How to decide on the Price Positioning for Your New Product.
(versus your key competitors...)
When launching a new product, determining the right price positioning is crucial. Should your product be priced higher, lower, or on par with your competitors? And how does this impact your overall business strategy? Here’s a simple framework to help guide your decision-making process and ensure that your pricing strategy aligns with your product’s value.
Cost Leader Positioning
This approach is commonly used by businesses that aim to be the lowest-cost provider in their industry. Think of brands like Walmart or Lidl—not necessarily offering the highest quality, but always delivering the lowest price. Customers know they’re getting a good deal, even if the product isn’t top-tier.
Cost leaders win by optimizing their entire supply chain to maximize volume and minimize costs, allowing them to pass savings on to customers. Companies like IKEA, H&M and Ryan Air are great examples.
The key goal in this strategy is to drive volume growth, leveraging economies of scale to sustain low pricing. However, keep in mind that there’s usually only room for one or two dominant players in any given market.
Disruptive Positioning
Disruptive positioning is typically adopted by tech innovators who shake up established markets by offering a new solution that’s both user-friendly and cost-effective. Companies like Zoom (versus Webex), Xero (versus SAP), and Canva (versus Adobe) have employed this strategy effectively.
These businesses win by delivering an excellent product at a much lower price than the incumbents. The result? They capture significant market share and grow exponentially.
The downside is that profitability may take time, and substantial funding is often required to support growth before profits materialize.
Premium Positioning
In contrast, premium positioning involves pricing your product higher than the competition due to its superior value. Brands like Apple, Tesla, Dyson, and Sonos excel in this category.
These companies dominate specific niches and maintain a strong product differentiation. While Apple holds just 20% of the mobile phone market share in volume, they secure 80% of the profit share thanks to their premium positioning.
The key to success with this strategy is constant innovation and a commitment to quality. Premium brands also avoid price deals and discounts, focusing instead on enhancing perceived value through strong communication and brand identity.
Uncompetitive Positioning
Nobody intends to end up in the uncompetitive category, but it happens more often than you’d think. Companies in this space believe their product is better than the competition and price it accordingly, but in reality, the product doesn’t deliver. Examples include Juicero (a fruit and vegetable press) and Microsoft Zune (a portable media player).
These products often fail because they misread the market and overestimate their value, leading to overpriced and underperforming offerings.
Real-World Applications
Several clients have used this framework to fine-tune their price and product positioning:
One chose to maximize market share with a competitively priced, high-value product, accepting that profitability might take time.
Another client prioritized short-term profit, confident that their product’s distinct advantages justified a premium price point.
Don’t Leave Your Price to Chance
It’s easy to default to a “cheaper price” strategy without considering other options. Instead, clarify your goals—both short- and long-term—and choose a pricing strategy that aligns with your business objectives.
Get in touch if you need any help with clarifying your pricing strategy.
Kind regards
Mark Peacock
