product pricing advice

friendsfirlife

I would like to get some advice on pricing our new product.  Our business is called Friends FIR Life and we have invented a Far InfraRed (FIR) radiant heat therapy device for pets.  The first of it`s kind designed for home use, our product is an effective alternative to drugs for arthritis, hip dysplasia, skin irritations, hot spots, dermatitis, anxiety, etc.  You can check out our website at www.friendsfirlife.com for more info and to see what it looks like.So my question re. pricing:  We are working on defining our pricing structure for retail, wholesale, and distributors and would love some advice.Our cost per unit from our manufacturer is $300 while we amortize up-front costs over the first 300 units, but ultimately will average to $200 per unit .  We are a home based business with no employees other than my husband and myself and since our manufacturer drop ships for us, we don`t have a lot of overhead for warehousing, etc.  We plan to both do retail sales through our website and shows, as well as wholesale through trade shows, direct contact with retailers, though vets, kennels, etc.After doing some research, we have come up with the following structure:Wholesale (3 unit minimum):  $390Distributor (20 unit minimum): $300Suggested Retail:  $550Our Website - 10% off: $495This allows for a 40% mark-up from wholesale to retail for smaller stores that just want a few units at a time, and an additional 30% for large retailers or distributors who might, for example, sell at wholesale to kennels who would then sell to their customers at retail.Does this pricing structure make sense?  Any comments or suggestions would be much appreciated.Also, since we are just going to market with a brand new product, we are considering doing some introductory pricing.  Can this get us into trouble with then raising prices to the above structure (or whatever we come up with) after, say, 6 months?Thanks in advance to all for any advice you can give us.Lisa

friendsfirlife

Thanks, everyone for the great advice.  We had already been considering  the question of whether or not having a lower online price as compared to retail is viable, so the input is very much appreciated.As for only doing direct web sales at first, we already have quite a few contacts and people who are interested in either carrying our product in their store (small "boutique" pet stores) or on working in a particular sector in the animal care industry (for example a past board member of the American Kennel Association who wants to focus on selling to kennels specifically).  These have come about just through talking to people as we were developing the product, as well as through my husbands work of selling Far Infrared saunas for people.Since, as you say Degrees, our product is a new concept and needs a lot of explaining, we feel that having people in the industry - vets, kennels, breeders, trainers, etc. - using and/or selling our product, will also help the general public`s "trust factor".As for media coverage, definitely part of the plan!  We are working on the press release this week.Would still be great to hear some feedback on the pricing structure, specifically if 40 % mark-up for the retailer is adequate.Thanks!

friendsfirlife

Thanks to everyone for all the great input.  Haven`t been here for a couple of days due to the flu, but now back up and running (literally). 
Vincent, I like the Great White Shark analogy - while we don`t technically do our own manufacturing, it is our invention, our product, and the manufacturer produces it exlusively for us.  Sort of best of both worlds, since we don`t have to worry about manufacturing process, warehouse space, etc.  We have already filed patent application, so when some one else tries to copy us, we will be ready.  Of course no one else`s product will ever be as good - we are setting the industry standard!  And I like the idea of setting pricing guidelines for retailers - will definitely have to work that in.
We do plan to do both retail and wholesale for now, but we will see how it goes and not get locked in to one or the other exclusively at this point. 
Thanks again to all - what a great community this is!
Lisa