Markup calculations

GP

Hi

I'm sure there's no magic figure but is there a "suggested" rate of markup that businesses use when pricing products?

I can see from some companies that they charge as much as a client is willing to pay but I subscribe to the "once bitten, twice shy" way of thinking and am trying to figure out roughly what markup to put on a product.

I have done all my costing and this is the only thing I'm slightly unsure of. I have hear mention of around 30%. Does that sound about right?

I'm sure it also depends on the product but I don't need a too detailed analysis. Just a rough starting point.

Thansk in advance.
GP

Hitchhiker's Guide to...

basic rule - you base your markup on what your competitors are charging, taking account of the unique perspectives of your own product.

you are obviously trying to get as much as possible without alienating customers.

Every industry will have a different average depending on costs, barriers to entry etc.

GP

Thanks.

I suppose the tricky bit is trying to get my competitors prices....it's not something one sees on the shelf and can make an educated guess at and prices are not freely available.

Hitchhiker's Guide to...

maybe ring them up and pretend to be a customer?

Sonnenblumen

I would treat any prices quoted with a pinch of salt, every business has room for negotiation and list prices are just that for printing and not binding.

You do not specify what business sector you are in or what channel, eg are you manufacturing, wholesaling, sales agent, retailer etc etc?? Channels have different mark-ups, eg sales agents/wholesalers mark-ups would typical be 10% - 15%, lower rates for high volume goods. Manufacturers and retailers on the otherhand will have a larger mark-up simply because these channels are bearing a greater overhead. Typical Retail mark-ups would be 100-125% of CIF prices. That said some will charge more.

Determining pricing is easy, selling is another matter, the former will bear heavily on the latter.

GP

Thanks for the advice all.