 Now why is it important for you to find and set the right pricing? Because if you set the right price you're going to encourage more customers to buy from you again and again and you're going to have a very profitable business because people feel like they're getting value and bang for their buck. Whereas if you set the wrong pricing you're going to hear crickets because no one's going to buy from you because it's overly priced or if you set the prices too low you're going to run your business to the ground and that's the reason why you need to consider these three factors when determining your product's pricing. First up quality. Is your product a higher or lower quality than others on the marketplace? How much more value does your product provide and in exchange is the value and if the price is worth it? So give you an example. This ice cream is one one of the most popular ones in Vancouver called Ernest ice cream and each pint sells for $12 whereas their competitor Ben and Jerry's they sell it for $5. How can you justify a ice cream that's worth more than double the amount of something you can get from your local grocery market? It is because the quality of this ice cream is just that much better. They use a lot of real ingredients in their ice cream it is much more dense and the fat percentage is a little bit higher so that means it has much more bite to the ice cream than the typical Ben and Jerry's because usually with Ben and Jerry's and the typical ice creams that you see in the market they pump a lot more air into their ice cream so when you eat it it feels a lot more fluffier whereas these ice cream it's much more dense and when it's dense it's creamy and it's good and it's just packed with great ingredients and that's the reason why they can justify selling $12 ice cream having four locations and being one of the top brands in Vancouver even though the prices are more than double of a typical Ben and Jerry's so understanding the quality because the quality dictates the pricing does not mean having the lowest price is always the best. Next up the cost the cost of good solds cost of your ingredients you don't need to calculate the exact cost right now we covered it in a few different lessons previously on how you can calculate the food cost but it is the bottom line that matters okay your bottom line should never exceed the price of the item because a lot of people they don't calculate how much is it that they cost to create a product and they just put the prices out there and they think they're making money when they have no idea whether they're making money or not and a lot of times businesses do this and they fail because they don't know their costs okay your price should be a range of two to four times your costs are good solds okay typically speaking you can start off with maybe times two only but it's your job to work your way up to times for the multiple now if this is messing you up and whatnot it's okay i'm going to give you an example ice cream pint if the cost of good solds the ingredients the label the jar everything costs you two dollars and fifty cents to make two times the multiple of that is what you should be retailing it at either five to ten dollars i highly recommend to go with times four the cost of good solds to get to a good retail pricing but typically speaking when you first start off your food brand the cost of good solds are a lot higher than when you are running a mature business so that's the reason why this cost might be at four dollars might be at five dollars and yet you cannot sell an ice cream that is too far off from the market price so ice cream at let's say fifteen dollars won't work twenty dollars won't work because it just doesn't justify it and that's the reason why we need to adjust our own expectation and to understand how much is the competitive competitors charging so these are different components and different factors we need to factor into our pricing strategy competitors we need to put all three of these variables and factors together in order for us to determine the price right so we talked about the quality we talked about the cost of good solds and then now we talk about the competitors our competitors are great reference point about what the customers are expecting for typically what you are to offer is your price range similar to the top three of your competitors so for example with us our ice cream shop we sell each cup of ice cream at five ninety five how can we justify that because of our competitors our competitors are charging six dollars in ice cream of similar size and another competitor charging six twenty five so i know for a fact that if i charge five ninety five it's falls along the same as what my competitors are charging i just need to make sure my quality is better and also my cost of good solds is lower in order for me to run a very profitable food business now why should i care about my competition it is because the market determines the price and your price and your success also you can't beat your competition unless you understand them and like what i was saying if you're all your competitors are charging six dollars for a cup of ice cream and you're charging eight dollars but the quality and the value you give them is no different from your competitors than you are over priced and that's the reason why we need to understand what our competitors are charging the four ways to analyze your direct competitors first up item price what is on their menu do you offer more or do you offer less how much do their products cost and what is their price so you can analyze these items put it in an excel in the link below there's an excel worksheet where you can actually put all these items and you can analyze exactly what they're charging next up brand prestige what does it mean it means how long have your competitors been in business what are the numbers of followers on instagram are they popular are they not popular do they have any retail locations do they have any accolades do they have interviews do they have publications understanding all those really also plays into the prices they set for example if it is really well known brand that has a lot of publications and a lot of features then perhaps they can charge higher whereas if you're offering similar products similar quality and if you don't have those accolades then you may need to charge a little bit less in order for you to penetrate the market next up to quality what is the quality of the ingredients what are the type of packaging that they use once again here we really talk about the quality of the ingredients so same example with earnest ice cream the quality is premium right that means that they can charge a premium price because you can tell exactly what they put into their ice cream they indicate that on their website and that's the reason why they charge $12 a pint whereas if you don't have that kind of quality if you're not investing into that then you cannot well charge $12 a pint of ice cream next up convenience how do your customers receive the product do they offer shipping or delivery also include that into your competitive analysis research because delivery is also part of the customer experience and people also factor into how they're receiving their product and how much they're paying so all in all these are the different ways for you to analyze your competitors and as you can see here with Bulbasaur this is the competitive analysis research that we have broken down for their pricing in order for us to determine our pricing right so this is something that you can use as a reference and as a template for you to understand what I mean and why we do this competitive analysis and how we can justify our price based upon what our competitors are charging now it is your turn use the competitor breakdown template below to determine your perfect price range now you you can justify why you're charging $30 why you're charging $50 because of your competitors okay and also because of the three different factors