How much do you charge for your product or service?

Here are three interesting and relevant facts:

1. The price of a product or service is directly related to the business’s profitability – that is, profit = (price x quantity) – total costs.

2. The price is the sum of all values (including money) that buyers exchange for the benefits of using a good or service.

3. The buyer and seller each bring different needs and objectives that indicate what a fair price is.

From a seller's point of reference, the major determinants that can influence a fair price include:

The business's pricing objective. That is, is your pricing objective:

• Profit-oriented - you want to maximise your current financial results;

• Market-oriented - you want to maximise your market share so you lower your prices; or

• Competition-based - that is, you set your price in accordance with what your competitors change.

The cost of conducting business: Here, you need to calculate your break-even point and charge a price that is this plus a percentage.

Other marketing strategies: For example, do you run seasonal promotion activities (eg, hot prices for bikinis in winter)?

Your distribution channel expectations: For example, do you pay a commission?

Your competitors' prices: You should know what your competitors charge, but understand that you do not have to match this price.

Legal and regulatory issues: Are there any of these issues associated with your product or service?

The response of buyers: This is the most important factor - How will your buyer interpret the price and respond to it? That is, will the buyer consider the price to be:

• A great deal;

• A fair price; or

• A rip-off.

Price setting should be a least an annual event. When you are next reviewing your pricing structure you may like to include these factors in your calculation.