This would have to be one of my most common FAQs when working with brands or product based businesses.
How do I price my product!!! And what components do I include.
It is not just the initial calculations but the different types of pricing. Wholesale pricing, retail pricing, trade pricing, margins….what does it all mean?
How can you make sure you are making enough money to sustain a strong business, have a great foundation for ensuring you have $$$ left to spend on marketing or advertising or offer a slightly better price to volume customers.
Let’s start first of all with what constitutes cost price. Or COG (cost of goods) it can be called.
This is all the parts that go into the making of your product. Not the sales, not the marketing and not the end presentation packaging (but does include the actual product packaging).
You have to consider if it has components what the costs of those are. Or what portion of the cost they are.
If you import your product you need to consider the cost to get it to you, the import duty, the gst.
I break this down further in my pdf document that you can grab here.
Next we have wholesale pricing. This is traditionally half the price of the Retail price (RRP).
And depending upon what country you are in you also need to consider the gst or VAT or sales tax.
For customers to receive wholesale pricing they need to be buying from you in volume. Now that volume will be different for everyone (ie volume could be 10 units or 1000!!) but most Retailers or onsellers would need to spend a minimum amount to get wholesale pricing. Again this is going to be different for everyone. Some start ups or smaller brands may have a $300 minimum spend others would be $5000 per order.
Now Trade pricing is something that can be offered in the industry also. This is for those who may buy from you for someone else however they are only buying in small quantities.
Example an Interior designer sourcing for their client (but they only need 1-2 units) or a tradie buying from a supplier gets just that trade price.
The client would need to have a Trade account with you and be a registered business to receive this discount. It varies between 10-30% off RRP and is very dependant on the frequency the client buys from you or your relationship. The work of those sourcing products for others comes down to negotiating this with their suppliers so they get better deals. They will sometimes pass this onto their client however often this where they get a percentage of the product cost for all the effort of sourcing it and admin and because of their relationship.
Next is Retail pricing and this is the price that the retailer sells the product onto the consumer for.
Now you can set a RRP but you cannot enforce what price the end Retailer sells the product for. That is why it has Recommended at the start of that.
There are consumer laws about this and you can find the Australian version of it here. I know when I had my childrens brand Moppit one of our competitors at the time was fined over $30,000 for dictating to the retailer what they could and could not sell it for.
Now the other thing that is often talked about is margin. This is set so that you can make sure you are actually making money at the end of the day!!
Each time you develop a new product or import a new product you need to now what is the minimum margin you should be aiming to sell that for (RRP). And this is going to be very reliant on branding and marketing of that product also.
To work out all these prices I have created a guide for you to download. This goes over exactly what to include in your calculations and also the margins you are aiming for also.
Click here to grab that guide.
If you want to take it a step further I also will have a Simple spreadsheet (I know scary right!) available to purchase. My clients all get this when we work together and it certainly gives them that sense of relief when they can see how easy it is to work out their pricing, margins and make sure they have covered their costs. It is still surprising how many people I see just guessing what their costs are!!!
Now I have not touched on Original art here even though I have quite a few artist clients. This may have to be another blog post altogether!!!
I hope this helps clarify a few points for you and gives the chance to set your rices right from the start.
If you want more detail or think you may need extra 1 on 1 advice then book in for one of my Signature Service sessions. Believe me it will save you money to get it right from the beginning!!!
And if you just want to make sure you don’t miss out on these sorts of tips and so much more to help guide you on your business journey then sign up to my mailing list here.
Til next time,
Use these images to pin and save for later.