How to Price Your Product

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How to Price Your Product

By an eHow Contributor

Price Your Product

Setting the right price for your product or service is a delicate situation. You must find a price

that will reflect your production costs as well as the value your customers place on your product.

Difficulty: Moderate

Instructions

Things You'll Need:

y Calculatorsy Accountants

y Patent Marketing Servicesy Calculators

1. 1

Consider your production costs. These costs consist of both the fixed and variable

expenses to manufacture or offer your product or service. Fixed costs include rent,salaries, property taxes - any expense that doesn't change often. Variable costs fluctuate

depending on the amount of goods produced or services provided. They include rawmaterials, hourly wages and sales commissions.

2. 2

Analyze your market. How much are customers willing to pay for your product? Conductmarket research to test your pricing strategy. See what competitors are charging. You

may price your product higher than the norm if you offer better service than your competitors.



3. 3

Evaluate your product's uniqueness. See how closely your product resembles a competingproduct. Consumers will be reluctant to pay higher prices for your product if they can pay

less for a competing brand.

4. 4

Determine your product's price elasticity. Your product's elasticity is determined by

whether price changes result in changes in demand. For example, if slight changes inprice results in significant changes in demand, your product is considered to be elastic.

However, if there is little change in demand even with significant price changes, your product is inelastic. The greater the price elasticity, the closer you should price your

products to your competitors' products.

5. 5

Set a price. Take all these factors into consideration before making a decision.

Read more: How to Price Your Product | eHow.com http://www.ehow.com/how_8598_price-product.html#ixzz1Fe5U3ear

How to Price Your Product

edits by:Imran, Ben Rubenstein, Abaya, Tom Viren (see all)

Article

Edit Discuss View History



As you know, there are many ways to price a product. Different policies and strategies work invarious situations.

edit Steps

1. 1

Premium Pricing: Use a high price where there is uniqueness about the product or service. This

approach is used where a substantial competitive advantage exists. Such high prices are charge

for luxuries.

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2. 2

Penetration Pricing: The price charged for products and services is set artificially low in order to

gain market share. Once this is achieved, the price is increased.

3. 3



Economy Pricing: This is a no-frills low price. The cost of marketing and manufacturing are kept

at a minimum. Supermarkets often have economy brands for soups, spaghetti, etc.

4. 4

Price Skimming: Charge a high price because you have a substantial competitive advantage. However, the advantage is not sustainable. The high price tends to attract new competitors into

the market, and the price inevitably falls due to increased supply.

5. 5

Psychological Pricing: This approach is used when the marketer wants the consumer to respond

on an emotional, rather than rational basis. For example, price point perspective 99 cents not

one dollar.

6. 6

Product Line Pricing: Where there is a range of product or services the pricing reflect the

benefits of parts of the range. For example car washes. Basic wash could be $2, wash and wax

$4, and the whole package $6.

7. 7

Optional Product Pricing: Companies will attempt to increase the amount customer spend once

they start to buy. Optional 'extras' increase the overall price of the product or service. For

example, airlines will charge for optional extras such as guaranteeing a window seat or reserving

a row of seats next to each other.

8. 8

Captive Product Pricing: Where products have complements, companies will charge a premium

price where the consumer is captured. For example, a razor manufacturer will charge a low price

and recoup its margin (and more) from the sale of the only design of blades which fit the razor.

9. 9

Product Bundle Pricing: Here sellers combine several products in the same package. This also

serves to move old stock. Videos and CDs are often sold using the bundle approach.

10. 10

Promotional Pricing: Pricing to promote a product is a very common application. In short words:

Buy One Get One Free.



11. 11

Geographical Pricing: Geographical pricing is evident where there are variations in price in

different parts of the world. For example rarity value, or where shipping costs increase price.

12. 12

Value Pricing: This approach is used where external factors such as recession or increased

competition force companies to provide 'value' products and services to retain sales e.g.

