Business Studies – 3.3.2 Price | e-Consult
3.3.2 Price (1 questions)
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I would recommend a cost-plus pricing method, with a consideration for value-based adjustments. While the cost of materials is low, the significant time investment in crafting each piece necessitates a pricing strategy that ensures profitability.
Justification:
- Cost Recovery: Cost-plus pricing ensures that all costs (materials, labour, overhead) are covered, guaranteeing a profit margin. This is crucial given the significant labour costs.
- Niche Market: The target market of customers who appreciate unique, handcrafted items are often willing to pay a premium for quality and artistry. This allows for a higher markup.
- Perceived Value: Highlighting the handmade nature of the jewellery and the skill involved in its creation enhances its perceived value. This justifies a higher price point.
- Flexibility: The retailer can adjust the markup based on the perceived value of each piece and the competitive landscape within the niche market.
Purely cost-plus pricing might result in prices that are too high for the target market. Therefore, it's important to consider the value proposition and potentially adjust the price upwards based on customer willingness to pay for the unique, handcrafted nature of the jewellery. Competitive pricing might be risky as it could devalue the unique selling point of the handmade items.