new frontier s e r v i c e s costs and pricing. 2 new frontier s e r v i c e s costs 1.start-up...

new frontier s e r v i c e s


COSTS AND PRICING

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COSTS

1. START-UP COSTS

2. TYPES OF COSTS

PRICING

3. PRICING POLICIES

4. THE MARKETING MIX

ADDITIONAL INFORMATION AND REFERENCES

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COSTS

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1. START-UP COSTS The initial costs to the running of the business

The first months are harder as you have more expenses than sales

Forecast based on previous research

Logo and brochures design, launch of the website, office furniture, stationery...

Set-up requirements, tax and environmental issues...

Quality management systems: ISO 9000 ‘International Standards for Business, Government and Society’ (ISO 2010)

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Leasing? Renting? Important issue to consider as sometimes you can avoid incurring debt just by making the right decision

Planning! It is essential to establish a timeframe with all your activities!

Organise your time!

Be realistic when setting your objectives

Be cautious and bear in mind you might need to include extra time in case any inconveniences come up

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2. TYPES OF COSTS Fixed Costs: are constant considering your business activity. If your sales

increase or decrease these are independent of that factor

Variable Costs: vary with your sales or output. Normally these increase when the business activity increases. E.g.: If your sales increase or decrease the amount of raw materials required is different. This cost depends on the level of activity

Mixed Costs: fixed and variable parts. E.g.: A factory consumes electricity (fixed cost) but during one month they have a higher workload, this difference is a variable cost

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Examples:

FIXED COSTS VARIABLE COSTS

Telephone, internet Raw materials

Rent Inventory

Stationery Packaging

Repairs Salary commissions

Social security Shipping

Staff training Utilities

Wages and salaries Advertising for a special promotion

Advertising Materials

Depreciation Additional electricity (mixed costs)

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PRE-TESTING Crucial before launching the whole project

It will save you money and time later

Bare in mind the costs of elaborating the pilot!

Materials needed, staff, overheads...

Market research before the pre-testing

Test your product/service with a sample from your target customers/potential clients

Modification, changes, improvements...

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PRICING

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3. PRICING POLICIES Key aspect of the marketing strategy!

Can be, not necessarily, an indication of the quality provided

Industry trends and practices

Aims and goals as a company

Total Costs + Profit Margin

The forecast of the cost is not rigid, it is an approximation

Break-Even Point (BEP): the point at which Costs = Revenues

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Break-Even Point: After this Point there is Profit; before this Point there is Loss

Source: Business Tools Pro 2009

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There are many issues to be considered, such as:

A. Customers and Demand

B. Competitors

C. Image

D.Subsidies

E. Costs and Profit margins

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A. CUSTOMERS AND DEMAND

Who are your customers? Know your customers and their behaviour

Who are your target customers?

Are there many customers?

What are their values? Which are their priorities?

Are you reliable? What is their relationship with you? Customer loyalty?

Which kind of services do you offer? After-sales service?

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B. COMPETITORS

What do the competitors offer?

Are there many competitors?

Who are they?

Are they powerful? Do they have a strong reputation?

Which is your comparative advantage? What do you offer that they do not offer? How important is this factor?

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C. IMAGE

Which image do you want to give? How would you like to be defined by your customers?

Which message do you want to transmit?

It’s important to highlight the pros of renewable energies

Young, dynamic, adaptable, environmentally-friendly, modern, high-tech...

All of these are important aspects to consider when designing the logo, brochures, advertising campaigns...

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D. SUBSIDIES

Additional financial sources

Renewable energies are not price-competitive to traditional sources of energy

Are they easy to reach?

In which sectors? Solar energy? Biomass? Wind power?...

Do these cover your costs?

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E. COSTS AND PROFIT MARGINS

The price has to include your costs and profit margins! (slide 11)

Remember the Break-Even Point (slide 11 and 12). You have to take into consideration your TOTAL costs (fixed and variable)

BEP TOTAL COSTS = REVENUE. Over this BEP, there is profit, below it there is a loss (see the graph in slide 12)

If your sales do not increase, your total costs have to decrease (fixed and variable) to avoid having a loss

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ADDITIONAL INFORMATION AND REFERENCES

Main Source: Dr. Sarah Ingle, lecturer at Dublin City University Business School

START-UP COSTS: Berry, T. 2010. BP Plans. Estimating Realistic Startup Costs. <http:/articles.bplans.com/starting-a-business/estimating-realistic-start-up-costs>

QUALITY MANAGEMENT: International Organization for Standardization (ISO) 2010 <http://www.iso.org/iso/iso_9000_essentials>

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THANK YOU FOR YOUR ATTENTION!

Special thanks to Dr. Sarah Ingle

Legal disclaimer: The sole responsibility for the content of this presentation lies with the authors. It does not necessarily reflect the opinion of the European Union. Neither the EACI nor the European Commission are responsible for any use that may be made of the information contained therein.

new frontier s e r v i c e s costs and pricing. 2 new frontier s e r v i c e s costs 1.start-up...

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