Setting your Retail Price
When setting the Retail Price, you should consider things like:
- How much competition is there in this market segment?
- How are my competitors pricing their products in this market segment?
- How sensitive is this market segment to price? What are the minimum and maximum price levels for this market?
Note: We recommend staying away from the top 5%-10% of the price range for every market segment, even for price insensitive segments. The maximum price is the level beyond which NO consumers will buy your products. So even for price insensitive segments, a product that is priced at the maximum looks like poor value compared to a more reasonably priced product.
Similarly do not price too close to the minimum price level for a given market. The extra market share is unlikely to make up for your smaller margins. Start off somewhere in the upper-middle of the price range and work your way up or down from there.
- What is my overall strategy?
- High Price, Lower Volume
- Medium Price, Medium Volume
- Low Price, Higher Volume
- What are my projected sales for a given pricing level and advertising mix?
Setting your Retail Margin
Once you set your price, consider your retailer margin, unit cost, unit margin and sales projections. Look carefully at your Forecast Results reports and your Forecast Net Marketing Contribution report.
- If your sales projections are accurate, will you make sufficient gross margin to give you a positive Net Marketing Contribution?
- Is it worth giving your Distributors more Retail Margin early in the simulation to encourage them to stock your products and gain market share?
- Or do you already have sufficient market share and distribution that you can afford to cut your Retail Margins?