Question

1. Costs. Identify and discuss costs associated with developing and launching new products and/or services. Provide dollar figure examples of costs.

2. Consumer Acceptance. Evaluate and discuss consumer acceptance of the price set for new products and/or services. Set a price for products or services and discuss how a business theoretically gathers feedback that the price would be accepted.

3. Competitor Prices. Evaluate and discuss competitor prices for similar products and/or services. Provide dollar figure examples of prices.

Answer 1

1) In launching a new product, the following costs might be involved:

a) Market Research: Before trying to develop the product and launching it a later stage, you need to research the market if there is already a similar product or not, would people be willing to buy the product or not, etc Expected spending: $5,000 to $50,000

b) Positioning & Strategy: Once you have researched and are sure about developing/launching the product, you need to realize the correct market for both your product as well as the resources used in production, example, labor, land, electricity, etc. Also, you need to analyze the possible market share in case the product has an existing substitute.

Dollar example would be $1,000 to $20,000

c) Production: After positioning, you need to hire all the required resources, raw materials and buy the plant to start the development of the product. The amount could vary from $5,000 to $50,000

d) Product Branding & Packaging Design: After production, you would need to pack the product and go for apt product branding. Expected spending is $1,000 to $5,000 for product branding and $2,500 to $25,000 for packaging design.

e) Marketing: Correct marketing would mean higher awareness about the product and higher sale. The optimal routes of marketing are newspaper advertisement, website, personalized emails, and social media. Expected costs are $500 to $5000 for a simple site and between $1,000 to $25,000 per month for other types.

2) Price acceptance by customers depends on various factors. Firstly, it depends on whether the product is entirely new or is it a substitute of an existing product. If the product is completely new, then you would be a monopolist in the market and can set the prices to be as high as you want until you don't lose customers. The acceptance rate to price would be very high in this case.

Secondly, people would be highly accepting of the price if the product is a necessity and not just a luxury. People often choose to postpone the expenses on luxury goods until they find a cheaper option but the same is not possible for necessary goods such as bread.

Thirdly, price acceptance would depend on the quality of the product and availability. If the product is easily available in the nearby markets, then customers would be willing to spend more money on a product.

3) The competitor prices affect your prices because if the competitor charges lesser than you, then she would attract most of the customer base and you would end up making loss. The optimal move, in this case, would be to keep the prices as low as possible, namely equal to the marginal cost of production. The other way to improve sale is to make your product better than the competitor's. Since you enter the market after your competitor, you have an added advantage in terms of information. Utilizing that information in your production would affect your product's prices.