Know-How Exchange : Strategy

Hi, Don, you ask a very good question. The classical answer to your question is that you add steps in the pricing which reflect your cost break points in your manufacturing process. In realility, very few people make the effort to do this so exactly because in your business, for instance, you probably won't realize real cost breaks in the range of quantites you can sell to any one wholesaler. The cost breaks in plastic materials and in equipment utilization are probably at very high levels. So, what most companies with whom I have worked do is arbitrarily set them. I have seen as few as three price steps and as many as nine. One of the most common methods is setting them at powers of ten - 1-999; 1000-99999; 10,000 - 99,999; etc. I have also seen manufacturers who have one fixed price, but give rebates on the back end for quantities sold. For instance, suppose you sold you scoop for $0.50. You could incentivize your whole saler by offering a rebate of $0.03 for quantities he sells between 10,001 and 100,000, and $0.05 for each one sold between 100,001 and 1,000,000.

Some of this depends on what is customary in the industry, too. I'd talk with a couple wholesalers about price points for similar products in the industry - say kitty litter boxes. They probably won't have much of a problem sharing with you the philosophy on those manufacturers' products. If you have a good relationship, you can probably even talk them into letting you know the pricing of your competitor.

I hope this helps.

Wayde