Company Objectives and Pricing Methods

Customers judge value by the benefits of what they buy relative to the cost of that item.Pricing decisions are then very critical to delivering value to the customer.

Profit Orientation - Cost Base Pricing

Variable Cost = $30 per tote

Fixed Cost = $4,500 (annually)

Whole Market Estimate is 76,000 (see Rochester census data for number of females between the ages of 18 and 65) of which I would like to get 10%

What would the selling price of the tote be if I wanted to get a 50% target profit.

What would the Break Even volume be, i.e., how many would I have to make and sell before I began to make money.

Break Even Sales Equal (BE) = VC 4500 + FC 30 = $4,530

Customer Orientation - Value Pricing

The cost based pricing gives me a starting point.There are other pricing considerations however.Consumers could use the price of this tote to judge its quality - is it priced appropriately for a custom item?If I change the price what would the effect be on my Break Even Volume?

Competitor Orientation - Competitive Pricing

What is the competition like for totes and purses of this type - is it oligopolistic, monopolistic, or pure competition?How would this affect how we might set a price.