What is important when setting prices for new products?
* Cost
* Demand
* Competition(competitors’ prices)
The first thing we must take into account is costs when setting prices for new products. Prices should cover the costs, such as insurance, raw materials, rent and equipment. Otherwise, the company will make a loss.
Secondly, demand is also important. Consumer demand for the product clearly affects the price that can be charged. When demand is strong, we can set high prices, when demand is weak, we can set low prices.
Besides, competition should be taken into account. If you fixed the price higher than your rivals without higher quality of service, you might soon find yourself in an unfavorable situation.(The company is supposed to consider the prices set by its competitors.
(Last but not least, if a company wants its new products to be competitive, it must take competition into consideration. It must set the prices equal to or lower than its competition.)
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