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As a reminder, the formula is: (Total production cost) × (1 + Desired profit) = Selling price If your production costs are $50 and you want to achieve a 40% profitmargin, your selling price would be $70. $50 Cost plus pricing is one way to price your products and create profit for your business. 50 x (1 + 0.40) = $70.
Perfect competition In a perfect competition market, the market is big, there are many buyers and sellers, and the products are similar. Companies don’t have much control over the price (the company’s marketshare does not impact the price), and the barrier to entry to this market is very low or zero.
These goals can include increasing marketshare, entering new markets, launching new products, or improving customer retention. They provide a clear path for sales teams to follow, guiding their actions and efforts towards generating revenue, acquiring new customers, and expanding marketshare.
This will allow them access to leverage and customer base as well as providing major discounts off list price in exchange for giving up higher profitmargins that could be obtained by going direct with customers. The benefits of a larger customer base outweigh the negatives from lower profitmargins.
That means that being just a little bit different is not good enough (at least not when you’re trying to increase awareness and gain marketshare). To do safe and boring marketing, post safe and boring stuff. Differentiation matters much less if you have a big marketshare. Profitmargins are increasingly low.
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