[tsh]

Hi all,

I am new here, and very happy to have found this website and forum!

I am starting a business and need help determining my price point(s) & profit margin.

Here is the background:
I will be selling imported pearl necklaces online through my website (at least for now).
I have 22 neckalces right now.
When I add up my start-up costs, the cost of buying the products and all necessary materials for the product's promotion & sending as well as my labor, I arrive at $128.49 per necklace to break even.

Comparable necklaces online range from about $190-$250 for smaller size pearls, and from about $300-$480 for larger pearls.

I believe I have comparable products to the companies with these price points, but I cannot offer a large selection (yet) or any jewelry certification, and I am a new business.

What would be reasonable price points for these necklaces?
What would be a reasonable profit margin?
What is the math behind all of this?

I hope that this is enough information.

If anyone is willing to try to answer these questions, and more information I am happy to provide it.

I am totally new to business!

I appreciate any help given!

Thank you!

[Unreal030]

The Price is Right
The cost of your product can make or break a deal. Is your price on point?
By Nichole L. Torres | Entrepreneur Magazine - June 2007
entrepreneur.com
http://www.entrepreneur.com/magazine...ne/178540.html

Imagine that you've created the best product in the world . . . but you've set the wrong selling price. Price it too high, and would-be customers will cringe and walk away. Price it too low, and they'll perceive it as second-rate. The right price point, however, can make your product fly off the shelves--just like the 99-cent reusable shopping bags created by Earthwise Bag Co. Inc. in Commerce, California. The co-founders, Stan Joffe and his nephew Steve Batzofin, envisioned an earth-friendly product that was simple for customers to buy. "We saw [it] as an easy way for people to make a difference on a daily basis," says Batzofin.

One key part of their strategy was setting an enticing price point, thus making environmentalism both convenient and practical for customers. "Ninety-nine cents is a really attractive price point," says Joe Kennedy, author of The Small Business Owner's Manual. "[And] recycling and reusing grocery bags has its appeal to just about everybody."

Joffe, 59, and Batzofin, 29, created their bag concept after seeing the success of a similar reusable bag program in Australia. "Reusable bags have been tried by a number of stores, and we had some resistance [from retailers] in the beginning," says Joffe. "However, there was a great deal of interest in the environment, and the price point seemed to be really attractive."

With earlier canvas versions priced at $7 and up, customers were reluctant to buy the bags. However, the pair got retailers to test-market them at the lower price point, and the reaction was enormous. Within the first year, they sold more than 2 million bags at stores like Albertsons, Kroger and Stater Bros.--2007 sales are projected to hit $3.75 million.

To set the right price point for your product, you must understand the market in a local context, says Kennedy. Also note the perceived value of your product: Are you aiming to be a low-price leader, or should your product command a premium price to reflect its high quality or extra features? Research how your product fits into the market, and put yourself in the buyer's shoes. Even ask a third party for an unbiased opinion on why they would or would not buy the product at your proposed price. Says Joffe, "You have to go out there and do some market research on what competitors' products are being sold for and what the perceived value of your product will be to the consumer."

Secrets to Pricing Your Product
If figuring out what to charge customers has left you baffled, try these tricks.
By Tim W. Knox | April 02, 2004

Q: My partner and I are having a hard time coming up with what we feel is the perfect price for our new product. We know what competing products sell for, but we don't know if it's better to price our product cheaper than theirs or charge more because we feel it's a superior product. What is the best way to determine the perfect price, and what is the rule of thumb for raising prices later on?

A: Unfortunately, there is no such thing as the perfect price. There is that mythical price that gives the customer excellent bang for his buck and the company excellent profits for its efforts, but even that price point can't be considered the perfect price. That's called compromise, not perfection.

Pricing is an important aspect of every business because price is used to create financial projections, establish a break-even point, and calculate profit and loss. Though price may be determined by any number of factors, basically there are three ways to establish the price for your product:

1. Perform a comparative analysis on similar products sold by competitors. Are the features and benefits similar to your product's? If so, use the price of the competing product as a possible price point for your product. If your product is of superior quality, features and benefits, then you might be able to justify a higher price and still be competitive. If your product is inferior, then your price point will be less.

2. Calculate the total cost to produce and deliver your product. Use this amount to figure in an acceptable margin of profit to calculate the final price.

3. Use what I call "The David Copperfield Method." Named after the famous magician who made the Statue of Liberty disappear on national TV, this method of pricing simply means that you pull the price out of thin air. Believe it or not, many companies use this method to establish pricing. It's also the reason many companies disappear.

