"Innovation doesn’t fund itself. Pricing does. Companies that embed strategic pricing into their R&D processes create a flywheel of innovation, differentiation, and growth. Here’s why pricing needs to be part of the conversation from day one."
Tom McClure, Director
When companies talk about innovation, the conversation almost always centers on R&D. What should we build? How much should we invest? What technologies lead the pack? These are important questions, but they often miss a more fundamental one: how will we capture and sustain the value of what we create? That’s where pricing comes in, and it’s what makes innovation pay for itself and actually scale.
Too often, pricing is treated as a post-launch task and something handled after the engineering is done and the marketing team is preparing for go-to-market (GTM). But when pricing is left to the end, it can’t influence what gets built, who it's built for, or how much value it can ultimately deliver. And that’s a missed opportunity.
How pricing fuels the innovation flywheel
While pricing is able to boost revenue, it also powers the entire innovation cycle. When companies price effectively, they capture more value from each product and that value turns into profit dollars and cash flow. Those dollars then become funding for more R&D. The funding for R&D leads to better products, which justifies stronger price positioning. Round and round it goes. We call this dynamic the innovation flywheel.
Here’s a simple breakdown of how the innovation flywheel works:
Smart pricing leads to stronger margins and revenue growth
That growth creates more budget and confidence to reinvest in R&D
Continued innovation leads to better products and clear differentiation
Differentiated products support higher pricing and better value capture
Premium pricing generates the next wave of growth
This cycle isn’t theoretical, but it’s a practical path to scalable innovation. But it only works if pricing is viewed as a holistic growth enabler and not a last-minute decision.
The risks of ignoring pricing in R&D strategy
Without a clear pricing strategy, even the most innovative products can fall flat. Teams might overbuild based on technical ambition instead of customer demand. Or worse, they may launch features no one wants to pay for.
We’ve seen examples across multiple industries:
Building Materials: A manufacturer introduced a high-performance insulation product with superior thermal efficiency. But sales defaulted to cost-plus pricing that ignored lifecycle savings and energy incentives. Early value-based pricing could have unlocked premium positioning.
Tech/SaaS: A B2B platform released a suite of advanced analytics features. Most users stuck to the basic tools, and high-value innovations went under-monetized. Pricing wasn’t part of the roadmap, so packaging and revenue models didn’t reflect what customers valued most.
Automotive: An OEM invested heavily in connected-car subscriptions, remote start, diagnostics, concierge services. Uptake lagged. Features were built based on engineering potential, not willingness to pay. Early pricing input could have shaped bundled offers that customers would actually buy.
When pricing is disconnected from R&D, the innovation engine runs without fuel. And as you’ll learn in the next section, it’s not just about hitting revenue targets; it also affects how you prioritize.
How to integrate pricing into the innovation process
Bringing pricing into early R&D isn’t about slowing anything down; it’s about helping product teams get clearer on what customers actually want and what they’re willing to pay for. Done right, it leads to better decisions across the board. It helps teams figure out things like:
Identify and target segments where differentiation matters most: By understanding willingness-to-pay across customer types (e.g., premium vs cost-conscious buyers, early adopters vs laggards), teams can tailor offerings and avoid a one-size-fits-all approach.
Prioritize features that customers value and are willing to pay for: Rather than over-engineering or adding bells and whistles, teams can focus on attributes with clear, monetizable benefits (e.g., energy efficiency, time savings, regulatory compliance).
Estimate commercial potential with greater confidence: Pricing insights inform not just what to build, but how much it could earn, helping shape business cases, prioritize investments, and avoid costly misfires.
When used correctly, pricing becomes a design input and not just a commercial output. That shift aligns product development with real-world market success.
Is it time to rethink pricing in your innovation model?
Some telltale signs it might be time to integrate pricing earlier:
A few products carry the profit load: When only a handful of SKUs consistently deliver strong returns, it's often a sign that pricing hasn't been strategically applied across the portfolio.
Innovations underperform despite significant investment: Strong technical execution doesn’t always translate to market success, especially if pricing strategy wasn’t embedded during development.
New offerings require deep discounts to gain traction: If your most “innovative” solutions can’t command premium pricing or need heavy incentives to move, the issue may not be the product, it could be that you haven’t framed and monetized the value effectively.
These issues usually aren’t about poor innovation, but misaligned value capture. If pricing isn't involved until late in the process, opportunities to build smarter and sell stronger are often lost.
Pricing: The innovation lever hiding in plain sight
The biggest misconception about pricing is that it belongs at the end of the design journey when it actually belongs at the forefront of your innovation strategy. Pricing isn’t just how you get paid for your products but how you fund the next big one.
Companies that treat pricing as a commercial lever can unlock this flywheel of growth, differentiation, and reinvestment. Those that don’t may find themselves with incredible products, but no profit dollars left to invest in what’s next.
We can help you figure out how to properly utilize pricing in your company’s R&D cycle. Contact our team today.
