Determining the price

How do you determine the price / what is a reasonable price?

• It is a price that the consumer is happy with and will buy the product at that price

• It is a price where you can make a profit from selling the product

What do you need to consider when determining the sales price or what determines the sales price?

• The manufacturing costs of the product plus the profits required

• The price in the market and competitors selling the same product

• The cost of risks (breakage, decay/rot, left over stock)

The price of selling by item, should include a profit margin of 35%, that is a product with capital cost of 100 Baht, plus profit, will have a sales price of 135 Baht. Products which have low capital costs, should include a high profit margin, while products with high capital costs, should have a low profit margin. For example

You can see that the pencil case with a profit of 75% has a price of only 35 Baht. This is a price that is not high, and has a profit of 15 Baht. If the embroidery had a profit of 75%, the price would be 1,750 Baht. This price is too high and the product will not sell. If you look at both products with the same profit margin it would come out like this;

The profit from the pencil case will be too low, while the profit from the embroidery is reasonable. Therefore when setting the price, you must determining the cost and price and then assess it to see if the price is reasonable or not, rather than keeping the profit margin the same for all products, as the price that results may not be reasonable.

How do you determine the sales price per item and wholesale prices?

The cost of selling per item must include a high profit margin. When selling wholesale, by order, large numbers, the profit margin must be less than the margin from selling per item. This is because the profit will increase by selling many items. For example selling a silver bracelet, think a profit of 100 Baht, if the buyer wants to purchase 10 bracelets, the price must reduce by reducing the profit, leaving a profit of 50 Baht. This means that overall profit is 500 Baht, more than if only one bracelet was sold. This is done so that buyers will purchase many pieces. People who will buy products at this price, will normally be middle people, who will sell the product on further. If the product is too highly priced, then when the middle people add on their own profit margin and therefore the product will be to expensive and not able to sell.

What else do you need to consider when determining the price?

Other things that must be considered when determining the price include; site rental, area rental, booth rental, per cent to a shop selling the product. In the case when the product is taken to a department store, then the profit of the store should be included in the price, by adding 10 - 15% to the price. The factor that is most important is to assess the market price, or the prices of the competitors (in cases where the product is the same).