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:
Before your product/service reaches the customer, a number of cost accumulating activities have taken place – activities such as:
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/moms.
The calculation of the sales price could look like this:
+ Cost of production, purchase or import
= Sales price
+ 25% VAT/moms
= Sales price including moms
Your target group conditions also influence the pricing:
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.
Depending on the competitive situation in your market you must at least investigate the below:
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.
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