Pricing Products That Your Competitors Don’t Have

You have just got back to your office after two international industry events, Vision Expo West and Silmo Paris. Your orders of designer frames or “lunettes de créateurs” will soon be ready for dispatch and will begin arriving at your office in a matter of weeks. You are so proud to be able to select an exclusive collection of various designs and colors that are not available in your competitors showrooms. You have one problem: how will you reasonably price those unique pieces without being too expensive and losing customers or being too cheap and losing profits? While products found at competitors make pricing easy (you simply price at the market, below, or over), unique pieces are difficult to price when introduced in untested markets, and determining the optimal point for price becomes problematic.

While on my way back from Vision Expo West I met a colleague at the airport who was traveling to Portland, Oregon. When I asked him this question he suggested we ask a few customers, “how much are you willing to pay for this Optical Frame or Sunglasses?” and after we collect the responses we use the average price. I thought about his solution and couldn’t determine if the price provided by this method would be too expensive or too cheap. Simply averaging the price after asking consumers how much they are willing to pay for a specific product does not provide a reliable price that ensures that 100% of customers will buy it at this price or accept it as fair without necessarily buying it.

This specific question may not give reliable insights, however, surveying customers is the way to go using completely different questions. Directly asking customers how much they are willing to pay is an effective method to collect interpretable answers, however, this method has many flaws. One of the flaws is, answers will fall within a range, and being able to get a single price point is almost impossible. Another flaw is that customers have the tendency to lowball when they are asked to price a product they would potentially buy, therefore, applying pressure on the company to lower prices. More frequently, customers are unaware of how much they would price a product because they don’t know all factors involved in the cost of the product like fixed costs, variable costs, labor, material, patents, technology, marketing, packaging, branding, etc.

In the coming posts, I will be detailing and comparing two distinct pricing methods. Until then, send me your thoughts on how would you price those unique designer frames or “lunettes de créateurs”?