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aefstoggaflm
Open Source Fan
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join:2002-03-04
Bethlehem, PA
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How is suggested retail price figured out?

If someone were to make a new product : How would they figure out what the suggested retail price should be for that new product.

Thanks
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davidg
Good Bye My Friend
Premium,MVM
join:2002-06-15
none
you figure your costs to make it(include R&D), and your required profit margin. Then tack on the costs to get it to the stores and add their desired margin to that.

this is the simplified version, but gives a good idea. Keep in mind that MSRP is just that, a suggested retail price.
--
Lack of Preparation on YOUR Part does NOT Constitute an Emergency on Mine!


aefstoggaflm
Open Source Fan
Premium
join:2002-03-04
Bethlehem, PA
kudos:7
Interesting.

How does one figure out what the required profit margin is?

Thanks


footballdude
Premium
join:2002-08-13
Imperial, MO

2 recommendations

reply to aefstoggaflm
If you make a new product, you can charge whatever you like for it. Ideally, you want to charge as much as the market will bear to maximize your profits without hurting volume of sales. Finding that magic price point is the subject of many volumes of marketing research.
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Concentrated power has always been the enemy of liberty - Ronald Reagan


Voxxjin
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reply to aefstoggaflm
said by aefstoggaflm:

Interesting.

How does one figure out what the required profit margin is?

Thanks

Somoe of it might be a required percent to make the production beneficial to the company. I would imagine the board or CEO or whatnot would decide the goals of the company. Different companies will have different goals for their products.

Part of it is also market research and finding out the want/need/desire for an item and how much people (your targeted population) might be willing to pay. If you are the only company that supplies the item, you might charge a little more (extra profit). However if you are entering a market with other competitors, management may decide that a lower profit margin is acceptable in order to gain market share.

And part is if you are only making a small amount of items, the margin will likely be higher whereas if you are making tons of the things a company may be ok with a smaller margin knowing that profits will still be a lot based upon volume.
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Cry "Havoc!" and let slip the dogs of war


Hall
Premium,MVM
join:2000-04-28
Germantown, OH
kudos:2
reply to aefstoggaflm
said by aefstoggaflm:

How does one figure out what the required profit margin is?

There is no across-the-board answer for that.


60632649
Premium
join:2003-09-29
New York, NY

1 recommendation

reply to aefstoggaflm
Depends on the company and their profit margin targets.
I wont do a dissertation on the subject but that sums it up.

If it truly is a new product, get your ass a patent and if working for some other company, make sure there's nothing in your contract that prevents you from getting patents on your own.

If you're working for indians or pakis then condolences.

MaynardKrebs
Heave Steve, for the good of the country
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reply to aefstoggaflm
said by aefstoggaflm:

Interesting.

How does one figure out what the required profit margin is?

Thanks

Get an MBA.


nightdesigns
Gone missing, back soon
Premium
join:2002-05-31
AZ
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·CenturyLink

1 recommendation

reply to aefstoggaflm
To add confusion, look at MAP (Minimized Advertised Price) and Minimum Sale Price.

I make several large equipment purchases from vendors each year. I never pay MSRP and I'm usually 15-20% below that. I've had several vendors quote me below MAP (the lowest price they can post publicly, hence the "add to cart to see price" on various sites) and often get below the Minimum Sale Price (the price at which a manufacturer says that a product cannot be sold less than...which happens all the time).

Keep in mind, what the vendor pays the manufacturer is usually the same. The difference in price usually comes out the vendor's pocket.
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Hayward
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Key West, FL
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1 recommendation

reply to aefstoggaflm
said by aefstoggaflm:

Interesting.

How does one figure out what the required profit margin is?

Thanks

Well if it is a new unique patented item pretty much whatever you think the market can bear.

Or as the Telemarketers do make it seem cheap but charge as much for shipping and the nefarious HANDLING.... like it took 100 people to put it in the box?

Just another of what 100 other people make MUCH lower.

--


Kearnstd
Space Elf
Premium
join:2002-01-22
Mullica Hill, NJ
kudos:1
They also like to hide prices via the use of payment plans. To the people who actually buy crap from an infomercial or telemarketing firm there is the infamous "Only six easy payments of $19.95" rather than just stepping up to the plate and admitting that its $120+S&H
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[65 Arcanist]Filan(High Elf) Zone: Broadband Reports