Know-How Exchange : Strategy

I concur with KK's numbers, though perhaps think the average may be a touch high (though, this varies a lot by industry and country, so my experience may have just been with lower markup areas.

Wholesale prices often have multiple tiers. Very common to see volume based pricing. I've also seen situations where there were 2 levels of wholesalers between manufacturers and consumer (one wholesaler only sold to the smaller, local wholesalers who made the end sale).

If the difference between your MSRP and wholesale price is not enough for you to make your desired margin, then you will need to adjust the price.

Of course, keep in mind any other channels you have and the pricing used there. For example, if you sell direct off of your web site, you need to make sure the pricing doesn't cause problems in your wholesale areas. One company I worked with specifically set the pricing of the product off their web site such that it would be the same, or slightly higher, than what someone would buy the product at from a retailer.

Brad,

"Should i kick up the msrp ... "

how do you know what the market will bear -- if you raise prices will buyers feel they are getting a better product that deserves "the price".

Many case studies of sellers raising prices and getting more orders. Not the typical cases but worth a look.

best of luck,

Steve

Steve and Olivier are right. You're asking the problem from the wrong end. Pricing is not a question of who makes how much money; it's a question of value to the end-user. What's it worth? Ultimately nobody will make any money if the end-user won't pay the price.

Start from that end. Then dollarize the value added by your distribution chain. What do they bring to the party? If they have true end-user access, then they're worth a lot. If they are simply providing warehousing and billing services, they are worth less.

There are norms in every industry, but you don't have to accept those norms if your product is different and better. (And if you don't think it's better, maybe you have a more fundamental problem.) Pay the distributors what you believe they're worth, and share your rationale with them.

That's the short answer. A specific pricing strategy project may be in order, but this forum isn't the place for that. If you want to pursue further, contact me via email.

Hi brad

would please provide us with these information, so that we can help you specifically as opposed to "general" ideas. Even you yourself can figure out your pricing.

1. is it a B2B or a B2C product?
2. What is the product?
3. what market are you playing in (region/country)?
4. what is your distribution setup structure (how many tiers)?
5. how the product is transported through the entire distribution channel?
6. how many distribution channels you have?
7. what are your objectives of the product? (what it wants to be, price leader or premium etc.)?
8. how do you want consumers to perceive the product?
do you want to build a brand name?(like steve said Higher Priced products are perceived to be of High Quality)
9. What kind of profit margin you want to retain for yourself(i am assuming you are the manufacturer)
10. What kind of pricing the consumer expects from your product/brand/company?
11. What is the consumer "Price Threshold" for your product?

hope this helps. Thanks to OlivierT for sharing with us the pricing process of Software products. you can have a look into it.

cheers!!

Michael Goodman, as always, has hit the nail on the head. This isn't about arbitrary numbers, usual discounts or markups, or what happens in another industry.

It's about VALUE!

What do your different value chains look like?

Make a simple manual drawing of the value chain for each of the existing or proposed distribution channels and figure what value each element is adding in each chain.

Relative price breaks at each point should soon fall into place.

For example, a consumer might expect to pay extra for home delivery because that has some value.

But do they see much value in buying your product for a hardware major versus a supermarket or niche store?

People here might be able to help more specifically if you explain more about your product line and existing distribution channels.

Hope this helps

ChrisB