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Is the Price Right? - 3/15/17
posted by: Jessica Nichols

Brandy Brabham WVU-Roane County Extension Agent   Reprint from the WEST VIRGINIA SMALL FARM ADVOCATE

What’s your pricing strategy? The price must fall between two points: what the customer is willing to pay and your break even point (you start losing money). Charge too much and it won’t sell. Charge too little and no profits. While research indicates that price is one consideration, there are multiple layers of pricing. Develop a goal. Pricing reflects how you position your product. If you want to be the go-to-girl for a certain product or service, then always sell only top quality product and offer great service. If you’re positioning your enterprise as a family activity, then have activities and operational hours geared towards the weekends with family friendly packaging, activities and prices. Study the competition. The Internet can give an abundance of information about your customers, the marketplace, and the profit potential. Interview potential customers. Tell them you’re thinking about selling a certain product and ask what they are currently paying for similar products. Calculate total costs. Add fixed costs and variable costs. Then calculate the break-even price for a product or service. Of course you’re not in business to just break even. Identify added value. “What’s your unique selling point? Is it quality, different varieties, free delivery, convenient location, or locally grown? What can you offer that customers are willing to pay more to obtain?” Consider pricing options: • Utilize odd-evening pricing ($3.99 instead of $4.00), standard mark-up pricing (typically a producer marks up price 15% over total cost per unit, a wholesaler 20% over costs, and a retailer 40% over costs.), or customary pricing ( when the pro- duct “traditionally” sells for a certain price). • Target “quality” customers versus “quantity” customers. • Offer volume discounts or add-on products. • Offer two layer pricing- one price for premium service and a lower price for economy service. • Match competitor’s pricing. • Use the same price to establish consistency. When setting prices, perception is everything. How customers view your product or service and what they are willing to pay for it is based upon perceptions. In the end, customers will tell you through their purchasing behavior whether or not prices are too high, too low, or right on the money.

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