Pricing Strategy

Pricing your product correctly will greatly impact your success.  Do your homework. Look at your competitors’ product and compare price by weight, packaging style, ingredients, product features and distribution.

When developing a pricing strategy take into account your branding, marketing and packaging decisions. Understand who is involved in getting your product into the marketplace and consider the cost associated before the consumer buys your product. One method to develop your price strategy, is to start with a suggested retail price the consumer is willing to pay for your food product and then work backwards.  If you end up with a negative figure then you will need to examine areas to cut costs and arrive at an acceptable profit margin.

First, know your COGS (cost of goods sold) or the direct expenses related to the cost of producing your product. This involves the cost to manufacture, labor, packaging materials cost and ingredients or raw materials.

Next you need to know the cost to get your product to the stores or the distribution channel costs. Factors that also play a role in the pricing strategy are the costs associated with distributors, freight carriers and distribution centers fees, broker fees and sales, marketing, and promotions. Additionally, other “hidden charges” exists that affect the price include slotting fees (the cost a retailer asks just to put your product on the shelf), demo fees, merchandisers, temporary price reduction requirements from the retailer, shrinkage, advertising, various retail ‘fees’, taxes, and more. If you are planning to sell your product in other countries, don’t forget costs associated with special packaging, customs and duties, and currency fluctuations outside the US.

Lastly, you must also understand the ins and outs of margin, mark-up and commissions associated with distributors, brokers and retailers.  Study the market to determine what works and what doesn’t, and how to price your product for profits while giving your consumers a good value, without losing it all in the process. With careful research and a complete understanding of the marketplace, your goal is to try get your product priced right the first time.