The importance of chemical product design has been well-recognized in the chemical engineering community. Pricing is one of the vital factors among all key issues such as product attributes, product quality, company and societal factors involved in chemical product design. It plays a major role to cover the development and operating cost in order to achieve target sales with a predetermined rate of return. It is an essential aspect as well for customers making their purchase decisions. Moreover, pricing has a huge impact on company’s financial results and it has already been reported that even a small increase in price has a larger impact on profitability than other levers of operational strategies. With all these issues, price setting is very important to achieve a substantial market s...[ Read more ]

The importance of chemical product design has been well-recognized in the chemical engineering community. Pricing is one of the vital factors among all key issues such as product attributes, product quality, company and societal factors involved in chemical product design. It plays a major role to cover the development and operating cost in order to achieve target sales with a predetermined rate of return. It is an essential aspect as well for customers making their purchase decisions. Moreover, pricing has a huge impact on company’s financial results and it has already been reported that even a small increase in price has a larger impact on profitability than other levers of operational strategies. With all these issues, price setting is very important to achieve a substantial market share over the duration of product life in the presence of all competing products in the market. The purpose of this study is to develop a systematic procedure as well as necessary heuristics and models for making pricing decision for chemical products. The optimal pricing strategies are identified by considering various elements. A workflow for determining the model parameters in the Bagajewicz’s pricing model is also discussed. The parameter of brand awareness linked with marketing expenditures, and the relationship between different pricing strategies and elasticity of substitution of products with different natures is evaluated. The practical application of this framework and pricing model is illustrated by a case study of launching a product in the energy drink market.