by John Grey on January 13, 2013
If you are in a business that sells products, the time will inevitably come when you will want to update the look of your packaging. Overtime you will learn things about your existing package that need to be changed, you will desire to modernize the feel, you will want to evolve the logo or communication, etc. Updates to packaging are perfectly natural and healthy as long as the changes do not erode your consumer base. Frequent changes are unhealthy since it destroys your brand equity. Brand Equity What is brand equity? In the world of accounting, it is considered an intangible asset which is quantified to add value to a companies assets. In marketing, it can be defined as the awareness or recognition of a brand. The stronger the equity of a brand, the more recognizable it is. With that in mind, brand equity is a function of the things [...]
by John Grey on January 5, 2013
Before reading this, please take the time to read my overview on The Basics of a Product P&Ls. One of the most costly lines on a product P&L other then the cost of goods sold (COGS) is the trade rate. Setting a trade rate allows you to accrue a predefined percentage of your sales for a given product so that you can then leverage a trade spend to promote your product and offer temporary price reductions (TPR) or everyday low prices (EDLP). There are two keys to successfully setting a trade rate: Knowing what the final suggested retail price (SRP) will be on your product Understanding the purchasing behavior for the type of product that you are selling Let’s start with key #1: Knowing what your retail price will be is a function of your selling price that enables you to hit your profitability requirement will be and what the [...]
by John Grey on January 4, 2013
Creating a P&L for all products that you sell will ensure the success of your small business. The purpose of a P&L is that it allows you to have visibility into your profitability, costs, opportunities for cost reduction, and better management of your final retail price points. My favorite P&L template divides your inputs and factors into four sections: Retail Price Drivers: Since the retailer that you are selling your product to typically will have a margin requirement to ensure their profitability, the price that you will be selling to them for ultimately determines the final SRP. This is important because in small business marketing, we always want to be ahead of the game and make sure that we price competitively in-market by staying below key thresholds, undercutting or pricing in-line with competition, etc. Product Margin Factors: Your product margin is the area in the P&L that allows you to [...]
by John Grey on January 3, 2013
If you own or manage a business that produces products that sell through a retail channel, there are two pricing scenarios that you need to develop so that you can determine what your selling price will be to either the retailer and the distributor that will sell to the retailer and within these two scenarios, two additional scenarios for a pick up price (at the manufacturing or warehouse location) or delivered price. Potentially, you can have multiple delivered prices (full truck load, limited truck load, etc.) as illustrated below: Because of the above, in order to sell efficiently as a small business owner or manager you should be creating two separate price lists if you sell your items both direct to retail or through a distributor (who then sells to the retail) – one price list for direct customers and another for distributors. On each price list you should provide [...]
