Before launching your latest invention into the marketplace, it’s important that you take some time to figure out how you will position your product, in terms of price.
This is a big decision, not only because it will have an immediate impact on your gross margins, but also because you are laying out the road map for your product brand and the price points for future launches.
How you price your product will also have huge implications for whether you have a viable business or not. Think of it this way – if it costs £10 to produce your product, but the nature of your target market means that you will only ever find someone willing to pay a maximum of £8, then you don’t have a viable business model.
Picking a number out of the air simply doesn’t work. You need to know what your production costs will be and what your target market is likely to be willing to pay, before launching. And your decision needs to be based on up to date and accurate research.
Positioning your product within the market
Some consumer brands will choose to position themselves as a value proposition, i.e. they go in cheaper than the competition, secure shelf space in mass retail, and aim to shift a large volume of goods in as short a time as possible.
In this strategy your gross margins run the risk of being squeezed when the volumes pick up, so you need strong relationships with your own supply chains to be able to pass on those costing pressures. Having the production capacity needed to handle high volumes is also vital to success here, as there is no point having a pile of un-fulfilled orders, which later get cancelled as you have missed your delivery deadlines.
Other brands will choose to pitch themselves at the higher end of the product category price range. This can be the case, even when the underlying product may not differ that much from its lower priced competitors.
It will often be the result of detailed market research that has identified a gap in the market for a premium range, with branding and messaging tailored to suit a more considered purchase.
Typically, this kind of positioning strategy is about setting the brand apart from the rest of the noise and making it desirable. Possibly even by limiting supply.
So how do you go about figuring out how your product brand should position and price itself?
The answer is a simple one – you need to know your market inside and out and to be carrying out continuous and rigorous market research.
Never view research as a ‘one-off’ activity. By gathering as much market intelligence as you can and keeping this data up to date – along with sharing it with the rest of your team and engaging them in the process – you will improve you chances of spotting gaps and trends in the market and better stay ahead of the competition.
Top tips for gathering market intelligence:
Got an interesting product?
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