Products & Services Price It Right Presented by Sheryl Nolen, CEA 4-H WebEx Houston4HCEO3 October 12, 2015

* Career & Entrepreneur Options (CEO) * Learn about running a business * Tapping into your talents * Work hard and make money * Grow your creative genius * Presentation and communication skills * Trade Show exhibit and contest * A chance to dream BIG

* What is marketing? Process of planning, concepts of pricing, promotion and distribution of ideas, goods and services Marketing focuses on identifying the customer needs and preferences –using information to shape the goods and services to satisfy the customer

Kids Biz Ideas episode 211: The Marketing Mix

* The Product can be something you sell or a service you provide * Products are something customers need or want * Products are made for sales or purchased for re-sale * 4 Ps of Marketing

What are customers willing to pay? What is the break-even point; are all costs covered? How much profit do you want to make? What is your competition charging? Reference: Ohio State Fact Sheet on Pricing. The amount of profit depends on your costs, both variable and fixed, selling price, and the number of items sold or services rendered

* Fixed Cost occur each month * Fixed Cost could be what it cost to make the product or provide the service * Variable Costs are additional costs paid * Variable cost are not always the same or not happening every month IE Labor or mileage traveled& fuel costs

Profit = Revenue - Expenses -basics-profit.htm Let's think of profit in terms of the money left over after you pay the bills. If you sold $ of goods and the expenses (costs) of all the materials to make those goods and all other costs you paid during the period that you sold the goods were $75.00, then you would have earned a profit of $ Profit = $ (sales revenue) - $75.00 (expenses) = $25.00

ess.com/index.htm Before you get started decisions; a recipe for their lemonade, a name for their amount of money required to set up the business (a budget) how to borrow the needed money supplies they will need; water, glasses, ice, lemonade ingredients, container to hold the lemonade Where and how serving table to sell the lemonade a money box with some change marketing materials; signs, advertise price they are going to sell the lemonade and serving size sales pitch that they will say to customers as customers approach their stand.

Let’s see if they made a profit. Product Costs lemonade cost $7.00 Supplies plastic glasses and other costs $5.00 Advertising supplies signs and other expenses $3.00 Total costs are $ $ $3.00 = $15.00 Sales: 30 glasses at 0.75 cents per glass Revenue: 30 x 0.75 = $22.50 What is the profit ? ess.com/index.htm

Formula A Materials + labor (production time x hourly wage) divided by number of units = selling price per unit. Example: $ $5.00 divided by 1 cage = $9.00 selling Labor Rate : 1 Hour=$5.00 What is the Price Point? You must determine material cost and give yourself a labor rate. There should be a value placed on your time. There is no allowance for overhead costs, inflation or profit.

Formula B Materials + overhead + labor (production time x hourly wage) divided by number of units = selling price per unit. Example: $ $ $2.50 divided by 1 cage = $11.50 per cage Overhead costs have been added in this formula. Labor Rate : 1 Hour=$5.00 Overhead: $2.50

Formula C Materials + overhead + labor + profit divided by 1 cage = selling price per unit Example: $ $ $2.50 divided by 1 cage = $11.50 This is the most individualized approach because a conscious decision is made about the profit you want from your business. You decide on a satisfactory wage and the amount of time you spend earning it. Profit and your labor rate are not the same.

Determining a Service Price Operating or fixed costs and the variable Variable costs Fixed (operating expenses) costs Profit Labor major business expense You must figure out what your time per hour is worth for each service job you do and include it in your price. Service complicated or requiring special skills Charge less than min wage to establish business Profit should be included in the price Charge per hour for your labor a Amount of overhead and variable expenses What is a fair and competitive amount of profit.

Consumer Psychology Toward Price Whether they know it or not, most consumers develop mental attitudes about the price they are willing to pay for a product or service. Importance of price in the decision to purchase varies from product to product and person to person. There are numerous price strategies used by businesses to take advantage of customer pricing psychology.

Multiple Unit Pricing Simply put, this is a strategy where the customer perceives quantity buying as involving greater savings. Several factors ought to be considered when using multiple unit pricing. Has to be easy to understand. Eight for 79 cents is usually less effective than simple multiples of two for 19 cents. Bargain concept of multiple pricing is not usually effective over the $10 range. It is, however, very effective for items within the $1 range.

Odd Number Pricing Odd number pricing refers to setting a price just below the psychological breaks in the dollar, such as a price is set at 49 cents or 99 cents rather than 50 cents or $1. Prices may be set at 19 cents or 49 cents or $ This gives the psychological impression to the customer that the price is not 20 cents or 50 cents or $20, but less. Odd number pricing is often avoided in prestige stores or with higher priced items. An expensive dress could be priced at $150, not $

Prestige Pricing Prestige pricing refers to high markups and/or pricing above the market. Many consumers are willing to pay more for a product or service because it is felt the product or service is of higher quality or possesses brand or manufacturer prestige. Usually above-market pricing can be done only when the product is unique or distinctive, or when the seller or manufacturer has acquired prestige in the field.

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* Product benefits and features * Cost of production – materials & labor * Cost of packaging * Cost of marketing * Overhead costs * Unit cost * Sale price * Profit margin About Money / Retail Marketing Strategies on/a/product_pricing.htm

* e-kennys-lobster-roaches Reference : lobster-roaches

* Complete a Marketing Plan * Describe the product * Identify Customer needs * Calculate Cost and Profit per unit * Describe marketing strategies (distribution and promotion) * Philanthropy efforts * Calculate marketing cost * Develop a Business Card and flyer