Entering into established market

[Deleted2BB3x9]

Is it better to price your product lower when entering as a new company in a already established market? Or is it better to price your product accordingly and just provide a superior product? I would offer a superior product in both situations. However, is it better to offer a low price or high price when entering a new market?

 

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[Walter Hay]

Is it better to price your product lower when entering as a new company in a already established market? Or is it better to price your product accordingly and just provide a superior product? I would offer a superior product in both situations. However, is it better to offer a low price or high price when entering a new market?

To a large extent it will depend on your sales and marketing skills.

If you are good at sales, you can forget about cost plus pricing or competitor minus pricing (price cutting) and charge what the market will bear. Competitors' prices will possibly give you some idea of the market value of your product type, but you must compare apples with apples.

Approach competitors as though you are a potential customer. How do they respond?

When planning on launching my importing franchise network in another country, I phoned my competitors, I visited them, I obtained samples from them, and was able to assess the true nature of the competition I was facing. Fortunately for me, I discovered that sales staff were largely ignorant about what they were selling, unable to answer even basic questions.

Their pricing was almost identical to one other's prices, and they all had a mean attitude that required them to charge for every little extra they could dream up. Even their advertising which at that time was predominately print Yellow Pages, was boring because instead of paying to have good copy prepared, they followed the free standard advice given by the totally inept YP representatives.

My franchisees entered the market well trained in product knowledge, confident that they were offering the best quality on the market, indoctrinated with the concept that the customer is always right, a willingness to give more than the customers expected, with "free" set up, and "free" delivery, and with prices way above what the competitors charged. They killed it, and in the first country where I set up franchises overseas our brand soon became #1. It still is, even though I sold out a few years back.

My view is that if you can only sell on price, you can't sell.

Walter

 

[MJ DeMarco]

Is it better to price your product lower when entering as a new company in a already established market? Or is it better to price your product accordingly and just provide a superior product? I would offer a superior product in both situations. However, is it better to offer a low price or high price when entering a new market?

Start low to gain traction, good reviews, good word of mouth, etc.

Your objective should be to determine the existence of a productocracy. Once gravitons are found, your pricing can escalate and be in the high range.

The only exception to this would be a product using a luxury branding strategy.

You don't want to start out cheap, and then go expensive as it sends two different brand messages.

 

[Walter Hay]

An extremely or even ridiculously high price can be a magnetic USP in the luxury market. If I may mix my metaphors, that red hot price can act like a flame to a moth.

Just having a superior product is not enough. The customer must perceive that product as superior, and unless quality is paramount for that customer there must be other incentives to buy from you.

Walter

 

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[Deleted2BB3x9]

@Walter Hay @MJ DeMarco

Thank you both for your solid advice. I will take both perspectives into consideration. However, as my product is not a luxury product, I will probably price it lower to start then gradually raise it. Also, MJ, I have your new book, it's definitely a really good book. Thank you both again.