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How To Price A New Product



Pricing your new product can seem a bit challenging. Here are some of the factors to consider when you develop your strategy. Competitive Landscape Look at a rival or similar products and take note of the range and median prices. A wide range of pricing could imply there are a lot branding and quality improvement opportunities. Are there opportunities to add features or design improvements that will justify a higher price? How important is branding to your product and how much higher is a top brand priced compared to a generic?

Cost To Make It It's hard to stay in business long if you’re selling a product for less than it costs to make. There are some rare exceptions however such as video gaming consoles which sometimes lose money on the hardware with the expectation to make money off game royalties and online subscriptions. On most products, the sale of the product is the primary source of profit. You’ll have to consider the cost of making the product, shipping, packaging, returns, and support. You may have to keep an eye on changes and labor costs and have some considerations. On many products, the rule of thumb would be

Cost To Sell It Depending on the type of product you’re selling you’ll have to consider the cost to acquire each new customer. Sometimes the cost can be somewhat obvious such as running an AdWords campaign and calculating the Cost Per Click (CPC) combined with the Conversion rate to determine the cost per sale. Some other efforts may be harder to track such as branding and social media efforts. There should be an internal number called the Customer Acquisition Cost (CAC) used to determine the price you are willing to pay for each new customer. Sales Channels

Many products are sold through retailers and 3rd party sellers. The advantage of this is the retailer is showing your product to its existing customer base. Those customers should already have some trust and relationship with that retailer which gives a favorable introduction to your product. Retailers and distributors know this and can expect a huge discount on your product when selling to their customers. This is especially true for brick and mortar retail where the wholesale prices can be 50% of final retail. Amazon and other online stores can take a 10-40% cut on your products price. Throughout these sales channels, it would be smart to have a Minim

um Advertised Price (MAP) agreement in place to maintain pricing standards and brand image.


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