Launching a new product on the market is a long process, and there is no flawless algorithm that can ensure its success. Millions of business owners are constantly thinking of methods that will attract new customers, and correct pricing is one of the essential elements. The perfect price is appealing to consumers and company leaders. Therefore, a balance should be reached, where the product is bought willingly, and the business gets the maximum possible profit from sales so that benefits exceed the cost of production (Abbey et al., 2015). It becomes even more difficult in the case where the product is new and has not been introduced to the market yet.
One of the most obvious advantages of this situation is that the business owner has a monopoly on the market. The price does not depend on such external factors as competitors because there did not appear yet. Nevertheless, a significant number of buyers should be attracted as soon as possible. Therefore, it would be helpful to start selling a product at a fairly low price. In this way, the product quickly becomes known and popular. However, there are some drawbacks to this technique, for example, its unpredictability. In the case where the manufacturer of the product does not succeed in the mass market, the company can go broke. For this reason, this method can be successful if the company changes in consumer demand, sales growth is steady, and benefits allow further development of production. The business owner can start calculating the price from the cost of manufacturing the product. In addition, he or she should study the market progress of a competitor’s comparable product that has already established itself among customers.
References
Abbey, J. D., Blackburn, J. D., & Guide Jr, V. D. R. (2015). Optimal pricing for new and remanufactured products. Journal of Operations Management, 36, 130-146.