Setting the Right Price for your Product Line
2020/06/23 12:48 PM
Do you know how to set the right price for your product line?
It took me years to figure out how to set the right price for my product line when I first started out, so I can imagine you might be in the same situation. If you are not sure if you are making any money, then there is a good chance you’re not pricing your products correctly.
Proper costing is the lifeline to your business and profitability. I’ll share some easy methods to figuring this out but you need to be able to find all the hidden costs. Once you have the actual cost (cost of goods sold) then it is easy to figure out the wholesale and retail price. COGS (cost of goods sold) is also important in figuring out your bottom line and calculating your companies gross margins.
This amount includes the cost of the materials used in creating the goods along with the direct labor costs used to produce the goods.
When figuring out your costs be sure to take into consideration the list below to be sure you are not missing anything. COGS do not include your overhead or salaries etc. ONLY the below items are included.
- Raw materials such as fabric, leather, findings, ribbon, buttons etc..
- The freight costs to get the raw materials to your factory (or home)
- Labor to make your product
- Packaging costs if any plus any freight cost involved
- Labels, hangtags, hangers, plastic bags etc..
NOTE: If you are manufacturing overseas, your factory will give you a final price for the Cogs, but you’ll still need to add the overseas freight and duty to get the final Cogs.
Once you have the final COGS, you can determine your wholesale and retail prices. Remember that the price on your website should always be the same as what you expect retailers to sell it for. Don’t make enemies by selling it for less…..no one will want to carry it in their store or sell on their site.
How to Set the Right Price for your Product Line
When setting your wholesale price, you need to consider your industry and the type of stores and type of product you manufacture and sell. Not everything is priced the same way. For example, the food industry wholesale prices are not calculated with the same margins as fashion.
When determining your ideal wholesale price you want to make sure you cover all your overhead, salaries, sales rep commissions, and marketing which includes trade shows or showroom fees. Here is the ideal formula for a fashion or gift item that you can use to plug in your own cogs. This formula adds in all the overhead costs.
Wholesale Formula: COGS x 2.5 (250%) = Wholesale price
When determining the retail price, you want to be sure you are using a mark up for your specific industry here too. These days, most fashion and gift Boutiques and Department stores use a 2.4% mark up. If you sell to a high-end boutique like Bergdorf Goodman or the Anthropologie chain, they may ask you for a discount on wholesale as they require larger margins and want to retail at the same price as everyone else. If you are selling to a mass-market store like Target or Wal-Mart then the retail is going to be greatly reduced thus reducing your wholesale and your margins but the orders will be larger.
Retail Formula: Wholesale x 2.4(240%) = Retail price
Note: Some boutique stores will only double the price – there is no “set” way to determine pricing so many stores will just do whatever they want in the end.
These are average pricing methods. Like I said, depending on the stores margin requirement, they will ask for discounts when they need it to meet their needs.
Once you have determined your wholesale and retail prices you are ready to sell to anyone as you will have all your COGS ready to review in case anyone asks for reduced prices.
Want to learn more about how to get buyers to take your call and get more sales?
Once you learn how to set the right price for your product line and are making more money, you will be able to expand your line and sell more products to more stores.
Click on the image below to learn my easy-to-follow method to handling buyers and closing more deals.
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Building an email list can be tough, I totally agree. But an email list is just as important as social media in my opinion. Social media is fleeting. Your customer might not see your post flash by, the FB or Instagram algorithm changes all the time so you never really know if anyone is seeing your posts (as much as you hope at least), and unless they purchase, it’s hard to tell if it is driving traffic or not.
When I started my handbag line, the internet was just getting started, and people were just beginning to get online for the first time and the biggest thing since sliced bread was www.match.com.
Note the www…… everyone used that back then so you’d KNOW it was a website. LOL.
And to get on the website, even just to learn more about it, you needed an email address to get past their “paywall”. The Paywall was a pop up of sorts that asked for your name and email in order to “grant” you access to see what was behind the curtain. They built a list of millions in a few short weeks and that was more valuable than anyone just “knowing” about their company because they could market to them incessentanly.
Daily. And I mean sometimes multiple times a day. I’d never seen anything like this.
They were the first company that I knew of who “collected” emails, then turned around and marketed to you to get you to sign up for their services. And they were relentless……
I’m not saying you need to send emails daily, or emails multiple times a day, but if you don’t email your list at least weekly, they will forget about you and end up buying something similar chez someone else who is sending them emails.
