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How do I price my products?

I own an online store and I am always getting new items for different categories including car accessories, phone accessories, electronics, kitchenware, etc. I have no limitations to my product line.

I am finding it hard to find the right price structure for my products. How do I determine what my profit margin should be added to the cost? And do I add a marketing percentage to the price for me to start building a budget?

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Hi Serge,

Pricing products are easier than pricing services you provide, trust me :) You'll definitely want to check out as much competition as possible (anyone who offers the same or very similar product). Research demographics to discover the category of buyers you can consider your main target market. What is their income? Interests, etc?

If I could put it simply, there are two main factors to hit first:

1. Research the competition thoroughly for pricing structure, advertising, display, etc.
2. KNOW your target market WELL.

Both of these are equally important.

Michelle Arbeau
Celebrity Numerologist, Author, Speaker, Radio/TV Host
CEO, Authentic You Media
Featured Columnist for LotteryUSA.com, Pathe Magazine, Antwhirl.com
www.MichelleArbeau.com

1

Many small businesses make the error of setting prices solely based on competitive pricing or "what the market will bear" approach. For accurate pricing it is essential to establish the overhead contribution factor, which is calculated by dividing the direct cost of material and labour by the fixed costs, which includes all costs that are not directly attributed to the products or services offered. These include such items as administrative salaries, promotion & marketing, owner salaries, rent or facility costs, telecommunications, taxes, professional fees, bank charges, loan interest, and all other overhead costs. When pricing an item you will normally know the material and labour costs, and the fixed or overhead costs can be accurately calculated as a percentage of the direct costs using historical financial records. This is the overhead contribution rate. Another pricing essential that is often omitted from price calculations is the Labour Burden ( government employment and health contributions, paid vacations, paid statutory holidays as a % of direct labor ). Pricing is tied to the following financial criteria, which are available from the historical Income Statements and payroll records:


TOTAL DIRECT COSTS Material + Labour + Labour Burden + Other Direct Expenses

OVERHEAD CONTRIBUTION % Fixed Costs / Direct Costs (historical)

FIXED COST (estimated) Direct Cost x Overhead Contribution %

TOTAL COST Direct + Fixed Costs

PRICE Total Cost ÷ (1-Profit%)

TARGET PROFIT % From budget

for more help on pricing and other business issuescheck out my professional business website: www.gsmbizsystem.com

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