In this episode Jack & Holly spend some time thinking about what the right price would be for the to sell their new vacuum cleaner.
What is the right price to sell something?Embed from Getty Images
The right price can be hard to come up with.
The key is to think of a price that covers the cost it takes to make your product and then a little bit more so that you actually make some profit!
This little bit more that you add onto the price is called the ‘Profit Margin’ as this is the bit that you actually make the profit on.
You’ve probably noticed that things in the shops cost different amounts, that’s because the companies that make them need to think about how much profit they want to make and how much it costs them to make the product.
Take the Playstation 5 for example, you probably know that it costs a lot more than the Playstation 4 does right now and that makes sense when you think about it.Embed from Getty Images
The Playstation 5 is brand new so uses brand new and high tech parts which cost the company who makes it more money to buy and put together. The Playstation 4 however, is old so the parts are cheaper. They’ve also been making them for a lot longer so they’ve gotten really good at putting them together and they can probably do it for cheaper now then they could before.
How do you work out the right price?
The first step is to add up every cost you will have in making the product itself.
Here are some costs to think about:
- How much all the parts to make it cost
- How much will you need to pay the people putting it together
- If you are using a factory how much will that cost
- Are you planning to do any TV adverts? That will cost money too
- How much will it cost for you to send them out to the shops or wherever you plan to sell your product?
When you’ve thought of all your costs, figure out how much that will cost for each one of your products being sold.
That cost is the minimum you need to charge as you want to cover your own costs!
After that you need to think about what your profit margin should be.
You need to give your profit margin a good think. If you charge too little the small profit may not be worth all the work you put in, if you charge too much then customers may not buy it because they think it’s too expensive.Embed from Getty Images
Come up with a price for your own product!
Think about all the things we’ve talked about and put a price on your own product.
You might not know how much some things will cost so ask your parents to help you and come up with a cost together!
Listen to ‘There’s Got To Be a Better Way’ at 6:45am on Fun Kids Radio every weekday starting Monday 14th December or subscribe to the podcast below…
This series is produced with help from Shark
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