Pricing / commissions / profit - Your thoughts.

[Newretailer]

I have a couple of rambling thoughts.

I have sold my products both wholesale and retail for years. On my wholesale price list I have a SRSP and I make sure I do not undercut that price, both on my website and my shop. It has worked out well for me. Strangely, the shops who sell it for more than I suggest, tend to sell far more than the ones selling it cheaper.

I recently did an excellent on-line course on value pricing. All along I have been pricing my products based on the formula: my cost * x for wholesale and double that for retail. Apparently this is not the right way to do it. You need to work out what the value of your product is to your customer and that must be your selling price, provided it is more than the formula above. I am also learning how a story around your products can make it more valuable to the customer and you can charge more.

To give a ridiculous but true example, a customer asked me to refill a container for a liquid soap she bought in the UK. She told me how precious the contents were and asked me not to wash the bottle first. I went onto the website and saw that she paid R1100 for a liter of soap. Why was she prepared to pay so much? Because they said it would "clear the aura" of any one going through chemotherapy. I know it is nonsense as the ingredients are inferior to mine and at the end of the day they have an employee manufacturing it and there is nothing special about it. The story around the product made it far more valuable to the customer. Some companies do this with a "special" ingredient etc. That's why Woolworths tell you these stories about their amazing farms so you would be prepared to pay more. Anyway, the value pricing course has opened my eyes.

As far as the agents go, be prepared that agents in South Africa want 30%, at least in my product line. I know agents in the USA work for 10 to 15%, but maybe that is because orders in the USA tend to be bigger? If I ever appoint agents, I will work on a sliding scale. If you bring in x amount, you get 15%, 3x you get 20%, etc.

[adrianh]

Why was she prepared to pay so much? Because they said it would "clear the aura" of any one going through chemotherapy.

This is exactly why I shouldn't go near retail - I simply do not have the audacity to write such things. (Yes I know that bull$h1t baffles brains but I simply can't) That's what marketeers are for :-)