Using the data in the table form, we can figure out how to calculate the markup size for each product item:
Posted: Sun Dec 22, 2024 10:17 am
ball - 30%;
tennis racket - 17%;
fins - 43%;
sneakers - 67%;
expander - 67%.
Without knowing the amount of added value, it is impossible to understand the full benefit of selling a product. There is a possibility of selling products to the detriment of the business.
Increase Profits by 200%: Download 5 Powerful Tools for Free
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have mexico number for whatsapp onducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you the 5 most valuable documents that we have developed for our clients.
Download for free and implement today:
How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating KPI for sales manager
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
Download the collection for free
pdf 8.3 mb
doc 3.4 mb
Already downloaded
153116
Situations related to changes in the cost price of products should be considered separately. For example, a retail outlet has been selling balls for 150 rubles for several months, but the company's net profit can vary greatly. This situation is related specifically to the cost price of the product. If it increases, the seller must recalculate the price taking into account the planned gross profit.
For example, in March the purchase price of a ball was 125 rubles. It was sold for 150 rubles (markup of 20%). Thus, the gross profit per unit of goods was 25 rubles. In April the purchase price increased to 130 rubles. Leaving the retail price unchanged, the store will receive a smaller gross profit - 20 rubles. If the selling price remains the same, the gross profit will decrease to 20 rubles, and the markup will decrease to 15.3%.
If the company wants to get the same profit in April as in the previous month, it needs to recalculate the retail price of the ball. Having data on the new cost price, the required trade margin and the gross profit, it is not difficult to make calculations. The required gross profit is added to the cost price, and the final price will be 156 rubles. Now the markup will remain the same as in April - 20%. In this case, the gross profit will be 26 rubles.
This example clearly shows the impact of trade markup on pricing. As an effective tool for price formation, added value allows for a comparative analysis of various product positions and periods of activity. With its help, you can obtain objective information about the work of competing companies and promptly change the prices of your goods.
Regulation of markups
As mentioned above, the amount of added value in most cases has no limits. However, there are categories of goods for which the state regulates prices. These include:
medical supplies and medicines;
food for children;
food products in catering facilities operating at educational institutions;
goods sold in the regions of the far north and equivalent territories.
The markup for these groups of goods is set by local authorities. For some medicines, prices are strictly fixed at the state level.
Regulation of markups
Source: shutterstock.com
For goods that are not included in the above list, if the state does not regulate their cost in any way, the manufacturer has the right to set any trade markup. There are certain categories of products for which it is impossible to set a maximum cost limit (jewelry and custom-made products, designer items and shoes, any goods produced in limited quantities, etc.). For exclusive products released in a single copy, the markup can reach 1000% or more. Note that such goods are not very common.
Case: VT-metall
Find out how we reduced the cost of attracting an application by 13 times for a metalworking company in Moscow
Find out how
The maximum markup on most types of products is actually formed by the market for similar goods. It is very difficult to sell non-competitive items. As the level of demand for a certain product increases, its manufacturer gets more opportunities to independently form the price.
If you wash the potatoes and make them look more attractive, you can increase the selling price by 250%. You can also sort the potatoes and pack them in 2 kg bags with handles, increasing the markup by another 100%. The profit will increase even more if you make semi-finished products. For example, the price of frozen French fries can reach 150 rubles/kg. In this case, the markup in relation to the original price of the root vegetable will be 400%.
Regulation of markups
Source: shutterstock.com
Example . On average, a 600-gram loaf of Uralsky bread costs 30 rubles in the Ural region. With a cost price of 17 rubles, the markup on this product is 76%. In cities where business activity is higher, sliced bread in appropriate packaging is more often purchased. The cost price for such goods increases by 10% on average. In this case, the markup already reaches 87%.
For rural consumers, the retail price is an important criterion, so they buy more unsliced bread. The manufacturer can add bran to bakery products or use flour obtained by mixing several grains (for example, corn flour). In this case, the cost of bread will increase insignificantly, but the trade markup will increase to 150-200%. Popular whole grain bakery products are sold with an increased markup of another 20-50%.
Even higher trade margins are for sweet buns, cottage cheese muffins, baked goods with nuts, raisins and other fillings. For such products, it reaches 250-450%. When setting retail prices, bakery producers aim to maximize profits. However, they cannot raise the cost of their products too much, since there are competitors with more loyal prices on the market.
When setting a trade markup, it is important to objectively consider all factors. Otherwise, the cost of the product may be too high. Retail businesses most often calculate the total percentage of markup for a group of goods. In this case, the same trade markup is applied to a group of products from one category. There is also a practice when, when calculating added value, entrepreneurs focus on their main competitors. With this approach, they set average market prices.
tennis racket - 17%;
fins - 43%;
sneakers - 67%;
expander - 67%.
Without knowing the amount of added value, it is impossible to understand the full benefit of selling a product. There is a possibility of selling products to the detriment of the business.
