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Marketing
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Eventually, an independent business owner must price his/her product/service – to many this is unexplored territory. However, it does not have to cause too much trouble – you just need to be aware of relatively few conditions.
Market mechanisms allow you to fix a high price on your product/service if there is a great demand and a poor supply – oppositely, if there is a poor demand and a surplus of similar products/services in the market you may be forced to fix a low price.
As price
is only one of many competitive parameters, you should also pay attention to a number of other conditions:
Expenses
Before your product/service reaches the customer, a number of cost accumulating activities have taken place – activities such as:
- Purchase, cost of sales and maybe also raw material processing
- Wages
- Freight, import duty
- Administration, etc.
Once you have determined your expenses you can easily fix a break even price on your product/service. Add your required profit and you have a sales price. Do not forget to add 25% VAT.
The calculation could look like this:
Cost price
+ Cost of production
+ Profit
= Sales price + 25% VAT
Target Group Demand
Your target group conditions also influence the pricing:
- What are the customer’s requirements, buying motive, expendable capital?
- Season, trend, fashion
- The customer’s price expectations – psychological price, corporate image, price = quality, etc.
Put yourself in the customer’s place, then fix the price. During periods of low consumer expenditure it may matter whether your product/service is a necessity or a luxury item.
Market Structure
Depending on the competitive situation in your market you must at least investigate the below:
- General price level of the product/service
- Are the competitors campaigning on price?
- Which other competitive parameters apply?
If price is a parameter you must consider if other products/services are interchangable with yours. The higher interchangability the more the customer gains from purchasing the cheapest product/service.
Carlslund
- Beregn din omsætning og nødvendigt salg
- Calculate turnover and sales
- Pricing - the market
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