OnDemand WTP Pricing Research

Pricer’s Points: Price it Right – Make Money by Knowing its Type | Sudeep Sharma

Someone Rightly said, there is no “one right way” to calculate your pricing. Once you’ve considered the various factors involved and determined your objectives for your pricing strategy, now you need some way to crunch the actual numbers. Here are four ways to calculate prices:

  • Cost-plus pricing – Set the price at your production cost, including both cost of goods and fixed costs at your current volume, plus a certain profit margin. For example, your widgets cost $20 in raw materials and production costs, and at current sales volume (or anticipated initial sales volume), your fixed costs come to $30 per unit. Your total cost is $50 per unit. You decide that you want to operate at a 20% markup, so you add $10 (20% x $50) to the cost and come up with a price of $60 per unit. So long as you have your costs calculated correctly and have accurately predicted your sales volume, you will always be operating at a profit.

Pricing is a tricky business. You’re certainly entitled to make a fair profit on your product, and even a substantial one if you create value for your customers. But remember, something is ultimately worth only what someone is willing to pay for it.

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Price it Right – Make Money by Knowing its Type.

sudeep sharma

Assistant Manager at Shreyas Relay Systems Ltd

 

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