Sometimes you have a new product or service category with little or no competition and are free to charge whatever you want for early adopters. When I had an Invisible Fencing franchise the sum of direct costs for a self-install kit was about $100 in parts and another $100 to cover the parent company’s national marketing efforts. My indirect expenses amounted to another $150 per unit.
Therefore, I had a breakeven of about $350. We sold the self-install kit for $750 in those days. One reason we could charge a premium price was that we were a new product category protected by a patent. The other reason and the subject of this post were based on the customer’s other options. Our customers essentially had three choices: buy a stockade (wood) fence, a chain link fence, or our invisible fence. The stockade and chain link options for a typical backyard installation averaged about $1,500 back then. So even though our product produced high-profit margins at the time, relative to the customer’s other options it was a bargain.
Do you have a product or service that you can charge a premium price for since the customer’s options are limited or alternative solutions are much more pricey?
