72% of all new products don’t meet their revenue targets, according to a recent HBR blog post “The Silent Killer of New Products: Lazy Pricing.”
Based on a recent interview with our firm’s Georg Tacke and Madhavan Ramanujam, Sarah Green outlines 3 keys to success on how to successfully introduce new products and raise prices.
Considering price from the very conception of an idea
Using technological tools to measure value and willingness to pay in a systematic way
Over the years, I have worked with many Consumer & Retail clients on new product pricing. Of the three success factors, my personal favorite is the second one because too often pricing is an after-thought when companies launch a new product. On a high-level, most companies start with product design years prior to launch, and pricing becomes top of mind only a few months before the new product hits the market.
This is how a typical new product pricing conversation goes…
Once in a while, the conversation goes in a different direction. When I asked the Head of Merchandising of a Global Lifestyle brand how he came up with the prices of their highly successful launch into women’s clothing, his thought process offered a refreshingly different perspective that started with the target consumers and their willingness-to-pay.
“We are designing this clothing line for the woman who carries a Chanel bag.She expects to pay $400-$500 for a designer cocktail dress.Details and fabric are important to her, so we spent a lot of time on that during the design phase…”
How does your company think about pricing for new products? I’d love to hear your success stories.