Essay on Pricing of Marketing

3239 Words Oct 30th, 2011 13 Pages
Intelligent pricing is one of the most important elements of any successful business venture. Yet many entrepreneurs fail to educate themselves adequately about various pricing components and strategies before launching a new business. Smart small business owners will weigh many marketplace factors before setting prices for their goods and services. As the Small Business Administration (SBA) indicated in The Facts About Pricing Your Products and Services, "you must understand your market, distribution costs, and competition. Remember, the marketplace responds rapidly to technological advances and international competition. You must keep abreast of the factors that affect pricing and be ready to adjust quickly."

Cost Factors and Pricing
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These fringe benefits can include social security, retirement benefits, insurance, unemployment compensation, workers compensation, and other benefits.

MATERIAL COSTS. Material costs are the costs of all materials that are part of the final product offered by the business. As with labor, this expense can apply to both goods and services. In the case of goods, material costs refer to the costs of the various components that make up a product, while material costs associated with services rendered typically include replacement parts, building parts, etc. A deck builder, for example, would include such items as lumber, nails, and sealer as material costs.

OVERHEAD COSTS. Overhead costs are costs that cannot be directly attributed to one particular product or service. Some business consultants simply refer to overhead costs as those business expenses that do not qualify as labor costs or material costs. These costs include indirect expenses such as general supplies, heating and lighting expenditures, depreciation, taxes, advertising, rental or leasing costs, transportation, employee discounts, damaged merchandise, business memberships, and insurance. A certain percentage of employees usually fit in this category as well. While the wages and benefits received by an assembly line worker involved in the production of a specific product might well qualify as a labor cost, the wages and benefits accrued by

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