Do you know how to calculate the selling price of an imported product?

Do you know how to calculate the selling price of an imported product? Calculating the selling price of an imported product is an extremely important task, but it is not always easy.

When it comes to setting the price for an imported item, it can be complicated, as not only do formulas have to be applied, but a number of determining factors have to be taken into account.

Whether your business is B2B or B2C, the first thing to consider is the cost of production.

Contrary to what we sometimes believe, the selling price of a product is not set for the sole purpose of making sales.

Remember that your products must be profitable.

Putting a product on the market without a profit margin may initially increase your sales volume, but it will not allow you to achieve your goals.

What costs does the product incur?

The first step in pricing a product is to know how much it costs to produce or buy it.

Be clear about this aspect, it is necessary to take into account both direct and indirect costs, since in one way or another they affect the company’s investment.

The direct expenses associated with the product are those that clearly derive from its purchase and/or manufacture; for example,

Indirect costs, that need to be taken into account when calculating the price, for example,

It is important to bear all this in mind, whatever formula you choose, you cannot establish the price of a product without knowing its unit cost, so it is important to dedicate time to this step first.

Calculate on gross profit or contribution margin basis

Generally speaking, there are two ways of calculating the price of a product:

  • The gross profit method
  • The contribution margin method

Each company will choose the one that seems most appropriate for their business and market aspects.

  • The gross profit method is based on the idea of establishing the profit margin that should be charged to the product; in other words, the desired profit margin is established (which is determined by the country, the sector, the target public, our position as a company, etc.) and the cost of the unit purchase (or production) of the product is added to it. 

Other aspects to be taken into account when determining the price

As you can imagine, beyond the mathematical operations that allow us to deduce at what price we should sell our products, it is necessary to use common sense and, of course, good market study.

Different aspects must be taken into account,

  • The current position of your brand (it is not the same to sell a product when we have a powerful branding strategy as when we are unknown)
  • Decisive factors, such as the competition or the profile of our target audience (the buyer persona)
  • The final selling price of your product will also be influenced by supply and demand
  • Finally, and equally important, we must take into account what value your product brings to the market

As we have seen, setting the selling price of a product is a task that, in some cases, can be very difficult. Finding the balance between a fair, competitive and profitable price can be one of our biggest challenges when introducing a new product to the market.