Tuesday, March 25, 2008

Greenhouse and Nursery - Pricing

The following are some considerations on pricing greenhouse or nursery products from Ginger Myers at the University of Maryland.

1. Develop a pricing strategy- consider:

a. Utilizing odd-evening pricing ($3.99 instead of $4.00), standard mark-up pricing (typically a manufacturer marks his price up 15% over his total cost per unit, a wholesaler 20% over his costs, and a retailer 40% over his costs.), or customary pricing ( when the product “traditionally” sells for a certain price, such as a pack of gum).).
b. Targeting “quality” customers versus “quantity” customers
c. Offering volume discounts or add-on products
d. Offering two layer pricing- one price for premium service and a lower price
for an economy service
e. Matching competitor’s pricing
f. Always using the same price to establish consistency

2. Develop a goal for your pricing strategy.

“What’s the goal for your business?” Pricing is part of your marketing strategy and reflects how you position your product. If you want to be the go-to-guy for a certain product or service, then you need to always sell only top quality product and offer great service. You may have to extend operating hours for customer convenience or perhaps offer a money-back, no- questions- asked
return policy. If you’re positioning your enterprise as a family activity, then you need to have activities and operational hours geared towards the weekends with familyfriendly packaging, activities and prices.

3. Study the competition.

The Internet can give you an abundance of information about your customer, the marketplace and the profit potential - all at a very low cost. You can even interview some potential customers. You might tell them you’re thinking about selling a certain product and ask them what they are currently paying for similar products.

4. Calculate your total costs of producing a product or offering a service by adding together your fixed costs + variable costs.

Once you have your total costs, you can calculate the break-even price for a product or service. Of course you’re not in business to just break even.

5. Identify your added value.

“What’s your unique selling point? Is it quality, different varieties, free delivery, convenient location, or locally grown? What can you offer that customers are willing to pay more to obtain?”

Remember this golden rule when setting prices: perception is everything. How customers view your product or service and what they are willing to pay for it is based upon perceptions. In the end, customers will tell you loud and clear through their purchasing behavior whether or not your prices are too high, too low, or right on the money.

Reprinted in part from "Master Marketing Highlight - Is the Price Right?" by Ginger S Myers, Regional Extension Specialist, Marketing, Univeristy of Maryland Cooperative Extension in the March 21, 2008 edition of the Greenhouse TPM/IPM Weekly Report, University of Maryland Cooperative Extension. http://www.ipmnet.umd.edu/08Mar21G.pdf

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