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Pricing | Introduction of a New Product

Pricing plays an important role in the course of the introduction of a new product, such as a healthy snack. A healthy snack is a new product which is introduced as an alternative to conventional snacks. Unlike conventional snacks, a healthy snack has no negative impact on human health and, what is more, it can be useful for health. Such position of the healthy snack defines the objectives and goals of its introduction. In fact, the healthy snack aims at taking a new niche in the market and taking the leading position in the market of healthy snacks. The healthy snack should become an alternative to conventional snack that will gradually replace its “unhealthy” competitors.

At the same time, the introduction of the healthy snack should be grounded on a wise pricing strategy because the price of the healthy snack should not be exorbitant because customers will be unable to afford high price of a snack and, instead of the healthy they will prefer a dinner in a restaurant or something like that. In actuality, it is important to maintain the price of the healthy snack at the level of its potential rivals – conventional snacks (Case & Fair, 1999). The use of healthy ingredients may increase the costs of production because ingredients should of the premium quality. On the other hand, the effect of the healthy snack on customers’ health can attract customers to this product and customers, who are concerned with their health, are likely to prefer healthy snacks. Therefore, they may be ready to pay a bit higher price for the healthy snack compared to the price of an ordinary, conventional snack.

In such a way, the pricing strategy should focus on the attraction of customers to the new product stressing its positive qualities and sacrificing revenues for the sake of the attraction of customers (Rodrick, 2002). In practice, it means that the price of the healthy snack should merely exceed its costs, about 1-2%. Basically, the price of the healthy snack should not exceed the price of conventional snacks more than 4-5% to make the healthy snack competitive in the market.

Other companies can use different strategies. For instance, some companies use discounts to attract customers and to gain a larger market share (Slaughter, 2007). However, discounts have a short-run effect because the company will need to establish the actual price and customers may lose their confidence in the company and its product if the price rises. In addition, discounts mean financial losses.

Finally, it is possible to raise price to maximize profits of the company but this pricing strategy works only if the company takes a monopolistic position in the market. The rise of price for the sake of profits may lead to the loss of customers and strengthening of the position of competitors who establish lower price and conduct more flexible pricing strategies.

Thus, the pricing strategy focused on the maintenance of minimal profitability and competitiveness of the price compared to major rivals is the effective and correct strategy to introduce the healthy snack in the market successfully.

References:

Case, K. E. & Fair, R. C. (1999). Principles of Economics. New York: Random House.
Rodrick, D. (2002). Alternatives to Globalization. New York: New Publishers.
Slaughter, M. (2007). “Globalization and Declining Unionization in the United States.” Industrial Relations, 46(2), p. 329-347.