So Why are Pop ups so important? Pop ups are a way to collect emails via your own “Paywall” and continue to market to potentially interested customers. If they take the time to sign up (first baby step) then they are showing you that they are on the first step of the staircase and want to keep walking up. It’s your job to keep enticing them to the top! AKA buy something.
Step 1: Sign up with a content management system like Active Campaign, Mailchimp, Klayvio or whichever one you like best. I like Active Campaign and have been using it for over 10 years. Some people choose to use the forms that come with these programs and I have too in various situations, but I also recommend Privy if you use Shopify, and Ninja Pops if you use Wordpress. They can easily be installed and connected to these CMS systems.
Step 2: The first and easiest way to collect emails is to have a homepage pop up with an offer for a % off the first order. That is a way to ‘collect” emails and give something in return. It’s the first step in building rapport with your potential customers. It’s like saying, let’s be friends, I’ll give you something you want, and you give me something I want, your email.
Step 3: Make sure you have an automation set up in the CMS system. This is an automated email series that will be sent to anyone who gives you their email address on your pop up. I call it the Hello Series. The idea of this series is to again, build rapport, and tell the customer a bit about you and your company over a 2 week period. This series has nothing to do with your regular email marketing emails. This is a sole and separate email series to build rapport so just set it and forget it. Yes customers will probably get some of these on the same days as other marketing emails but just don’t worry about it.
This is how it works:
The first email to go out immediately is the one with the coupon code they just signed up for. Add something about your brand and photos of your products linking to your website.
The second one goes out the next day and asks them if they had a chance to use the coupon yet, and then tells them to whitelist your email so they don’t miss your promotions and special offers for people on your list. Always have images of products that link to your website.
The third email goes 4 days later and in this one I like to tell a story about how I got started with the business. Add images and links here too.
The fourth email shares something cool about your business. Could be some nice stores you are in, a press placement, a celebrity who has your stuff or perhaps posted about it on Instagram. It can also be a tutorial about how to use your products, or a blog post you wrote on a topic they’d be interested in. Share something that will make them feel happy for you, and encourage them to hang with you.
The fifth and final email in this sequence encourages them to follow you on social media. I like to entice them with “doing” something in exchange for a gift. Could be something like “post your photo using or wearing our product, and be entered in our monthly drawing for a free X”.
Step 4: Now that you have collected more emails with a pop up, your ongoing marketing efforts will start to pay off faster. As the list continues to build, you’ll have more people to market to, invite to events you do, and share your good news with. Hopefully they will become loyal customers, share your site with friends, and continue to be an active part of your social media channels. Keep sending emails weekly ( at least) to your list so keep them active and engaged. I’m sure you’ll see a big difference.
If you want ideas to help you fill in the blanks about the above, drop me a comment below and I’ll be happy to help out.
Anna shares a few of her start up mishaps, her successes, and how important her trips to visit her factories can be.
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Have you ever seen the product you’d dreamed about developing in stores and on TV and thought, “Why didn’t I do that?” The reason is, most likely, that you didn’t have the information and connections to do it.
Want to learn more? Drop me a comment below.
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Shows are cancelled: Buyers still need new products. Book a call with me today and learn how to get through this crisis. Want to learn more? Drop me a comment below.
#sarahshawconsulting #buyers #buyer #clothing #business #fashion #apparel #boutiques #consultation #dropshipping #ecommerce #dropship #dropshippingtips #reseller #boutique #accessories
Do you know how to set the right price for your product line? Lordy knows I sure didn’t when I first started my handbag line. But once I learned the correct way to do it, I never mispriced anything again! Now I want to share this method with you so you can be profitable and not wonder why you can’t pay yourself.
It took me years to figure out how to set the right price for my product line when I first started out, so I can imagine you might be in the same situation. If you are not sure if you are making any money, then there is a good chance you’re not pricing your products correctly.
Proper costing is the lifeline to your business and profitability. Taking into consideration and finding all the hidden costs, is the key. So many people forget little things that they add up and then BOOM, you are not making any money. Once you have the actual cost (cost of goods sold) then it is easy to figure out the wholesale and retail prices so you are always making money.
I’d love to share this formula with you. It totally saved my rear when I was in year 3….. Just thinking of all that lost money in the first 2 years…. I want to cry!
Drop me a comment with “PRICED FOR PROFIT” and I’ll reach out and connect with you.
