What Is ‘Demand Pricing’ And Should I Use It In My Wholesale Business?

Demand pricing is the process of figuring out what the price of a commodity will be of the desired volume of sales. Market pricing is mostly used to set prices of goods which are sold through different sources at different prices. This kind of pricing is challenging because it does always result in the best profit margins as you might anticipate, so as a wholesaler, you should consider the costs of goods and the markups separately so that the prices will not cut deep into your profit margins.

You know the basics of demand pricing, the more the demand is for a product, the higher the price for that particular product it will be. On the other hand, the lower the demand for a product, the lower the price for that stock.

But, what drives the demand for a product? Let us say the stock for a particular brand in your local stock market closes at $ 25 on Monday afternoon, what is likely to happen the following morning? You cannot predict what the demand for that product will be although some business analysts will try it is not a guarantee that their predictions will be right.

But in general terms, the demand for a product in the market is mostly affected by the market, political environment and the industry news. But in the long run, the demand for a stock will still have the final say on what you as a wholesaler and your customers will accept.

demand pricing wholesale business

A New Day

In business, every morning is a new day, a clean plate to start a fresh. The demand for a product can be entirely different from what it was the previous evening. So you cannot rely on demand as a determining factor for pricing your goods and services.

You might have noticed that the products that closed with a very high demand in your warehouse the previous day could be having the least demand the following day. So if you were selling a particular brand at a high-cost yesterday, if the market goes down today, you will be forced to adjust the price accordingly. The demand for goods and services in the market goes up and down every new day.

If you want to succeed in your wholesale business, take your time to study the market and then determine the best price for your products. Do not be quick to drop the price of your goods and services neither should be in a hurry to raise the price of your products.

If the demand for a particular product is going down, sit tight in your warehouse and keep your eyes open at a good price.

Be A Wise Investor

If you are a wise wholesale investor, you will watch the market policy and other factors when determining the prices of your products.

As a wholesaler, you must learn other techniques and strategies for determining the prices of your stock apart from demand. You can set the prices for your goods and services by either finding the right price or simply moving into another brand/product that will help you meet your business plans.

Verify The Demand For Your Product At Your Desired Price

As a wholesaler, once you have set a price, let us say for your new product, and you introduce it to the market, you will know if the demand for your product is high or the price is too high hence you will need to lower the price to attract more demand. Remember, it is easier to reduce the price of a product than to raise it.

You need to determine the price of your product from the ground up based on production cost for example and your profit margin and not based on demand alone. However, you need also to check your price against the demand of that product to ensure that the price you have set is not too high to affect demand or too small to eat into your profit margin.

Know The Market Demand

You will need to familiarise yourself with your wholesale buyer’s market. You will need to study the purchasing power of other similar goods in the market and compare them with your wholesale prices. Know the highest and lowest prices in the market and how they affect the demand for those products. This knowledge will help you set prices that will allow you to get a real demand for your goods and services at the cost that you will set for your wholesale products.

Once you have known the market demand, you will not stop there; you will still need to check the price to ensure that it is not too low or too high. You would be better off if you set a higher price because you can easily adjust it downward to meet the market demand than when you had set a low price, and you will try to adjust it upward.

Other Pricing Options

Apart from demand pricing, there are other methods you can use to determine the price of your wholesale and they are:

Competitive Pricing
In this method, you will have to study what your wholesale competitors are charging for the same products as yours and then charging the same price. This method of price determination is common where the products are the same. If you decide to adopt a method, it is not a must that your price be equal with those of your competitor.

Cost Plus Pricing
In this type of pricing, you will need to consider all the expenses that you have incurred to product your product which include labour, materials, overhead and profit percentage. In this method, you must ensure that your profit is not too small and be accurate about all the costs inquired thus far. To determine your selling price using this method, you must add all the costs plus the profit and then multiply that figure by two to get your sale price.

Whichever method you will decide to use to determine the price of your goods, make sure you are clear about your brand and the competitive market.

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