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Optimize Your Pricing for Wholesale

When we talk about business strategy, most of the time, we’re talking about sales and pricing. And there are probably about five million books on sales strategies. Just when you look online to try to get a sense of perspective, you’re hit with hundreds of millions of results. When you do an image search, there are a few ones that look like a flowchart, and one that looks like a Venn Diagram-quadrant thing, then there are pyramids and 3-dimensional graphs. All of this can quickly get very confusing. But all of these say the same thing: to explain how best to attract other businesses to buy certain goods and services. 

And it makes sense. Business strategies have been around since mankind has been selling things and over time strategies have accumulated to serve different purposes. At the center of all of these strategies is a single concept that ties them all together: pricing. We will break down how important effective pricing strategy is, and how you can get the most by setting your prices accordingly.

The Importance of Effective Structuring 

Everything comes second to pricing. Everything. So let’s lay it out.

We know that price is “both the money someone charges for a good or service and what the consumer is willing to give up to receive a good or service.” We know that it is the payment charged for a good or service. Say, a food item on a restaurant menu costing x-amount of money. Or the service fee the cobbler charges when you get your shoes repaired.

And we also know that price is something that consuming entities (individuals or other businesses) must pay to receive a good or service. It does not always mean money; because before money was even invented, people used bartering as a system of exchanging products and services. For example, teachers will provide their skills and services to a school, in exchange, the school pays them. Or when kids trade baseball cards. 

A Dynamic Strategy

In sales and marketing, price is the most dynamic variable. It is the easiest to change, but it also the easiest to imitate. 

It is how a good or service is priced that makes it critical to shaping the overall profitability of a business, especially when we start considering long-term effects. A well-designed pricing strategy determines all marketing and sales efforts. Marketing and sales plans are the symptoms of well-designed pricing strategies.

It puts products and services into perspective for consumers, it optimizes profitability and the forecast of how much can be sold. What manufacturers, wholesalers and retailers will gain from this, is a deeper and more comprehensive awareness of what you’re selling, who your market is, and who your consumers are. When pricing is not optimized “…you’re throwing off the math that powers the fundamental economics of your business.” 

So the question now becomes “Are your products being priced fairly and favorably to generate maximum profits for your sales?”

Get The Most Out Of Your Pricing

It is important to note that pricing is not a one-shot deal. Prices can be manipulated in many different ways much like a Rubik’s cube. There is no one-size-fits approach because it is bound to be changed many times over depending on the changes in consumer demand and how much a manufacturer can be produced. Manipulating price is kind of like playing chess. You need to calculate a few steps ahead to determine whether making a move is right. 

Let’s review the demand curve for a second. Price goes up, demand goes down. Price goes down, demand goes up. Each time there is a change in price, there is a reaction by consumers. The change can either create an opportunity for increased profitability or result in unfavorable results. Either way, it will affect sales volumes. 

Let’s say for example, you’re selling clothes. And say, you introduce a markdown. What will most likely happen is that consumers will want to buy your product more. This is because consumers are heavily influenced by even the slightest difference in price. This why we care so much when gas prices hike up. 

Sales And Marketing Goals

The first step to optimizing your pricing for wholesale is always understanding which segment of the market you aim to sell your products to. Keep your sales and marketing goals in mind, when doing market research. Different market segments look for different aspects. Some markets look for cheaper, more economical options. Others, for a higher-end products.

Second, calculate your breakeven price. Basically, the total costs to make your product or the cost to deliver a service. This ensures that all your costs are covered– including materials, labor, delivery fees, shipping and handling, or any additional costs necessary to produce your output and make it ready to sell. A popular formula is: 

Total costs of materials + Total costs of labor  + Additional costs incurred = Production Cost/ Breakeven Price

Next, set your wholesale price. It is common for most businesses to multiply production cost/ breakeven by 2, as this ensures that your profit margin (the amount by which revenue from sales exceeds costs in a business) is at least 50%.

Wholesale Price = Production Cost/ Breakeven Price x 2

A More Streamlined Approach

There are many ways to target other businesses and encourage them to buy your product. A lot of these methods depends on how you interact with conduct your business operations, your sales strategy, the size of your business, and of course, your scope and pricing. Using effective communication tools to reach out to distributors, manufacturers and retailers is one of them, so it’s important that you pick the one that fits the bill your business needs best. 

SeeBiz is all-encompassing online networking platform, than can be tailor-fitted by every business owner for their company. Whether you’ve been in business for awhile or you just began, when you bring your connections onto the platform, by inviting them or importing existing ones, you are starting a network of connections that you know can help you with your marketing and sales goals. 

Then you can start organizing them into categories. SeeBiz has taken the liberty by starting you out with “wholesalers”, “distributors” and “manufacturers”, which you can certainly add and change to your liking.

When you create a product post, you can price them correspondingly and toggle privacy settings for which groups prices are visible to. You can also organize your products into catalog and price them as groups. This allows your connections the ease of seeing your products all in one place, removing the hassle of long processing times and third-party software.

Written by
Victoria Billones

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