Marketing mix: pricing strategy & product positioning

Pricing models and positioning for high-tech products · Cost + profit margin: Add a profit margin percentage to the costs associated with producing and ... Skiptocontent. JumptoPageFooter. Howtoavoidunderpricing:Buildingaquantifiablevalueproposition Downloadthisfreeguidetobuildaquantifiablevaluepropositiontodetermineyourpricingstrategy. Download Techproducts:Pricingandthemarketingmix Productpricingcanhelpyourcompanyachieveprofitability,supportproductpositioning,andcomplementyourmarketingmix. Onceyourstartupisreadytocommercializeitsproduct,youmustdeterminehowmuchtochargecustomerstopurchasetheproduct.Inotherwords,itistimetoestablishthepricingstructure. Pricinginthemarketingmix Pricingisoneofthefourmainelementsofthemarketingmix.Pricingistheonlyrevenue-generatingelementinthemarketingmix(theotherthreeelementsarecostcentres—thatis,theyaddtoacompany’scost).Pricingisstronglylinkedtothebusinessmodel. Thebusinessmodelisaconceptualrepresentationofthecompany’srevenuestreams.Anysignificantchangesinthepricewillaffecttheviabilityofaparticularbusinessmodel. Awell-chosenpriceshouldaccomplishthreegoals: achievethecompany’sfinancialgoals(profitability) fitwithintherealitiesofthemarketplace(customersarewillingandabletopaythesetprice) supportaproduct’spositioningandbeconsistentwiththeothervariablesinthemarketingmix(productquality,distributionissues,promotionchallenges) Pricingmodelsandpositioningforhigh-techproducts Therearedifferentmethodsofdeterminingthepriceforhigh-techproducts. Cost+profitmargin:Addaprofitmarginpercentagetothecostsassociatedwithproducinganddistributingtheproduct. Rateofreturnandbreak-evenpoint:Calculatetheunitprice:price=unitcost+[(rateofreturn×investment)÷quantitysold].Thendeterminethebreak-evenpoint:thelevelatwhichsalesfigurescoverrelatedfixedandvariablecosts. Marketprice:Setthepriceaccordingtothemaincompetitor’sprice. Biddingprice:Setthepriceaccordingtoavailableinformationaboutcompetitorbidsandthecustomers’opinionoftheproduct’sadvantages. Comparisonwithsubstituteproducts:Setthepricerelativetoproductsforwhichitwillsubstitute. Value-basedpricing:Setthepricebasedonhowthecustomervaluestheproduct.(Seebelowforfurtherdetails.) Value-basedpricing Value-basedpricingattemptstoestablishthereturngeneratedbytheproduct’susefromthecustomer’spointofview.Howacustomerperceivesproductvalue,andtheactualvaluethecustomerreceives,canbeestimatedbyidentifying: thetargetcustomer(theirbudget,abilitytopurchase)—specifically,thevaluecanbeestimatedbydevelopinganapplicationscenario buyermotivation(willingnesstobuy,theriskinvolved) theproductanditscomplexity(itsabilitytomeetcustomer’sobjectives) distribution(delivery,support) Value-basedpricingandthetechnologyadoptionlifecycle(TALC) SettingapriceintheEarlyMarketinvolvessomeguessworkastheproduct’svalueisunprovenatthisstage.Toguideyourpricingdecisions,determinethe: customer’sexpectedreturnoninvestmentfrombuyingtheproduct amountyourcustomermaybewillingtopay referentialpriceforthenewproduct(thisisthepricecomparedtothecostofthetotalproject) Pricingyourtechproductasyourmarketdevelops TocrosstheChasmandentertheBowlingAlley,pricingmustbebasedonvalue.Toguideyourpricingdecisions,determinethe: amountofmoneyyourcustomeriscurrentlylosing(seeapplicationscenario) expectedreturnoninvestmentwiththenewproductstrategy,andwhenthereturnswillberealized returnoninvestmentderivedfromusingtheproducttosolvetheproblem Finally,keepyourpricingmodelsimpletocommunicateandensureitmakessensetothecustomer.Ifitdoesnot,yoursalesstaffwillstruggleinthefaceofothercompetition. References Wiefels,P.(2002). TheChasmCompanion. NewYork:HarperBusiness. Viardot,E.(2004). SuccessfulMarketingStrategyforHigh-TechFirms. Boston:ArtechHouse. Related Pricingstrategiesforstartups Theexperiment:Pricingstrategiesforstartups Effectivepricingtactics:Pricingstrategiesforstartups SignupforourmonthlyStartupResourcesnewsletteraboutbuildinghigh-growthcompanies. Enteryouremail* Youmayunsubscribeatanytime.Tofindoutmore,pleasevisitourPrivacyPolicy. MaRSStartupToolkit Topics Courses StartupServices