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Pricing |
How do you price your product or service? |
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If you make a product that costs $5 to produce and package, how much should you charge for it?
I don’t know.
But there’s a simple bit of arithmetic you can do to understand sensitivity in pricing.
Should you charge $7 or $9?
Well, if you charge $7, you make $2 a unit.
If you charge $9, you make $4 a unit, or twice as much.
Which means, all other things being equal, you’ll need to sell twice as many at $7 as you’ll need to sell at $9.
It doesn’t feel that way, but it’s true. 100 sold at $9 is more profitable than 180 sold at $7. And to take it a step further, you’ll need to sell 800 at $5.50 to make as much as you would have made at $9. Eight times as many.
https://seths.blog/2018/08/all-other-things-being-equal-simple-contribution-analysis-for-pricing