Q2 - Q2. How would you price a new product (say a Mixi)?...

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Q2. How would you price a new product (say a Mixi)? What options would you employ to generate quick revenue? Ans: We can classify new products into: (i) Intrinsically new products arising out of technological innovations, and (ii) New products arising out of marketing-oriented modifications. It is the first category of intrinsically new products that demands a special approach in pricing. As there are no precedents for new products, there are no trends to indicate how the market will react to different levels of pricing. Even in the matter of demand, often only some sketchy information is available for new products. The following are commonly used methods of pricing: Demand–based pricing This method of pricing is not suitable for such products because adequate data is not available in respect of these products Competition–based pricing This method of pricing is also not suitable for such products, because the product is a pioneer and competition will only be a later phenomenon, when ‘me-too’ products enter the scene. Cost plus pricing Here too, there is a difficulty in respect of new products. In several cases, the actual costs of new products are difficult to measure. For example, allocation of overheads to the new product is usually done on the basis of untested assumptions. Similarly, R&D expenses would have been shared by several new product ideas and apportioning it to a particular may become difficult. Even if the costs of new product can be accurately measured, cost plus pricing or breakeven pricing cannot be straightaway adopted because no information is available regarding the marketability/possible sales volume of the product. In fact, such imponderables have prompted marketing experts to comment that new product pricing has to be done in a vacuum. Obviously, new product pricing cannot be a matter of a formula. The subject needs a special
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Q2 - Q2. How would you price a new product (say a Mixi)?...

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