How do you go about pricing your products?
Answers:
Its market dependent, as well as supply and demand, assuming you have your internal costs well documented. Often times small businesses fail to account for the cost of capital, where as larger business often times have costs buried, such that their true overhead assigned to a given product is anything but realistic.
A generally accepted minimum retail price is 6X the cost of labor and materials from the stand point of the manufacturer. Overhead and distribution costs however, can allow that to be as low as 1.5X, to as high as 10X.
However, a minimum retail price has to have relevance in the market place. Many times, products are sold as loss leaders, and as such, their sale is not to directly turn a profit in and of themselves, but more so, to facilitate a different, but related profit center. For example, in ink jet printing, and games, the consoles and printers are sold with a minimal margin, or in some cases, a negative margin. The profit is made on the consumables or related products.
In other cases, one may have achieved a level of efficiency or product cost unheard of in the market. Rather than coming out with a "fair price" one has to look at the competition. If your device is as good, or even better than the competition, and could sell at 30% of their price, don't even think about doing so, as consumer perception will be that your product is too good to be true. In those situations, it is far better to undercut the competition by a few percent, rather than come in way under priced.
A general rule, is never market on price alone. The customer perceptions and headaches are often times inversely proportional to product cost. Thus a product sold cheaply often times has much greater overhead from a customer support standpoint, than the same product sold at a premium price. The only way to truly compete on price, is massive volumes, such as the big box or discount stores. If the volume is medium or low. price competition can make such a postion a negative one pretty fast.
It depends on what product you are selling , but, I always like to click on www.ebay.com and search my item then add and subtract all the different prices of the items, low and high and get a median and go from there! :-)
I look to see what my competitors are charging, and then I price myself a little less than them.
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