What’s involved in pricing?
From the time a product leaves a plant or factory to the time that it becomes part of the consumer marketplace, there are more than several levels of price mark-ups that it can go through. And, it is important that both buyers and sellers understand the methods and reasons for a product market's pricing structures. .
There are really no formulas that can easily be applied in this matter. Some people simply go by rules of marking up a certain percentage (based on their role in the marketplace), whereas others try to gain information about their competitions prices (to match or undercut), and there are others that apply formulas based on their expenses.
In this article, I am not going to give any specific formulas that you would be able to apply to your particular situation. Rather I am going to give you a description of the overall structures of a market - an indication of the costs that you should factor in at any of the various levels in which you would fit, and insight into the costs that your buyers will factor in at their level.
With this information, as well as information that you would be gathering from industry data, publications, your own network of suppliers, buyers and even competitors, you should be able to structure competitive pricing.
The one known rule of pricing
There are certain products and commodities that are traded in product specific or world exchange markets, and have published prices - products such as stocks, bonds, oil, metals, lumber and many others.
While many people in those markets quote their prices based on those published prices, they are not often the prices that they finally settle on in all transactions. And, this is because of the one known rule of pricing - "Everything is negotiable".
This is true for all products and services - from negotiating a $30 bank charge up to negotiating a $10 Billion purchase of a corporation, and everything in between. It's all negotiable, no matter how adamant the other party is about it - if they need to close the transaction, they will negotiate.
You should keep this in mind when structuring your own pricing. You will be negotiating.
