Help with setting price for a product
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Hi all,
I'm having some problems in setting a price for my product because this is my first time. :D
My case as follows:
I've made 30 pieces of a certain product.
Below are the equipment which I purchased, in order to make these 30 pieces of product
Pieces of wood = $60
Metal parts = $30
Heating equipment = $150
Paint = $20
Misc tools purchased = $60
So, to decide on my price for each product, I would use:
($60 + $30 + $150 + $20 + $60) / 30 pieces of the product = $10.67
Is this the right way to decide how to price a product?
Or should I factor in only [Pieces of wood] and [Metal parts], since these are the actual materials used, whereas [Heating equipment], [Paint] and [Misc tools] are more like long-term investments?
Because in future when I sell more of my products, for example, the costs of the [Heating equipment], [Paint] and [Misc tools] would already have been long covered and it's not fair to still continue charging the customers for it. Some more, I'm trying to keep prices low. -
What's your product mate?
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handmade clock.
now, back to topic. :-)
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are u going to share the profits with us?
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My suggestion would be to just just include the paint, wood and metal components into the cost. Let cost price be X. Your selling price given the nature of your product should be Y% of X + X=Z.
In this case, Y will your variable.
Do a calculation of how much does your heating equipments and misc. tools cost and see how many clocks do you need to sell to break even. If you believe you can sell 30 of these clocks, let Y x 30 be 50% of your investment cost in the heating equipments and misc. tools.
Therefore, you'll need to sell 60 clocks to break even. This is provided you believe they will sell. Since you need to sell 60 of them to break even, Z should be <$8, which is a sum of money I'd pay for a clock.
This is just my 2 cents, just suggesting
Good luck in your business venture!
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got pic?
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@ Math: no lah, still making....where got pic. :-)
@ FireIce: u want profits, can! be my side-kick / assistant / marketing lady lor.
@ troubledphantom: Whoa......your explanation really complicated leh! Sounds like F maths to me. I must read slowly again and try to understand. :-)
thanks though!
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You did not include your design cost, production time cost, marketing cost.
Time also costs money.
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Originally posted by Nikar 3:
Hi all,
I'm having some problems in setting a price for my product because this is my first time. :D
My case as follows:
I've made 30 pieces of a certain product.
Below are the equipment which I purchased, in order to make these 30 pieces of product
Pieces of wood = $60
Metal parts = $30
Heating equipment = $150
Paint = $20
Misc tools purchased = $60
So, to decide on my price for each product, I would use:
($60 + $30 + $150 + $20 + $60) / 30 pieces of the product = $10.67
Is this the right way to decide how to price a product?
Or should I factor in only [Pieces of wood] and [Metal parts], since these are the actual materials used, whereas [Heating equipment], [Paint] and [Misc tools] are more like long-term investments?
Because in future when I sell more of my products, for example, the costs of the [Heating equipment], [Paint] and [Misc tools] would already have been long covered and it's not fair to still continue charging the customers for it. Some more, I'm trying to keep prices low.
$25 to $30 each if you want to keep it low and affordable enough to lure people to buy it.
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there's no right or wrong way to set a selling price for your product =)
but u need to set ur objectives right and identify all costs that you intend to cover.
so far you mentioned materials and equipments. how about overheads? manpower? opportunity costs? storage costs? work area? up to you to factor them in if you realise these costs play a big factor in your production. if they are not consistent, your prices will vary in the future if these factors are not plan properly.
so objective is low and affordable? low but enough to cover costs, what about profit margin? any target profit margin? or do you want to approach a different strategy by benchmarking against the market rates and putting a lower price? but will it cover your costs and target profit margin?
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18 dollars.
For something handmade, it's low enough and good enough for skills+misc+profit. -
When the product is new to the consumers, it is always prudent to set the selling price of the product according to what the consumers has evaluated.
You can always re-evaluated your selling price again when the your demand is higher than your supply.
Don't think too highly of yourself and listen to some so-called elite people who bought education with money. Their parents bought them education so that they can show off to others that they're elite...which in fact isn't the truth anyway.
Knowing how to use their brain to store plenty of knowledge is one thing, but not knowing how to use their brain to digest the stored knowledge is another thing.
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Nikar, you forget your transport costs + workmanship cost.
Example:
Product cost = ( Material cost + Equipment cost + Transport cost + Workmanship cost/hr + 30~50% profit)
Handmade items most of the time ppl sell it at 2 ~3 times it supply cost.
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$10.67 ....
cos you can't set it at any less, but the cost price per unit of something made in china similar to yours would be considerably less than $10.67, so how you plan to compete ? ....
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I think in China, the cost price would be like.... $10 for all 30?
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Originally posted by Fatum:
$10.67 ....
cos you can't set it at any less, but the cost price per unit of something made in china similar to yours would be considerably less than $10.67, so how you plan to compete ? ....
the clock limited edition leh (haha!)somemore handmade
not taking the workmanship into account first,
these 2 points shud be something right?
so can be priced above 10.67
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Originally posted by ChoCoChips:
the clock limited edition leh (haha!)somemore handmade
not taking the workmanship into account first,
these 2 points shud be something right?
so can be priced above 10.67
they would probably hand make those things at those chinese sweat shops too ...