It's easier to understand the allure of the Copperfield Method when you realize that more often than not, product pricing comes down to one thing: perception.

Perception-or, as it is more commonly referred to in business, perceived value-is one factor most entrepreneurs use to determine product pricing. After all, our products are our children. We create them, nurture them, grow them and love them. And often we perceive their value to be much greater than the market perceives it to be.

It's all about the perception of value. What makes a $10,000 Rolex watch more valuable than a $10 Timex? Functionally, both are watches and both perform the exact same function: They tell time. Why then does one sell for a thousand times more than the other? The answer is because it has perceived value.

An expensive wristwatch cannot make you better-looking, smarter, healthier or more popular with the opposite sex. But the perception is that if you have a Rolex on your arm, you must have something going for you that the wearer of a $10 Timex does not.

Establishing a good price point from the beginning is vital, because it's much easier to lower prices than to raise them. If you introduce a product at $100 and make no sales, you can easily lower the price to $75 without attracting much attention. However, if you introduce the product at $75 and it proves popular, and you subsequently raise the price to $100, you may face irate customers and even be accused of price-gouging. So it's better to start high and adjust down, if needed.

There really is no rule of thumb when it comes to raising prices. Prices are never set in stone, and consumers expect them to change with the times. You might raise prices to cover an increase in the cost of manufacturing and other production costs, or in response to market demand (the greater the demand, the higher the price).

You can also justify a price increase when you improve a product's quality, features and benefits. The buying public is generally price-conscious, but if you can show that the value of your product has increased by the addition of new features and benefits, then the public will usually not balk at an increase in price. Keep in mind that price increases should be done in small increments over time, not by significant amounts overnight.

Tim W. Knox is the founder, president and CEO of three successful technology companies: B2Secure Inc., a Web-based hiring management software company; Digital Graphiti Inc., a software development company; and DropshipWholesale.net, an online organization dedicated to helping entrepreneurs launch and prosper from their own eBay or online sales business.

I do not own a business of my own yet, as I will be starting mine when I go to college soon. There are others on this site that should come along and give your advice from their personal experiences however. I always find entrepreneur.com quite helpful however, especially if its to just help get a general feel for a specific problem or subject.

[Unreal030]

Oh also there are even more articles dealing with how to price your products and how to market them properly based on your choices on that site. (entrepreneur.com) just go there and type in price point in the search box.

[akula]

you still here?

Originally Posted by tsh

Hi all,

I am new here, and very happy to have found this website and forum!

I am starting a business and need help determining my price point(s) & profit margin.

Here is the background:
I will be selling imported pearl necklaces online through my website (at least for now).
I have 22 neckalces right now.
When I add up my start-up costs, the cost of buying the products and all necessary materials for the product's promotion & sending as well as my labor, I arrive at $128.49 per necklace to break even.

Comparable necklaces online range from about $190-$250 for smaller size pearls, and from about $300-$480 for larger pearls.

I believe I have comparable products to the companies with these price points, but I cannot offer a large selection (yet) or any jewelry certification, and I am a new business.

What would be reasonable price points for these necklaces?
What would be a reasonable profit margin?
What is the math behind all of this?

I hope that this is enough information.

If anyone is willing to try to answer these questions, and more information I am happy to provide it.

I am totally new to business!

I appreciate any help given!

Thank you!

[akula]

Originally Posted by Unreal030

Oh also there are even more articles dealing with how to price your products and how to market them properly based on your choices on that site. (entrepreneur.com) just go there and type in price point in the search box.

please leave the forum

you have no idea what you're doing and you shouldn't be giving people advise

you're not qualified to give people guidance and your pathetic efforts degrade the quality of the forum

[tsh]

Yes, I am still here.

[tsh]

And I would still very much like to get some help here.

[Unreal030]

Originally Posted by akula

please leave the forum

you have no idea what you're doing and you shouldn't be giving people advise

you're not qualified to give people guidance and your pathetic efforts degrade the quality of the forum

What is with the anger lately? You having personal life issues or something? Entrepreneur.com is a quality site, they have their own magazine for pete sakes that I know a number of people on this forum subscribe to, and none of that info is my own. I also stated very clearly that I am not qualified to give advice and where the source of said information was.

I don't know whats up with you the last couple days but please separate your problems from me.

I will end up leaving this site if this hostility does not cease though. It is unwarranted and immature. People look for help, I help when I can but do not present myself of someone with experienced knowledge, and when I ask for help as well I also am getting this hostility. I do not understand.