New product pricing

The core of new product pricing takes into account the price sensitivity of demand and the incremental promotioneil and production costs of the seller. What the product is worth to the buyer, not what it costs the seller, is the controlling consideration. What is important when developing a... 

Redmond, W. H. (1989), Effects of New Product Pricing on the Evolution of Market Structure, Journal of Product Innovation Management, Vol. 6, pp. 99-108. 

Determing the price of a product which is not on the market can be achieved by utilizing price comparison with imported products on a nutrient basis. For multiple nutrient products, new product prices can be determined by calculating the price based on imported component materials. For example, the price of a new multinutrient -produGt-4 -25i -Gan-be-determined as follows ... 

Given the new product price np and perceived value v q), a customer s perceived value for a refurbished product can be calculated as v q) x np). A low-end customer will purchase the refurbished product as long as he/she pays a price that is less than v q) x np). Thus, the customer gets a positive surplus v q) x np) - rp. In the market, a customer s perception of product quality is uncertain and can be characterized to fall between [q - i, q + i, where i is the uncertainty range. The corresponding perceived value of the product falls between [v q - i), v q + i)]. The distribution of perceived value (also referred to as a customer s willingness to pay) is assumed to follow a uniform distribution in the literature (Mitra 2007 Atasu et al. 2008 Ferguson 2009). We will also assume a uniform distribution to model the customer s perceived value. Note that the customer s perceived value for a refurbished product is always less than or equal to a new product price, that is, (v q) x np) < np. 

Purchasing cost of raw material from supplier s by plant m Transportation cost per unit from plant m to warehouse w Transportation cost per unit from plant m to hybrid facility h Transportation cost per unit from hybrid facility h to retailer c Transportation cost per unit from warehouse w to retailer c Transportation cost per unit from retailer c to recovery center r Transportation cost per unit from recovery center r to plant m Production cost for a new product at plant m Refurbishing cost for a returned product in tier k at plant m Price of a new product Price of a refurbished product... 

The cost parameters are modeled as a function of the new product price. Refurbishing cost and inspection cost of returned products are set based on their tier of return that is, the higher the tier of return, the higher is the cost of refurbishing and inspection. Initially, we assume a mix of 70% low-end and 30% high-end customers (o)i = 0.7, (O2 = 0.3). Other cost parameters are shown in Table 8.10. 

Group). This published information can be used to assess at what price a new product will sell or to assess the minimum allowable selling price for given raw materials costs. 

The value of crude ore produced ia the United States was estimated to average 32.50/t in 1994. Product pricing was reported to vary from 99/t for New York State 200-mesh paint grade to 220/t for ultrafine Montana paint grade. Cosmetic grades were quoted at 263/t. 

Depending on the product and sales arrangement, the revenues calculation can take from a few man-hours to many man-months of effort. For instance, determining the price for a synthetic fuel from coal can be done in a very short time, based on the cost of service. However, if the price is tied to the price of natural gas or oil, the task becomes very difficult, if not impossible. On the other hand, determining the sales growth and selling price for a new product requires a great deal of analysis, speculation, market research, and luck, but projections can be made. 

This new lower price changed the comparative economic advantages of some of the newer plastics and led to a search for new uses of acrylonitrile and its polymers and copolymers. A new route to Dacron was developed by du Pont using this lower priced acrylonitrile and the use of acrylic fabrics grew rapidly. There was also an increase in uses of ABS and acrylonitrile production capacity. 

Many academic texts are available to teach chemists the fundamental tools of their trade, but few books are designed to give future industrial research and development chemists the knowledge they need to contribute, with confidence and relevance, to the development of new environmentally benign chemical technology. This book aims to be a handbook for those chemists attempting to develop new processes and products for the twenty-first century, which meet the evermore stringent demands of a society that wants new products with improved performance, and with a lower financial and environmental price tag. 

New product concepts are tested against the baseline to check whether there is a genuine improvement or not and can be plotted in the form of a spider-diagram (Figure 3.5). This allows alternative solutions to be easily compared, and specifically highlights the trade-offs that have to be made. It may not be possible to ensure that a new idea has a lower or equal impact on every dimension to the existing solution. There may be a price to pay on one dimension to secure a range of benefits on other dimensions. 

The criteria used to fix the individual prices of drugs in each country that opts for this type of system are various the therapeutic value of new products, the cost of comparable treatment, the manufacturer s contribution to the national economy and the observed price in other countries. Table 3.2 shows a comparison of the use of these criteria in several OECD countries according to the answers given to a survey carried out in each country. As can be seen from the table, all the countries that responded to the survey acknowledge use of the comparison of authorized prices in other countries as a price-setting criterion. 

It is interesting to note that most price regulation systems for new products that are applied in the EU acknowledge either explicitly (criteria or norms... 

The behaviour of the company will consist in applying price increases to products with a faster-growing and more inelastic demand (new products) and price cuts to products with a decreasing and more elastic demand owing to increasing competition or obsolescence. 

PCR regulation does not restrict the price of new products, so the initial price of the product introduced onto the market will be higher than in the absence of regulation. In the simulation carried out by Abbott19 the initial price can be seen to be higher under PCR than with free pricing in the first years. The effect on welfare is very sensitive to the social and private discount rate. 

In order to determine whether or not the growth in pharmaceutical expenditure entails an increase in the price of the resources used in health production, the important factor to determine is the significance or otherwise of the innovation and its marginal contribution to health production. The large number of new products in some markets, such as Spain, Italy and Germany that provide a very small degree of innovation may constitute an indication of increasing prices rather than an increase in value (contribution to the improvement of health status and welfare). 

One study on the evolution of Spanish public pharmaceutical expenditure21 concludes that spending on pharmaceuticals rose 264 per cent in real terms from 1980 to 1996. This figure can be broken down into a 39 per cent decrease in the relative price of medicines, a 10 per cent increase in the quantity and a variation of 442 per cent explained by a residual that reflects the effect of the introduction of new products and a shift in consumption. As we can see from these figures, we have no practical price index and no quantitative approximation to the breakdown of the increase in expenditure into price and quality. 

Very strict price control systems can give rise to higher prices at the time of introduction of a new product and the weakening of potential price reductions on expiry of a product s patent (the case for 88 per cent of products in the USA). These observations support the idea that it does not appear to be at all efficient to continue with the system of product-by-product price intervention currently in force in Spain. A regulation system that gives the company flexibility of pricing and excludes products that are subject to competition would be far more recommendable.1... 

European pharmaceutical markets are strongly regulated as regards the introduction of new products onto the market (through authorization and patents) and also as regards prices and consumption (medical prescription and public financing). However, the way in which entry, prices and consumption of pharmaceuticals are regulated varies enormously from country to country. 

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