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Agricultural Microeconomics Lesson 2: Pricing and Revenue Considerations

Agricultural Microeconomics Lesson 2: Pricing and Revenue Considerations.

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Agricultural Microeconomics Lesson 2: Pricing and Revenue Considerations

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  1. Agricultural MicroeconomicsLesson 2: Pricing and Revenue Considerations This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

  2. Revenue and Pricing Revenue = Price per unit x Number of units sold Profit = Revenue - Costs

  3. The Price is Right How much would YOU charge for your product?

  4. Variations in Pricing • Cost to produce product • Competition • Demand for product exceeds amount of supply • Quality of product • Reputation of farmer • Product marketing • Transportation costs

  5. Piedmont Farm Revenue Revenue from sale of 30 head of grass fed beef (total of 10,800 pounds):

  6. Important steps in setting price • Know your costs • Know your customer • Assess your competition • Review your pricing continuously

  7. Know Your Customer What does your customer “want?” • Are they searching for the best price? • Do they want to develop a trusted relationship with you? • Do they depend on you for a high quality product? • Are they willing to pay more for a high quality product?

  8. Price Sensitivity Scenario 1: Customers are VERY price sensitive Scenario 2: Customers are NOT price sensitive

  9. Assess Your Competition How can you differentiate yourself from others: • Do you offer a higher quality product? • Do you offer something that no one else offers? • How many other farmers offer the same (or similar) product? • How can you be a price maker and not a price taker?

  10. Optional Exercise How much would you PAY?

  11. Next Class: Cost and Expense Considerations This course developed by The Environmental Finance Center at UNC Chapel Hill for The North Carolina School of Science and Math and NCDPI is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License

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