You're launching a new product in a competitive market. How do you determine the optimal pricing structure?

I believe this traditional mindset of cost and product has to be changed. In my experience, setting the cost analysis based on market does not really say about the value of the product. It is blinded by price war and the brand is chasing for the cheapest as a GTM strategy. What about the value of the product? If the value tmof the product is taken care of and disseminated well into marketing it out to the right audience, price will not be an issue. The brand itself carries the product through and the value it bring in helping businesses will be key focus instead.

Know your costs: Figure out exactly what it costs to make and sell your product. This is your baseline - you can't go lower without losing money. Scope out the competition: Check out what similar products are selling for. This gives you an idea of what customers expect to pay. Understand your target customers: What are they willing to pay? What value does your product offer them? Sometimes you can charge more if you're solving a real pain point. Test different price points: Try out a few different prices with small groups of customers. See how they react and what sells best. Be flexible: Don't be afraid to adjust your pricing after launch. Keep an eye on sales and customer feedback, and be ready to tweak things if needed.

Completely depends on the kind of market or product you are offering. For commodities it is cost plus pricing, for niche products like art, its value based pricing. Best way is to analyse your product and benchmark with and relevant competitors and price based on competition based pricing. Higher or lower price on the proposition you are offering. Then eventually as your product and strategy evolve , you change based on that.

A thorough understanding of competitors' pricing strategies is essential. By analyzing the factors influencing their pricing decisions, you can gain valuable insights into market dynamics. This knowledge, combined with a deep understanding of your product's unique value proposition, will empower you to make informed pricing choices that align with your strategic objectives.

Firstly, we need to be clear about our primary objective. Are we aiming for Penetration Pricing to quickly gain market share, or do we want to establish a niche offering? The industry we are in also plays a crucial role, as Dynamic Pricing is often used in e-commerce and travel sectors to adjust prices based on real-time demand, competition, and market conditions. By combining thorough market research, understanding our costs, and applying strategic pricing models, we can determine the optimal pricing structure that balances profitability with customer acquisition and retention.

If pricing is a part of your value proposition, penetration pricing will work well. If it is not then skimming will work as well. Having a clear segmentation, optimized distrib. channel and optimized production/operations helps. Create a "weighted" model using the parameters above to calculate a "control" parameter which will help you determine the optimum margin. The "weightages" can be determined by the market and type of engagement of the product (low, medium or high).

The market is very dynamic and changes every other day, no one wants the competition so they lower the price to that extent where competition cannot match the price, they do so by subsidising the price from the other products margin. Nowadays no company has patience and work on the long term strategy, they want instant gratification so they do everything to cannibalise the competition.

I believe that understanding the competitive landscape isn’t just about knowing who your competitors are—it’s about dissecting their pricing strategies and identifying opportunities where your product can stand out.

In my experience, it is always critical to understand the product anatomy when trying to identify, and more importantly quantify value. The product anatomy helps in understanding the capability, its dependencies (upstram & downstream), value dirver (what is the business, operational metric impacted), value lever (how does it impact business & operational metric), value multiplier (what are the impact measurement metrics), and rationalization (proportionality of impact and how easy is the understanding for the end customers). Once this is throughly understood, value discovery through whatever method becomes objective. The product anatomy analysis is what most folks miss and why value discovery process becomes a whimsical set of "values"

Value Proposition is the starting point. If you've done the work to understand value then you've necessarily engaged in all the other activities listed. But equally important is to monitor and adjust. Following Eisenhowers' advice that "plans are nothing, planning is everything", markets constantly change we are obliged to continually understand and adapt to that change.

When setting your pricing structure, you must translate your product’s distinct features, benefits, and advantages into tangible value for your customers. This means understanding how your product solves specific problems, meets unique needs, or enhances the customer experience in ways that competitors can’t. The price you set should be a reflection of this value—it should clearly communicate why your product is worth the investment.

Try to avoid being the most affordable or cheapest option among your competitors. You need to be true about your cost and revenue threshold that is aligned with your company's growth while being able to attract new customers and retain them. If your unique value proposition separates you from your competitors and is revolutionary that your prospecting customers cannot find an alternative from anywhere else, that means you have got a good competitive edge. If not? Why you? Then go find that unique value proposition.

La propuesta de valor de una empresa es la razón por la cual los clientes eligen comprar sus productos o servicios en lugar de comprar los de la competencia es una combinación única de beneficios , caracteristicas y experiencias que la empresa ofrece a sus clientes para que una propuesta de valor sea efectiva tiene que ser RELEVANTE osea debe de ser importante par a el cliente UNICA debe de diferenciarse de la competencia CREDIBLE debe de ser creible y factible COMUNICABLE debe de ser facil de comunicar y entender para crear una propuesta de valor efectiva se debe de conocer al cliente

When it comes to selecting the right pricing model, there’s no one-size-fits-all solution. Each model offers distinct advantages, but the key is to choose one that aligns with both your product’s value proposition and your market dynamics. As a digital product marketer, I believe that pricing should be as strategic as it is data-driven.

