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Pricing

Price is only one of many competitive parameters, you should also pay attention to other conditions.

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.

Sales price

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 price
+ Cost of production, purchase or import
+ Profit
= Sales price
+ 25% VAT/moms
= Sales price including moms

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.

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