The Role of Pricing in an Organization: Pricing Excellence Begins in R&D

October 17, 2017

Pricing excellence begins in R&D

For most companies, new products are a way to escape rising price and competitive pressure. However: An astounding 72 percent of all new products miss their profit targets. The main reason for these flops are mistakes in the R&D process. Specifically, the market side, i.e. pricing and marketing, are completely ignored or are factored in much too late in the product development process. Pricing experts are asked to determine the best price for the product only just before its launch. By then, it's usually too late. A product configuration that doesn't meet market needs is hard to fix through the price. If customers do not value the product features, a company cannot charge for them. Ideally, companies get market, pricing and sales experts involved from day one in the innovation process. This is the only way to factor in customers' willingness to pay for features during product development.

Advice of Simon-Kucher experts:

Expand your R&D teams to include market and pricing experts; regularly measure product value and willingness to pay throughout the R&D process. Encourage your team to kill features or even entire product ideas if needed.