments to share ideas and discuss opportunities for product improvements. You could even get a coffee machine and put it next to your insight wall!
  3. Don’t rely on internet research only. The internet is a very fast and cheap way to gather market intelligence, but it should never be the only method you use. That’s because it will distort your pricing analysis if it is the only research tool you use. Online retail and search algorithms favour the lowest price and latest special offers, whereas the high street is less efficient in this respect. You need to ensure you have a balanced view that gives you the comprehensive insights needed for a multi-channel approach to selling your product.
  4. Buy products and use them. Give your staff a budget for buying any products they find interesting within a certain price bracket. Get them to use and test the products and to say what is good about them, what they like and what first attracted them to the product. For example, was it the packaging and if so, what is it about the packaging that’s so effective? What was it like to then use? Were the instructions clear and easy to follow? Does it deliver on its promises?
  5. Talk to your customers. When you have developed a pricing strategy for your product, test it out on your target customers, wholesalers or distributors.  It’s a lot easier to change the price before you launch your product, if you need to.

Got an interesting product?

If you have a well-designed product that fulfils a distinct need, or solves an important problem, then get in touch.  Applications for funding available through the latest British Design Fund are now open, and can be submitted here, or for more information email us using enquiries@britishdesignfund.co.uk.

If you are interested in learning more about how you can invest in future British Design Funds, then please email us using enquiries@britishdesignfund.co.uk

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