1.      “Full Value Pricing” is a new way of working
“Full Value Pricing” provides more useful information than any other method for deciding what price to charge in each and every situation that arises.

2.     “Full Value Pricing” suits every business
You can use “Full Value Pricing” for every kind of transaction, and for every kind of business.

The upper limit gives you the required profit at the present level of operation. This is called the “Present Required price”, and is almost always higher than the market will bear.

The lowest price covers only the “nett economic cost” plus a small margin to cover possible minor mistakes. This is called the “Must Win” price. Use it only in the most extreme cases.

For large value or infrequent purchases, typical of contract or large value retail sales, prices can be calculated for each prospective sale. For small value and frequent purchases, like food and clothing, prices can be calculated for a complete range of items, or for a complete promotional campaign.

If you are using Full Value Pricing to create a price list or shelf tags, you will need something more.  Your Full Value Pricing Calculator calculates aggregate mark-ups - for instance, for "Retail".  Not all categories in each activity (like "Retail") can support the same mark-up.  You will need to use the "Category Mark-Up Calculator" to determine your best mix of mark-ups by category, to give you the best possible aggregate mark-up.   You will find it hard to achieve the aggregate mark-up you need.  Achieve the best possible.

Go back to My Red Zebra Powerhouse to get the Category Mark Up Calculator.

3.     Using “Full Value Pricing”
Four calculated price points provide a framework for deciding on a response to any pricing question: Present Required Price, World’s Best Practice, Price Fighter, and Must Win .

Present Required Price - usually above market level because:

• Your offer has more value than the customers recognise. May be you could promote the added values more effectively
• Your offer includes things customers simply do not want. Review your offer, and delete needless costs
• Your efficiency is below industry standard. Improve internal management to improve efficiency.
• You are offering something that can be sold separately! For example, do you offer selection assistance or after sales service that others charge for, or you should charge for? Price so that these additional costs are clearly separated out from the main part of the offer.

Sometimes, just seeing the Present Required price will help you raise prices to a more profitable level. You probably have not fully tested the real level of competitive pricing, and this won’t create customer backlash or reduce sales.

World's Best Practice Price - the current “middle of the market” price point. Usually set by efficient, well managed companies who have done their research well, it matches the most readily accepted value package for the mainstream customer.

This price will be adequately profitable, if your volume is high enough. In almost every case, you are better off by pricing at this point, and building up volume. 

Price Fighter Price - provides a useful guide to sound pricing for a promotional campaign, or a price fight.

Must Win Price - For use only when winning a particular sale is more important than making a profit. This may be to fill a gap in contracts, or to close out a competitor, or to confuse a competitor, especially when you know you won’t get the sale anyway.

4.     Calculating the Prices
Easy! Go to your "My Red Zebra Powerhouse" that contains your calculator. How? Simply type your labour and purchase estimates in each yellow cell. The prices are calculated immediately. Remember, enter the hourly rates are you actually pay the people who work in that part of the business. Get your Full Value Pricing calculator now - contact The Red Zebra Business Centre

Your FVP Calculator  calculates prices three ways for each activity.  Use these guidelines to choose the ones relevant to you:

• Manufacturer:  Specifically tailored to suit ONLY factory manufacture of repetitive items
  
• Service Provider:  For any activity in which labour is sold - except manufacturing as defined above.  For example, a builder or T V service person
• Trader:  Used for any business that sells goods without the addition of labour.  This does not include a service activity that also sells parts.  It is for retail and wholesale trade activity ONLY.

5.     Points to Watch
The Present Required price indicates the prices you should be trying to attain. Improve sales techniques to make this more likely.

Establish a target gross profit for each trading period, usually a month. Select the prices to be charged with a view to maximising your chances to achieve your gross profit. Once you have established the maximum value to your prospective customer, it is better to accept a lower price and get more sales, than hold out for a more attractive price to you, but which reduces activity and reduces total gross profit.

It is even better to maintain prices to current customers and in existing outlets if you can, and increase the competitive edge to your pricing to new customers or in new markets.

Remember - "Maximise the price at each sale, and maximise the number of sales at each price".

6.     Go to your own Full Value Pricing Calculator
Your Full Value Pricingcalculator is already established for you, as soon as you have a budget approved.  It is easily accessible in your "My Red Zebra Powerhouse".

Go back to My Red Zebra Powerhouse to see the FVP Calculator.

7.     Updating Your Data
Your “FVP” calculations are based on figures provided by you, and will be affected by changes in business mix and expense patterns through each financial year. You should arrange for your “FVP” data to be updated annually by contacting The Red Zebra Business Centre

Data is protected, so you are not at risk of losing any factors calculated.

Full Value Pricing. The one sure way to increase both sales and profit - and at the same time!