How to Price a New Innovative Product across Different Markets

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Pricing
How to price a new and innovative
product across different markets?

Key benefits
By aligning the pricing structure across markets but keeping a market specific consumer price, the company was able to maximize its margin control and achieved its gross margin objectives within 2 years after launch.

Summary
A premium pricing strategy was set out to launch the new product based on cost plus price setting and tailored price execution, using: • structured trade terms with a price waterfall structure, • pay-for-performance principle regarding discounts and rebates, • engagement of sales and specific training of the sales force.

Background
As its core business was under pressure and an urgent need for product portfolio broadening was identified, a global player in the food industry embarked on a new strategy of FMCG product launches in different markets. By exploiting its strong, world-wide recognized brand name, the company launched several innovative products. A new pricing strategy was developed for the product group and price setting and execution needed to be adapted and made market specific.

The Challenge
In order to make the new business a success, following challenges were to be tackled. • Innovations were launched within a niche segment of FMCG business in which the company had no prior experience. Therefore, limited possibilities towards economies of scale existed and the pricing structure of the existing core business could not be leveraged. • As the company aimed to be the first global player with an innovative product, the window of opportunity was limited. Time to market needed to be short and the launch and roll-out of the new business needed to be fast and thorough in order to outsmart competitors who might be preparing similar launches themselves. Therefore, significant market penetration was targeted within the first year. • Launching a new and innovative product implied that little competitive information was available and...
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