Unit Pricing Strategy
Price per unit is calculated by adding desired markup to cost per unit. With $25 cost and 50% markup, price is $37.50, giving $12.50 profit per unit and 33.3% margin. Pricing determines profitability, competitiveness, and market positioning - too low leaves money on table, too high reduces sales volume.
Markup is percentage added to cost, while margin is profit as percentage of price. 50% markup equals 33% margin. Most businesses use cost-plus pricing (cost + markup), but also consider value-based pricing (what customers will pay) and competitive pricing (market rates). Test different price points to optimize revenue.
Price affects demand - higher prices reduce volume but increase per-unit profit, lower prices increase volume but reduce margins. Find the sweet spot that maximizes total profit. Consider psychological pricing ($9.99 vs $10), bundle pricing, volume discounts, and premium positioning strategies based on your market and brand.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
Varies by industry - retail typically 50-100%, restaurants 200-300%, software 80-90%. Consider competition, perceived value, and sales volume. Higher-volume products can use lower markups and remain profitable.
Research competitor pricing, then price based on your value proposition. If you offer premium quality, price higher. If competing on cost, price lower but ensure profitability. Match prices only if products are identical.
Cost-plus ensures profitability but may undervalue your product. Value-based pricing captures what customers will pay but requires market research. Use cost-plus as minimum, then adjust upward based on value and competition.