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take a look at this handmade clock pricing.. ==> $29.90
http://www.etsy.com/view_listing.php?ref=sr_list_8&listing_id=8608860
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marketing play very importance role
you can has simple produt, is how you market you product.
handmade is one point, limited,
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maybe his clock very nice leh?
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Ya...maybe his clock can spray water on you if you snoozed it too many times and still don't want to wake up!
Can you add this feature or not?
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You never factor in labour cost.
You need to factor in overheads as well. And you should price it at least 17% higher, because people like to ask for discounts, and even if they don't you make 17% more. -
How abt a alarm clock that has different alarm depending on how many times u snooze it...
1st time: "Wake up~ Wake up~"
2nd time: "WAKE UP!!!!"
3rd time: "WAKE THE HELL UP~~~"
4th time: "*starts cursing and swearing*"
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Thanks all! :-D Happy new year!
From Dinky1409:
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so far you mentioned materials and equipments. how about overheads? manpower? opportunity costs? storage costs? work area? up to you to factor them in if you realise these costs play a big factor in your production. if they are not consistent, your prices will vary in the future if these factors are not plan properly.
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Actually, since this is going to be a very small business (just part-time, won't even register it as a real biz), manpower, work area and storage costs won't be a problem, because I'll be working in my bedroom. Actually, a 2 by 2 metre work area allocated in my bedroom is enough. X-D
btw, what is opportunity cost?
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what about profit margin? any target profit margin? or do you want to approach a different strategy by benchmarking against the market rates and putting a lower price? but will it cover your costs and target profit margin?
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I'm trying to make S$5 - 6 out of each product. I already have a day job so I'm not looking too much to make a real living from this, but to supplement my income.
I've thought of benchmarking against the market and setting a lower price, but then, their biz concept and marketing etc is different from mine, so I rather not go that route.
My idea is to keep it affordable for people to buy in this economy, and also sensible enough for me to make some $.
From Mk7:
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18 dollars. For something handmade, it's low enough and good enough for skills+misc+profit.
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are handmade stuff usually expensive?
From Parn:
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When the product is new to the consumers, it is always prudent to set the selling price of the product according to what the consumers has evaluated.
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So, if the customer see the product as S$3.99 stuff, then how? X-D
From Bubbly:
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Product cost = ( Material cost + Equipment cost + Transport cost + Workmanship cost/hr + 30~50% profit)
Handmade items most of the time ppl sell it at 2 ~3 times it supply cost.
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Ah, I think I can use the above formula to base my pricing on, just that for the Equipment cost, I will probably not factor it 100% in. Maybe like:
Product cost = (Material cost + 3% of Equipment cost....blah blah blah)
If I factor the equipment cost 100% in, then if the equipment costs $12,000, then ho-seh liao.
The final price will be insane. :-)
If I just factor in a tiny % of the equipment cost, then I can recover it slowly, assuming I can sell the products.
From Fatum:
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cos you can't set it at any less, but the cost price per unit of something made in china similar to yours would be considerably less than $10.67, so how you plan to compete ?
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I've thought about this before, but if I really have to compete with the Chinese, then mostly it will be through branding. A single "Made in Singapore" sentence printed on the product is enough to beat out most of them. :-D
Anyone, cannot compete with Chinese on price, will 101% lose out.
From eagle:
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I think in China, the cost price would be like.... $10 for all 30?
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That's not surprising, but usually, that $10 is only if you order 5000 pieces in quantity or more. :-)
From Bubbly:
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http://www.etsy.com/view_listing.php?ref=sr_list_8&listing_id=8608860
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Thanks, but the link isn't working. :-)
However, if the price of that clock is $29.90 (USD, I assume), then it's really quite expensive.
Add in the shipping cost (especially International shipping) and you're looking at US$40+ for this clock.
The advantage to setting a high price for a product, though, is that it elevates the status of the product, because usually in people's minds, it's :
very cheap product = imitation, shoddy work, outdated, made-in-china, low quality, defects
very expensive product = premium quality, very rare, luxury item, precious, made in USA / France / Japan, one-of-a-kind
that's how it goes. :-D -
hmm orite cool.. but you may want to consider factoring in overheads such as electricity/water expenses if you incurred extra expenses in the production of your products..
Roughly research on a good average market price for similar products, and you see if you can set a price below this price while still covering your material costs and targeted profit margin.
You would want to consider lowering costs by getting cheaper materials to allow more profit margin or reduce your sellling price further. But of course, there is always a trade-off, and it may be quality wise.
Perhaps, you can try to adopt the low price and differentiation strategy by making your products unique and difficult to be emulated by others and yet still cheap.. Depends on your workmanship i guess.. =)
All de best! gd luck~