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Product Pricing

The basics of pricing entail covering the total cost of the merchandise plus adding a margin that  yields a profit. The cost of goods—which includes the price paid for the merchandise plus freight, import duties and any handling costs—can be reduced by taking advantage of quantity discounts or time payment discounts (extended dating). Operating expenses include wages, advertising, management salaries, rent, utilities and office supplies. Most of these costs are not directly attributed to any one product item, but must be spread out across all items sold.

Service business pricing is more complex than retail pricing, yet the price is reached the same way: cost plus operating expenses plus the desired profit. Services are more difficult to price because costs may be harder to estimate and the competition might not be as easy to compare.

Your Product Pricing Position

It's Never Just About Price - It is too easy to say "price is the only thing that matters to customers". You may believe that you work in a commodity market, it's not just about price.

Here is a lesson to learn

Back in 1848, when Morton Salt was founded, salt really was a commodity. It was sold loose, in bags, and would quickly become hard and lumpy, especially in warm damp climates.

It wasn't until 1914 that Morton Salt introduced a distinctive 26oz round container with a pouring spout. They dramatized the benefit of the free-flowing salt with a picture of a little girl sheltered under a large umbrella with the salt can under her arm and the now famous slogan: 'When it rains, it pours'

This image, and the slogan have been used for almost 100 years.

As a result Morton Salt is the number one brand of salt in the US. For every two cans of salt sold in the US, one is a Morton Salt can, and it sells at a $0.20 price premium over other brands and private labels. As a former Vice President of Marketing at Morton Salt said...

"The answer turned out to be simple. We found that the successful process of marketing commodities requires value added benefits... and if you are the first to add these benefits, and support them, your chances of success are far greater than if you follow someone else."