Before the customer gets the product, the product goes through several processes, and pricing is one of them. The price depends on some indicators. In addition, this price will influence and determine the risk involved in your business, your profit margin, and how much you can pay for other expenses. Therefore, the two are interrelated.
Pricing is critical; you have to calculate it while doing market research. It depends on production, shipping, demand, sales, and how much tax you pay per item. All these factors determine the price of the product. The entire business foundation is built on calculations; product price determines your risk strategy. So how to price a product?
If you want to simplify, there are three metrics that determine the price of a product: unit cost, unit expense, and unit profit. However, that's not all. You must consider the following:
- variable cost per product
- your profit
- constant cost
You have to do several calculations before determining your product's price. For example, the cost of raw materials and how much product you can make from those materials. For raw materials, you need to check labor costs, electricity bills for production, packaging of the product, and the shipping cost of the finished product to the market. In the end, how fast or slow you can free up time to pay back your investment in production.
These elements are all things you need to think about when pricing.
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