• Pricing Strategy for Business Owners

    Let’s assume you want to import 10 units of ‘Hair Clippers for Men’ from China for resale as a newbie who’s just taking a plunge into Mini Importation business. What costs will you take into consideration to guide you to determine the best price to charge for your product? And, what will be your selling price?

    These two questions are critical to helping you need to make informed decision before investing your hard earned money.

    Pricing strategy

    Let’s just assume the unit price of the product you’re buying for resale is 32yuan. Then, 10 units will be 32 yuan x 10units = 320 yuan, right? Good.

    Let’s also assume dollar exchange rate to yuan is $1 = 6.3 yuan
    Let’s also assume dollar exchange rate to naira is $1 =N370...

    Because you’ll be making payments in naira equivalent of the total cost you’ll incur.

    1) Product Cost
    10 units = 320 yuan
    320 yuan = $51
    $51 x N370 = N18,870

    2) Weight – Every 1kg of item to be imported cost $8
    Now, each item weighs 0.65kg and you have 10 units to import.

    0.65kg x 10pcs = 6.5kg
    6.5kg x $8 = $52
    $52 x N370 = N19,240

    3) Custom Clearing Cost
    To clear an item that weighs 1kg cost N380
    6.5kg x N380 = N2,470

    4) Advertising Cost
    Let’s just assume you’ll spend $50 ad on Facebook & Instagram
    $50 x N370 = N18,500

    5) Internet Subscription = N5,000

    6) Deliver cost:
    - Within Lagos = N1,500 x 5units = N7,500

    - Outside Lagos = N2,000 x 5units = N10,000

    7) Fueling for power = N2,500

    Below is a breakdown of the relevant costs to take into consideration when importing the Hair Clipper for Men in Naira.
    Product cost (10 units) 18,870
    Product weight cost 19,240

    Custom clearing cost 2,470
    Advertising cost 18,500
    Internet subscription 5,000
    Deliver cost (Within & without) 17,500
    Fueling for power 2,500
    Total cost 84,080

    It will cost you N84,080 to effectively import, promote and deliver 10 units of Men’s Hair Clipper to Lagos from China. How do you determine the selling price of your product? Unit cost (i.e. Cost of buying one) of product = N84,080/10units = N8,408

    To determine your SELLING PRICE, you ‘MARK IT UP’ by whatever percentage you’re comfortable with. For example, Markup by 239% and unit cost is N8,408

    Selling price = 239% x N8,408 = N20,095.

    So, selling price = N20,095

    So, if you sell the 10 items = N20,095 x 10units = N200,950
    Less your total cost = (N84,080)
    Profit N116,870

    Your ROI is a positive 138%.

    MY Counsel

    Dive deep into this business if you know you can turnover the sale of the product in the shortest possible time. Next article, I’m going to be looking at the qualitative aspect of pricing strategy for SMEs.I hope this helps.

    Updated on 7:25-am January 9,2020


    Tags: pricing strategy

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