Saturday, August 28, 2010

The Problem With Pricing Formulas: Econ 001

Put extremely simply:

Let's say I make and sell mud.
My ingredients are dirt and water.
I find a cheaper dirt supplier with higher quality mud even closer to my house.
My supply costs go down.
My time costs go down.
Why should I charge less for my new nicer mud just because my costs went down?
I could charge the same and make more.
I could charge more and maybe make even more more.

Better plan:
Look at how much people buy mud like mine.
Look how much they willingly pay.
Look for the most they willingly pay and see when and why they pay that.
Don't look at "Mud for sale: $9 gazillion" signs unless those stores have paying customers.
Don't worry about people who do things that you are physically incapable of doing.
If no one wants mud, consider selling address labels.

Art: Victor Electric Adding Machine by me (JillHannah)

1 comment:

PrairieStar said...

Mud and dirt, sounds like wet or dry oreos to me. Of course it's late and I am on pain pills so I may not have a clue what you are asking!