Increase Profits by 200%: Download 5 Powerful Tools for Free
Alexander Kuleshov
Alexander Kuleshov
General Director of Sales Generator LLC
Read more posts on my personal blog:
Over the past 7 years, we have mexico number for whatsapp onducted over 23,000 comprehensive website audits and I have learned that all of us as leaders need clear and working algorithms for our marketing and sales.
Today we will share with you the 5 most valuable documents that we have developed for our clients.
Download for free and implement today:
How to find out the 5 key marketing metrics in your company?
Step-by-step calculation template with fields where you can insert your data
How to make a KPI for a sales manager based on his work results?
Current template for calculating KPI for sales manager
9 Examples of Universal Selling Commercial Proposals
Upgrade your CPs to close more deals
Cold Lead Processing Script Template
A checklist of ready-made questions for engaging cold clients
7 Profitable Marketing Strategies Examples
Will help increase customer flow by at least 30%
Download the collection for free
pdf 8.3 mb
doc 3.4 mb
Already downloaded
153116
Situations related to changes in the cost price of products should be considered separately. For example, a retail outlet has been selling balls for 150 rubles for several months, but the company's net profit can vary greatly. This situation is related specifically to the cost price of the product. If it increases, the seller must recalculate the price taking into account the planned gross profit.
For example, in March the purchase price of a ball was 125 rubles. It was sold for 150 rubles (markup of 20%). Thus, the gross profit per unit of goods was 25 rubles. In April the purchase price increased to 130 rubles. Leaving the retail price unchanged, the store will receive a smaller gross profit - 20 rubles. If the selling price remains the same, the gross profit will decrease to 20 rubles, and the markup will decrease to 15.3%.
If the company wants to get the same profit in April as in the previous month, it needs to recalculate the retail price of the ball. Having data on the new cost price, the required trade margin and the gross profit, it is not difficult to make calculations. The required gross profit is added to the cost price, and the final price will be 156 rubles. Now the markup will remain the same as in April - 20%. In this case, the gross profit will be 26 rubles.
This example clearly shows the impact of trade markup on pricing. As an effective tool for price formation, added value allows for a comparative analysis of various product positions and periods of activity. With its help, you can obtain objective information about the work of competing companies and promptly change the prices of your goods.
Regulation of markups
As mentioned above, the amount of added value in most cases has no limits. However, there are categories of goods for which the state regulates prices. These include:
medical supplies and medicines;
food for children;
food products in catering facilities operating at educational institutions;
goods sold in the regions of the far north and equivalent territories.
The markup for these groups of goods is set by local authorities. For some medicines, prices are strictly fixed at the state level.
Regulation of markups
Source: shutterstock.com
For goods that are not included in the above list, if the state does not regulate their cost in any way, the manufacturer has the right to set any trade markup. There are certain categories of products for which it is impossible to set a maximum cost limit (jewelry and custom-made products, designer items and shoes, any goods produced in limited quantities, etc.). For exclusive products released in a single copy, the markup can reach 1000% or more. Note that such goods are not very common.
Case: VT-metall
Find out how we reduced the cost of attracting an application by 13 times for a metalworking company in Moscow
Find out how
The maximum markup on most types of products is actually formed by the market for similar goods. It is very difficult to sell non-competitive items. As the level of demand for a certain product increases, its manufacturer gets more opportunities to independently form the price.
If you wash the potatoes and make them look more attractive, you can increase the selling price by 250%. You can also sort the potatoes and pack them in 2 kg bags with handles, increasing the markup by another 100%. The profit will increase even more if you make semi-finished products. For example, the price of frozen French fries can reach 150 rubles/kg. In this case, the markup in relation to the original price of the root vegetable will be 400%.
Regulation of markups
Source: shutterstock.com
Example . On average, a 600-gram loaf of Uralsky bread costs 30 rubles in the Ural region. With a cost price of 17 rubles, the markup on this product is 76%. In cities where business activity is higher, sliced bread in appropriate packaging is more often purchased. The cost price for such goods increases by 10% on average. In this case, the markup already reaches 87%.
For rural consumers, the retail price is an important criterion, so they buy more unsliced bread. The manufacturer can add bran to bakery products or use flour obtained by mixing several grains (for example, corn flour). In this case, the cost of bread will increase insignificantly, but the trade markup will increase to 150-200%. Popular whole grain bakery products are sold with an increased markup of another 20-50%.
Even higher trade margins are for sweet buns, cottage cheese muffins, baked goods with nuts, raisins and other fillings. For such products, it reaches 250-450%. When setting retail prices, bakery producers aim to maximize profits. However, they cannot raise the cost of their products too much, since there are competitors with more loyal prices on the market.
When setting a trade markup, it is important to objectively consider all factors. Otherwise, the cost of the product may be too high. Retail businesses most often calculate the total percentage of markup for a group of goods. In this case, the same trade markup is applied to a group of products from one category. There is also a practice when, when calculating added value, entrepreneurs focus on their main competitors. With this approach, they set average market prices.