Pricing New Products:

Abstract

Introduction The problem of establishing a price for a new product is typically related to one of a number of possible company pricing objectives. McCarthy and Shapiro, for example, divide possible pricing objectives into the categories “profit oriented”, “sales oriented” and “ status quo ”, and then further subdivide them according to the diagram in Figure 1. The status quo objective of “meeting competition” translates itself directly into a new product price, while that of “nonprice competition” implies that price is to be de‐emphasised—one is, nevertheless, left with a pricing decision. All the other pricing objectives require either an explicit or implicit knowledge of the relationship between the price of the product and the quantity of goods sold—i.e. the demand curve.