Help with setting price for a product
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Theres nothing wrong with your formula, but you need to include a profit margin multiplier. So since your cost is $10.76, you can sell at $21 for a 100% margin.
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thanks, but is it the norm to have 100% profit margin? what about 50%? or 30%?
like selling at $18.99 etc instead of $21.
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Originally posted by Nikar 3:
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. :-DIf most of the consumers really evaluate your clock at $3.99, then take it as a kind feedback for you to improve the accuracy/quality/finishing/workmanship of your clock to get obtain a higher evaluation.
Cos ultimately, as the creator of your own products, you not only want to fulfill your own standards but you also know that you needed most to fulfill is the standards of your consumers who will be paying and using your products.
Consumers' satisfaction is the highest honour that you can ever bestowed upon your own products. And that's what determines between a successful product against an overly advertised piece of junk.
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Originally posted by Nikar 3:
thanks, but is it the norm to have 100% profit margin? what about 50%? or 30%?
like selling at $18.99 etc instead of $21.
Use 250% to 300% profit margin.Most watches that you buy from shops are getting 700% to 800% profit margin.
Don't be surprised, it's the truth.
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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.You forgot hidden costs
Time (Opportunity Costs)
Electricity
Water
Rent
Storage
Marketing
Workmanship
Design
Packagingetc etc
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this is just management accounting..u haven't factor in the economic factors
who would want to buy a handmade clock with the current technology we have? Unless yours is a niche la..
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Originally posted by Nikar 3:
thanks, but is it the norm to have 100% profit margin? what about 50%? or 30%?
like selling at $18.99 etc instead of $21.
No, thats not really the norm, it all depends on how much you want to earn and how much you value your product.Some products can be sold at a High Margin like 500% becuase of high demand and low production cost...like panadol pills ect ect
but I think $18.99 is a fair price for a handcrafted clock with your blood, sweat and efforts in it.
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Originally posted by Nikar 3:
thanks, but is it the norm to have 100% profit margin? what about 50%? or 30%?
like selling at $18.99 etc instead of $21.
Fark! Of course its alright! 600% is not unheard of.
Take Coach bags for example. Oops bad one.