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edit Tips

y You need to understand your segment.

y Set the price according to market demand not according what you think your value is.

How Much? : Pricing Your Product

Posted by: eTips

3 Jul

Pricing is one of the most important factors you must consider in whatever business you plan to put up. The idea is not to price your product or service too high or too low.If your price is too high, not too many people will be able to afford your product or service. If

it¶s too low, customers won¶t buy it because they¶ll think what you¶re offering is of inferior quality.



There¶s no hard-and-fast rule in determining the right price for your product or service, but thereare a few things you¶ll want to keep in mind when doing so. One is the cost of your merchandise

or service. At the very least, you¶ll want to recover the cost of producing your product or servicefor every sale, and to know your recovery cost you must first determine the cost of producing it.

Your cost has two components: the variable and the fixed. The variable component comprises alldirect costs related to producing your product or service, and these are usually your directmaterials and direct labor that are directly proportional to the number of units you plan to sell.

(Directly proportional means any increase in production will proportionately increase your variable cost or your cost of producing each unit, while any decrease in production will

proportionately bring down your variable cost.) Your fixed component is usually your indirectcosts known as overhead, which is inversely proportional-meaning any increase in units

produced will result in a lower amount of fixed cost per unit produced-to the volume you plan tosell.

To simplify price-setting, make your operating costs part of your overhead so that your costs are

all in when you compute for the selling price. Your cost will set the base in computing for your desired gross profit, which is the other factor to keep in mind when setting the price of your

product or service.

Your desired gross profit is of course the amount of profit you¶d like to earn for every productyou sell or service you provide. This should set the minimum amount of profit you¶d like to

make in operating your business, and it may be expressed in pesos or as a percentage of your cost. (Use percentage of cost as this is easier especially when you need to raise your prices.)

Your gross profit rate could range from 10 to 200 percent, but ideally it should be 20 to 50percent. Keep in mind that all businesses are established with the ultimate goal of making a

profit, and this is one area of your price setting that¶s crucial to your success.

Also remember that your desired gross profit rate is likely to be influenced by your payback

period. The longer your payback period, the lower gross profit and selling price you need tosustain your business; and the shorter it is, the higher your gross profit should be. Let us illustrate

how you may determine your selling price without considering your payback period by lookingat your cost of producing, say, fruit juice or fruit shake:

y Direct Materials: Fruits (pineapple, mango, orange, banana, apple, kiwi, strawberry, etc.),

sugar, water, cups, straw, etc.y Direct Labor: Crew to slice and prepare the fruits, mix them with other ingredients, etc.

y Overhead: Juicer, osterizer, chopping board, knives, depreciation of refrigerator or chest-type freezer, air conditioning, etc.

y Renty Utilities: Electricity and water bills, etc.

y Cleaning supplies: Mops, soaps, sponges, etc.y Other fixed expenses related to your business operations

Let¶s now assign your hypothetical cost in producing one cup of juice:



y Direct Materials (DM) : P7y Direct Labor: P2 (P400 a day with a projected production and sale of an average of 200

cups a day)y Overhead (OH) : P15

y Total Cost (DM+DL+OH) : P24y Desired Gross Profit: P12 (50% of total cost)y Selling Price: P36

After coming up with your selling price based on your cost and desired gross profit-thequantitative factors-you may adjust it further using qualitative factors like the characteristics of

your target market. If your target market is the upper class, you have room to price your productor service higher; if it¶s the lower class, then you should bring it lower as price is a major

consideration with its members.

Another factor to consider when setting your selling price is the industry to which you belongand its standards. (Do some research to determine exactly who your competitors are and what

they¶re charging for the same product or service. Then make it a point to price your product or service within their price range.)

