new business module

62
BUSINESS SKILLS
Price
(1) It is always a good idea to sell your products cheaper than the other sellers in your area.
FALSE: You can lose money if you set your price too low, even if you sell more products. You must
always consider your costs when you set your price.
(2) Your price should cover your production and selling costs, generate adequate profit, and
attract customers.
TRUE: The difficulty is to set the price accordingly.
(3) If you charge more than other sellers, customers will not buy from you.
FALSE: Customers do not only consider the price, they also consider the product itself, the service,
customer relations, the location of the shop, etc. (e.g. a customer may buy fruit at a more
expensive market stand if the quality is always good and the service very friendly).
(4) It is difficult and risky to compete with large businesses on the basis of the price of a product.
TRUE: Large businesses usually produce larger quantities, which allow them to realize economies
of scale. Small businesses should compete on others aspects, such as quality, individual service,
location, uniqueness, etc.
(5) Adding a profit margin to the total cost of your product is a good method.
ANSWER: Yes, but you have to take into account the customers’ willingness to pay and the prices
of alternative products on the market.
(6) If you sell high-quality chairs and a new seller starts to sell cheaper, low-quality chairs, you
should lower your price to keep your customers.
FALSE: You should first change your promotion method to emphasize the quality of your product.
If you realize that people prefer low-quality cheaper chairs, you should adapt your product, which
reduces your costs, and then lower the price.
(7) Your profit depends only on the price you charge.
FALSE: It also depends on your costs, the customers’ perception of your product and their
willingness to pay, the presence of other products, and other things.
(8) Setting your price below the total cost of your product is risky.
FALSE: You will lose money over time. However, you may decide to do this if you are promoting
a product, or if you expect production costs to decrease as a consequence of increased sales.
(9) Your profit should always be at least 10% of your product cost.
FALSE: There is no fixed rule regarding the profit margin. Your profit margin depends on the price
you can ask for your product and the cost of producing it. You will typically try to sell your product
for as high a price as possible.
(10) It is important to review the price of your product on a regular basis.
TRUE: As market conditions change, your product price may need to be adapted.