Effective pricing There are different methods for determining an acceptable price for a product. Each of them is unique and can be appli in certain situations. Depending on your niche, company goals, the nature of the product, market conditions and many other pricing factors. Remember, choosing a method can be difficult.
Next we will consider the formulas by which the price is set in one method or another. Many of them will involve 2 concepts:
- Fix costs are expenses that a company must incur on an ongoing basis, regardless of how much product it produces and sells. For example, office rent, administrative staff salaries.
- Variable costs are those that are directly relat to the volume of products produc: materials, wages of shop workers, packaging, and so on.
Costly
Cost-bas pricing methods most often help large c level contact list companies correctly determine. The cost of a product, goods, or service, bas mainly on their internal nes and indicators. They are bas on the analysis of all costs associat with the production and sale of products.
1. Cost plus markup method
This method involves adding a fix markup to the cost price (variable costs) of the product.
2. Full Cost Method – Cost-Bas Pricing
Here, the desir profit is add to the total cost price (the total of fix and variable costs) of the product. The method allows for a more accurate how to choose the right type of team management system determination of the minimum price necessary for the sustainable functioning of the company, taking into account all possible expenses.
3. Marginal cost method
This pricing method is relevant for those who want to increase the volume of sales of goods within the framework of an existing production. It is us if the current business model already covers fix costs – that is, the business is at zero or makes a profit.
To better understand the logic of this method, let’s look at an b2c fax example. Let’s imagine that a young entrepreneur took out a loan of 200,000 rubles to develop his business at 13% per annum. This is our investment.
In this case, the product sales strategy determines that the entrepreneur can produce 5,000 units of products, and variable costs are equal to 40 rubles per unit of product. Fix costs are 300,000 rubles.