The formation of the retail price is an important stage in entrepreneurial activity. It is on competent pricing that the profitability of a commercial enterprise is based. To determine the retail price of a product, it is advisable to use several methods that complement each other.
It is necessary
- - analysis of competitors' prices;
- - cost accounting.
Instructions
Step 1
Analyze the retail price for similar products in your category. Compare the products on the market carefully. The same name may differ significantly on closer examination, which, of course, will affect the final price. Consider brand awareness as well: Highly advertised products tend to be much higher than less common products.
Step 2
Form the price based on the variable and fixed costs of selling the product. Determine what costs are incurred per unit of production. In this case, consider not only the direct costs of delivery, storage and sale. Don't forget about fixed costs like taxes, electricity, payroll, etc. The retail price of the product must cover all these costs and still provide a certain level of profitability.
Step 3
When it comes to a rare or exclusive product, retail price fixing depends more on your entrepreneurial intuition. For example, a mark-up for exotic fruits or handmade designer jewelry can be 800-1000%. At the same time, most buyers are probably aware that the cost of the purchased product can be an order of magnitude lower. That is why many will easily pay $ 10 for a mango, knowing that in any South Asian country this fruit can be bought for $ 1.
Step 4
When pricing a new product, use the skimming strategy. A progressive model of a mobile phone, an innovative cream, the latest designer collection - products of similar categories always cost more at the market launch stage. Consider this fact in order to be able to gradually reduce the price when many similar products appear around.
Step 5
Form the retail price taking into account subsequent discounts. This technique also has a psychological impact on the buyer. Set a price that is known to be high in advance. And after a few weeks, run a sale while still staying within your profit margins. At the same time, a significant price reduction will attract customers and increase sales.