Defining the correct pricing model depends on the many factors such as product value proposition, product market fit, customer demographic etc. 1. In B2B SaaS, customers usually expect to use a trial version of the product before purchasing it. You can test how many customers are getting converted from 'free trial' customers to 'paying' customers, whether tweaking your product pricing has any significant effect on the conversion rate and adjust accordingly. 2. In B2C companies like Spotify, freemium model is used. Customers pay extra for the perceived value. 3. In eCommerce, probably you need to use penetration pricing if you are a new player in the market which requires a deep pocket. Case in point: Amazon entry to India.

Utilize a dynamic pricing strategy that adapts pricing to demand fluctuations, competitor actions, and inventory levels. This method enables instantaneous price modifications to optimize sales and profits.

Consider a dynamic pricing strategy that allows you to adjust prices based on real-time market conditions, demand fluctuations, or seasonal trends to maximize revenue.

Pricing is one of my favorite stages of the product launch process - I love numbers, because numbers always make sense. Even though it's mind consuming, that a-ha! moment at the end is worth it. Pricing strategy will depend on where the product will stand... is it the only product of the company? We have more flexibility, whether we start with penetration vs skim strategies will mainly depend on the competitive industry. Is the product will be part of a larger product catalog, here we need to be more careful, we need to abide with organization's existing (and proven) pricing strategies - we need to make sure the launch price we'll assign will not cannibalize other products in our catalog and be clear about timing and sales expectations.

Customer feedback is critical and yet tricky. The key is really to understand the customer's perception of value and not really an absolute number in their mind. Take an example of a market disrupting brand new capability, there is no way the customer can put a number to it (and they should not be asked to also). However if you go back to the anatomy exercise, validation on how strong is the proportionality between the value metric, value lever, and business/oprational value, is what one can well establish. That gives a much better and data backed identification of the exact price point.

Customer feedback is invaluable in understanding consumer preferences and expectations. My experience with a previous brand underscores the significance of direct customer input. By actively seeking and analyzing customer feedback, businesses can gain invaluable insights into the key factors that influence purchasing decisions, including price sensitivity. Failing to address customer needs can lead to brand switching, even in the face of competitive pricing.

Customer feedback can be tricky, because everyone as customer will always want to pay less - that's the reality. And you can get customer feedback either before launch, after it or both. With so many digital tools to gather feedback, it's easy to share a well designed survey, here's where the magic of storytelling is important, you need to present the competitive industry, show a comparable product with it's price and then present ours with our pricing and value proposition - the key is in the way you ask to get valuable feedback. "Would you pay $X more for this product?" or "How much more would you pay for this product?", you may be surprised by leaving money on the table. You can also do a test launch, just one channel or a region.

Customer feedback is essential for deciding whether to stick with an idea or move towards a successful transformation. It helps us understand if the product truly solves real problems and meets user needs. Innovation is key in this context, ensuring the product evolves and adapts to market demands. Additionally, social proof, such as testimonials and case studies, can validate the product’s effectiveness and build customer confidence, driving success in a new market era. In summary, leveraging feedback and integrating innovation, supported by social proof, are crucial for turning an idea into a successful product.

Set prices based on the perceived value of the product to the customer rather than solely on costs. By understanding customer needs and preferences, businesses can make better pricing decisions that ultimately enhance customer satisfaction and foster loyalty.

To achieve an agile approach for an optimal pricing structure, that is competitive at the same time, it’s crucial to grasp market pricing dynamics, monitor competitive moves and identify shifts in customer value perception. An effective competitive pricing intelligence program will be necessary to swiftly provide these insights. In order to keep up with competition, value propositions and pricing strategies need to be reviewed and adjusted accordingly.

Adjusting and monitoring are crucial for product success. Using A/B testing allows you to experiment with different approaches and determine the most effective one based on real data. It's essential to pivot at the right moment, adapting strategies based on feedback and results. In some cases, creating a spin-off to explore a new idea or direction may be necessary. In summary, continuously adjusting and monitoring, supported by A/B testing and the ability to pivot or spin off, ensures that the product remains relevant and successful in the market.

In a competitive market, fast reaction is the key! if you don't try and change based on market rules, then it’s a matter of time to loose.

Willingness to Pay is an important metric here 💡 Price is what one is ready to pay for, by the customer, and not what one charges in isolation. So while you've done all of the above from analysis to positioning, let's not forget the switching cost involved here. I would always recommend to first understand what we are bringing to the Market⁉️ Product Differentiation vs Cost Advantage The former lets you charge for the disruption of what is the ask from the user while the latter will let you understand the switching cost. It's not one short fix and therefore a lot of beta version and surveys will help to understand the " Willingness to pay "