The image your want to project for your product or service is equally important. If you want toproject your product or service as something superior, then price it a bit higher-though not too

high-in relation to your competitors. If you want to project the image of being inexpensive,reasonable or affordable, then price your product or service lower. The key is in knowing what

your market can afford or is prepared to pay for whatever it is you¶re offering

product Pricing - September 27th, 2010

Product Pricing:-

Approximate Manufacturing cost: 75% to 90%

Approximate Profit margin: 25% to 10%

Manufacturing cost includes:-

Cost of paper : 72%

Cost of inks : 0.5%Cost of varnishing : 1.5%

Cost of lamination : 5%Cost of pasting : 5%

Labor charges : 5%Electricity : 4%



Others : 7%(Approximate Percentages)

Pricing Procedure and Negotiations:-

Firstly, the customer provides the company with particular specifications, in which he requires

his product to be made. Accordingly, a sample is made and its cost is calculated, adding to it theappropriate profits along with other expenses incurred.

Then an offer price is placed before the customer. If this price is approved by the customer then

the contract is signed, but if not, then negotiations are done.

In negotiations, they try to check out where the prices can be reduced e.g., change in quality of

paper or method of buying the paper (cash basis or on credit basis; buying paper is cheaper oncash basis rather than on credit basis).After this the two parties settle on a price and enter a

contract.

In case the paper bought on cash basis, according to the agreement with the customer, the credit

period given to the customer is reduced. Maximum credit period is 60 days and it reduces to 15to 30 days in terms of cash payment.

Pricing Methods with Examples - December 13th, 2007

i urgently need industry examples of pricing methods in

Marketing .

eg:

Psychological Pricing: BATA since it prices it products close to

the round figure i.e. 99 or 299.99, so as to play with the psyche

of the consumer

i need examples for the following methods:

Bid Pricing

Cost Plus Pricing

Customary Pricing

Differential Pricing



Diversionary Pricing

Dumping Pricing

Experience Curve Pricing

Loss Leader Pricing

Market Pricing

Predatory Pricing

Prestige Pricing

Professional Pricing

Promotional Pricing

Single Price for all

Special Event Pricing

Target Pricing

even if you have examples for any 1 method also please do

reply.. it would be of great help

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Re: Pricing Methods with Examples

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Rohan Sanghavi

ross18

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Re: Pricing Methods with Examples - December 13th, 2007

Hey there,



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Bid Pricing :-The stock exchanges use a system of bid and ask pricing to

match buyers and sellers. The difference between the two prices is the

bid/ask spread.

Cost-plus pricing: - It is a pricing method commonly used by firms. It is

used primarily because it is easy to calculate and requires little

information. There are several varieties, but the common thread in all of

them is that you first calculate the cost of the product, then include an

additional amount to represent profit. Cost-plus pricing is often used on

government contracts, and has been criticized as promoting wasteful

expenditures.

Customary pricing:- is where the product "traditionally" sells for a certain

price. Candy bars of a certain weight all cost a predictable amount -- unless

you purchase them in an airport shop.

Dumping Pricing:- The Best example here would be China Dumping the

Electronic Goods in the Indian Market.

Experience curve pricing: -A pricing policy in which a company expands

its market share by fixing a low price that high cost competitors cannot

match. For Ex Spykar Jeans.

Loss Leader Pricing :-The intent of this pricing strategy is to not only havethe customer buy the (loss leader) sale item, but other products that are

not discounted. For Eg Big Bazzar.

Prestige pricing:- Cheap products are not taken seriously by some buyers

unless they are priced at a particular level. For example, you can

sometimes find clothing of the same quality brand at Nordstrom as you do

at the Men's Warehouse. But because it is priced higher, Nordstrom's

clientele believes it to be of higher quality.

Professionalpricing:- Pricing used by people who have great skill orexperience in a particular field or activity. For Eg Corporate Professionals

Promotionalpricing :- It is related to the short term promotion of a

particular product. For Ex :- Pricing of a product during its Launch.

these are some of the pricing strategies that i found have passed it on..



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How to Price Your Product