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Your Product Price Point is Independent of Cost

Updated: Feb 28, 2022

Many startup companies and people who are new to product development make the mistake of pitching their product price as a multiple of the production cost: "So if it costs me $10 to make it and I can sell it for $40, that gives me a $30 profit". Notwithstanding all of the other costs like shipping, warehousing, import duties, VAT, and distributor and retailer margins that have to be added to the factory cost, the price is determined, not by the cost but by what the market is prepared to pay based on the perceived benefits that the product offers. In the early stages of Covid in 2020, what were normally $0.50 face masks were selling for up to $10 in some places because people were frightened and prepared to pay almost anything to feel safe.

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