Pricing

What Should I Charge For My Product?

The lowest possible unit price was found in the breakeven analysis. This is to say that production costs ultimately set the lowest possible price you can charge and still break even. Because there is little data concerning past unit prices and quantities sold for NTFCs, producers must take more responsibility for their own market research than producers of more traditional commodities. Instead of looking to market statistics, producers can use two different approaches to determine the demand curve. One approach is to conduct price experiments, such as charging different prices in a similar region and observe the changes in demand. The second approach is to take a consumer survey by asking buyers the quantity of goods they would purchase at various unit prices.

It is helpful to know how elastic demand is in relation to price. Demand is considered to be inelastic if consumer demand changes vary little with respect to price. Conversely, demand is considered to be elastic if consumer demand changes significantly with respect to small changes in price. Demand tends to be less elastic in the following situations:

• little or no product substitutes or competitors
• the higher price is not noticed by consumers
• consumer buying habits are slow to change
• buyers consider price increases to be justified by improved quality or inflation

In addition to market considerations for setting prices, you also must consider a variety of other factors when deciding upon the final price for your product.

• Seasonal versus year-round product. Prices may fluctuate seasonally.
• Fresh versus packaged and preserved. Fresh products demand a higher price.
• Wholesale or retail sales. Through a wholesaler you will accept a lower price.

References

Burkhart, Eric and Mike Jacobson. 2004. American Ginseng. Nontimber Forest Products (NTFPs) From Pennsylvania. The Pennsylvania State University. University Park, Pennsylvania.

Greaser, George L. and Jayson K. Harper. 1994. Agricultural Alternatives. Enterprise Budget Analysis. The Pennsylvania State University. University Park, Pennsylvania.

Kahn, James. 1998. The Economic Approach to Environmental and Natural Resources. Dryden Press. Forth Worth, Indiana.

Kays, Jonathan and Joy Drohan. 2004. Forest Landowner’s Guide to Evaluating and Choosing a Natural Resource-Based Enterprise. Natural Resource, Agriculture, and Engineering Service. Ithaca, New York.

Kotler, Philip. 1997. Marketing Management: Analysis, Planning, Implementation, and Control. Prentice Hall, Upper Saddle River, New Jersey.

Odellion. 2006. www.odellion.com

US Small Business Administration. 2006. http://www.sba.gov/