New Product Development

1. New Product Development Pricing

2. The Six Discussion Questions + • What is incremental pricing and how does one go about using it? • What is the release price and how would one go about calculating it? (Include 6-8 components including ceiling and floor price). • What is the difference between the release price and the reference price? (Give alternatives to discounting during launch. Why is this important?) • What is the ceiling price and why might it not be used? • What is the floor price and how would one go about calculating it? • Is it always wise to go for the price that would result in the largest market segment? (Clearly, pricing for the largest market share may not maximize profit. Why? When is penetration pricing a good strategy? Why?)

3. What is the two-edged pricing sword? • Charge too much and the product _______________________. • Charging too little is even more dangerous! • Once a product hits the market it is almost ______________________ ___________________________ What is the main point of the paper? • 80-90% of release prices are __________________

4. When to start working on product pricing for a new product? • ________________________________________________________________________ “Now we have the cold fusion machine what do we charge for it? Well, $99.99 seems good”

5. New-to-the-World: Innovative products. New Product Lines Additions to Existing Product Lines: Extensions. Product Improvements: Repositioning: Existing products targeted to a new market. ______________________ ______________________ ______________________ ________________ Classifying New Products

6. Later discuss how these pricing approaches compare to those from the 4 P’s Video? Four P’s Video • Layered • Luxury • Skimming • Penetration NP Pricing • Incremental • Release • Reference • Ceiling • Floor Pricing New Products By: Michael V. Marn, Eric V. Roegner, and Craig C. Zawada Published July 2003

7. Q#1-What is the incremental pricing approach? • Starts with _________________________ _________________________ • Adds enough to cover the new offerings ________________ • Adjust that amount based on ______________ When does it work Best? • For ________________ • & _______________________new products • Incremental price can show you __________ _______________________ with some small margin of return

8. Q#2-How would one calculate the release price? • Begin by defining the __________ price. • Use _______________________and/or • ______________________analysis. • Establish the ___________________ • Gauge the market’s _____________ • Establish the ________________ price. • Determine ________________________ . • Launch

9. Q#3-What is the difference between the release price and reference price? • They could be the same if there are no discounts or incentives offered • ____________________________________________________________________________ • “More than any press release, sales pitch, or catalog description, the ________________ __________________tells the market what a company really thinks a new product is worth • Release & reference price are ______________ ____________ process NOT a way to come up with a price.

10. Q#4-What are the pros and cons of the ceiling price? • It ensures that each ________ ______________will be considered. • However, there may be: • Insufficient ______________, or • it may leave ____________ ____________ for competitors.

11. Q#5-How would one calculate the price floor? • _________________________pricing works here. • Needs an accurate cost _____________________ _____________________________________________________________________________________________________________________________ • Be careful of ______________________________(for spreading of fixed costs!)

12. Why is it not always wise to go for the price that would return the largest market segment? Q#6 • Does maximizing volume maximize profit? • The trade-off-____________________________profits • A low reference price may trigger ____________ • The lower price won’t allow the ______________ _________________________________________ • It could _________________ existing products • (may be ________________________________

13. How do these pricing approaches compare to those from the 4 P’s Video? Four P’s Video • Layered • Luxury • Skimming • Penetration NP Pricing • Incremental • Release • Reference • Ceiling • Floor Pricing New Products By: Michael V. Marn, Eric V. Roegner, and Craig C. Zawada Published July 2003

14. Clarify the NP Prices Presented NP Pricing • Incremental • Release • Reference • Ceiling • Floor • Incremental price is _________ ___________________ with some small margin of return • Release & reference price are _____________________________________ process NOT a way to come up with a price. • Ceiling price is the _______ ____________________________and sell some product (hopefully at a profit) • Floor price is the ___________ _____________________ with some small margin of return

15. Boil down the differences NP Pricing • ________________ • ________________ • ____________ Four P’s Video • __________________ • _______________ • __________________ Pricing New Products By: Michael V. Marn, Eric V. Roegner, and Craig C. Zawada Published July 2003

16. Other Basic Pricing Considerations and Strategies New Product Pricing Competition Based Pricing Other • Product Line/Mix Pricing • Captive & Optional Pricing • Bundling • Discount Pricing • Psychological Pricing • Promotional Pricing Penetration, Skim & Luxury Incremental Other • __________________________________________________ • _________________________ • _________________________ • _________________________ • _________________________ • __________________________________________________

17. What are some important pricing considerations during launch? The first six months or year are critical to a new product. • Discounting ___________________ the reference price. • Alternatives are; • ______________________generally, • _____________________________ get free samples • Free _____________________

18. When should penetration pricing work? • When high ___________________________________. (lowering price yields more or less revenue?) _______________ • When you have a ___________________ • through ______________________________________ • _________________________

19. A lesson from Slide Serve http://www.slideserve.com/awentia/pricing-products-pricing-considerations-and-strategies

20. THE END