1. Presentation Title This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported LicenseCreative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License “Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SA http://www.andrewsgray.com/2012/07/cattle-at-sunset/ Agricultural Microeconomics Lesson 2: Pricing and Revenue Considerations This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported LicenseCreative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

2. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Revenue and Pricing Revenue = Price per unit x Number of units sold Profit = Revenue - Costs

3. Photos by: Nancy Ranney, Ranney Ranch. Used with permission The Price is Right How much would YOU charge for your product?

4. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Variations in Pricing Cost to produce product Competition Demand for product exceeds amount of supply Quality of product Reputation of farmer Product marketing Transportation costs

5. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Piedmont Farm Revenue Revenue from sale of 30 head of grass fed beef (total of 10,800 pounds): Product Price ($/lb) Quantity Sold (lbs) Total Revenue Bulk Sales to Grocery Store $7.007,560$52,920 Packaged sales at farm $8.003,240$25,920 TOTAL REVENUE:$78,840

6. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Important steps in setting price Know your costs Know your customer Assess your competition Review your pricing continuously

7. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Know Your Customer What does your customer “want?” Are they searching for the best price? Do they want to develop a trusted relationship with you? Do they depend on you for a high quality product? Are they willing to pay more for a high quality product?

8. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Price Sensitivity Retail price per pound$7.00$8.00 Number of pounds sold10075 Total Revenue:$700$600 Scenario 1: Customers are VERY price sensitive Scenario 2: Customers are NOT price sensitive Retail price per pound$7.00$8.00 Number of pounds sold10095 Total Revenue:$700$760

9. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Assess Your Competition How can you differentiate yourself from others: Do you offer a higher quality product? Do you offer something that no one else offers? How many other farmers offer the same (or similar) product? How can you be a price maker and not a price taker?

10. Photos by: Nancy Ranney, Ranney Ranch. Used with permission Optional Exercise How much would you PAY?

11. Presentation Title This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported LicenseCreative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License “Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SA http://www.andrewsgray.com/2012/07/cattle-at-sunset/ Next Class: Cost and Expense Considerations This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported LicenseCreative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License