Section 5

Pricing Strategy for Your New Product

In order to determine a price that will cover a business’s costs, produce a
profit, create a positive image, and possibly even create a competitive
advantage, a marketer must consider the pricing factors in the chart below.
For example, suppose that a local manufacturer of ‘jollof’ flavored chips
decided to launch a new product. The fixed costs of the manufacturing
100,000 bags of the chips are $500 000 per year. The variable cost is $200 per
500 chips.

Activity
Determine the best price for YOUR NEW PRODUCT IDEA by considering all of
the pricing factors that are relevant to your decision. DECIDE WHAT’S YOUR
PRICING STRATEGY???

Example:
Pricing Factors Details
Ethical Issues Packaging (uses less plastic)
Price $3.10 (your price here)
Pricing strategy Competitive Pricing
(You must decide on your
pricing strategy for your New
Product … is it Market
Skimming; Penetration
Rationale
Environmentally friendly
packaging – biodegradable
bags)
Market Entry Price…
Neither penetration pricing nor
skimming would work
effectively in this market.
WHY?

Pricing😉

Competitors e.g. (Lays 10 oz bag -$3.05
Roast Chicken Potato Chips)
Price sensitivity A traveller looking for a mid-
priced hotel is pre- pared to
pay $80 to $130; for a
boutique hotel $120—$170.
Positioning $3.10 positions the Jollof
Chips as a mid-priced
individual snack;
Promotional Pricing The hotel would be willing to
The price competes with the
chip flavor that is a close
alternative price that can
attract customers to this
new product.
The price will not affect the
demand within the target
market.
The manufacturer of the Jollof
Chips would like to be thought
of as being on the same level
of affordability as Lays Potato
Chips
It is better to make some
 reduce its rates on days that
were not 100-percent booked.
Combo pricing BOGO Half Price – this
campaign will run for a month
in January leading up to the
Super Bowl
money from a room than to
make nothing from it.
Heavy usage of Chips during
Super Bowl. A bag of chips is
inexpensive and by doing a
BOGO deal the company can
increase its unit sales and
revenues

CONCLUSION OF THE PRICING

 Pricing Objectives

What price will your product be sold at? (i) Clearly state the Pricing Strategy that you will use
when you enter this market (ii) Explain why you selected this price and Strategy.

Also include some type of promotional pricing that you/you retailers could offer to boost sales
(i.e. Loss Leader Pricing, Special Events/Sale Pricing, Rebates, Coupons, etc.)