Pricing Your Products

There’s probably nothing more stressful than setting prices for the first time. ‘What if the price is too high?’ ‘What if it’s not high enough?’

While there are some tips and techniques that can help you establish fair prices, there are no absolutes. Pricing is part Science, part Art.

Marking prices clearly eliminates "sticker shock" at the cash register.

What is a ‘fair’ price? It’s a price that reimburses you for the labor and inputs plus a little for profit while still providing good value to the customer. The first step in establishing a fair price is to understand what you have invested in a product. These production expenses can be tricky to identify.

Expenses are generally divided into two categories: fixed and variable. The fixed costs are those which stay the same in spite of your production levels. Examples of fixed costs include: rent or mortgage payments; taxes, insurance; and loan payments for livestock or equipment.

Variable costs are those costs that vary with the production level. Examples include seeds, feed, hourly labor, and packaging.

Start by tracking your expenses. Keep a log of where you spend your time. Track equipment hours—what equipment did you use and for how long? Keep a log of all expenditures from ordering the seed to displaying the product at the market to the bag you send it home in.

The unit price of your product should include: the variable costs of producing it; a portion of the fixed expenses consumed and some profit.  Failing to add in the profit means you’ll never do more than recoup your costs. Profit allows you to make money that you can invest in your business or for your retirement.

Here are a few tips to help with pricing:

  • Know what the market ranges are for the products you produce. What are the lows and highs during the season for sellers in your market area?
  • Adjust your prices frequently to reflect reality
  • Calculate Break-even Costs to determine how many units you’ll need to sell
  • Be honest, fair, and ethical in your pricing strategies
  • Set your prices as though your livelihood depends on it—even if it doesn’t

Do NOT…

  • Undercut prices to gain customers.
  • Sell substandard product at premium prices.
  • Rely on catalog or supermarket prices as a guide for you. They generally reflect volume discounting that you probably can’t afford to offer.
  • Apologize for your price or your product (if it’s not good enough to sell, then don’t sell it).
  • Give away food free just to get rid of it. When you give food away you send a message that food has no value.

If you have surplus food that is not selling then by all means donate it to a food shelf, a soup kitchen, a local church or nonprofit.  If you have a lot of a product consider offering bulk discounts or “home canning specials”. If you have some blemished or bruised items then perhaps offering a discount will help.

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About Mary Peabody

Working with beginning farmers since 1994.
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