How to decide on the price for your new product
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Posted: Fri 14th Oct 2022
A client of mine 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. You in essence could do the same.
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 provided four primary pricing options
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 £1,000. In that scenario, every guest over 10 is clear profit.
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, making the total cost is £12k. Again, 10 guests minimum, so the cost of a ticket would be £1,200.
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.
Pick a number that ‘feels’ right, and that you’d be comfortable selling at.
Each of the four above has valid reasoning behind them, and none are ‘right’ or ‘wrong’. You may even end up doing a merge of all four.
Seven more pricing strategies to consider
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 seven new product pricing strategies as follows:
Value-based pricing
Competitive pricing
Price skimming
Cost-plus pricing
Penetration pricing
Economy pricing
Dynamic pricing strategies
So, plenty of food for thought when you come to selecting your new product price.
Relevant resources
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