Do you know what "Achology" is? Formally, this word does not exist. But in the informal way of saying things, "Achology" is the pseudoscience of the "blind" who want to guide other "blind", that is, of people who have never seen a process or situation and, therefore, know nothing about the subject, and that, therefore, use obscure methods (not clear) to suggest solutions with which they intend to guide other people who also do not know.
“Achology” is present in numerous sectors of society and many times we do not even realize it. And the problem with when she gets into the pricing business of an online store is that she can bankrupt a business.
“I think we can sell this device for “x” dollars”, says an achologist. “I already think that “x” real is a lot. How about “y” reais?”, replies the other. And so on, but they don't realize that this method is quite risky and that there is a more accurate way of doing it, which is called Mark-up.
In Economics, Mark-up is a mathematical process with which it is possible to add the costs, expenses and taxes of your e-commerce with the profit margin you intend to obtain, in order to find the sale price. Here it is:
Markup = 100%/[100%-(DV%+DF%+LP%)]
e
PV = Mark-up x CP
In these two formulas:
• 100% is the Sale Price
• DV are Variable Expenses
• DF are Fixed Expenses
• LP is the Intended Profit
• PV is the Sale Price
• CP is the Product Cost (for you, the webshop owner)
For example purposes, let's assume that:
• CP = 57,00
• DV = 15%
• DF = 20%
• LP = 25%
So the calculation of the first formula would look like this:
Mark-up = 100/[100-(15+20+25)
Markup = 100/(100-60)
Mark-up = 100 / 40
Mark-up = 2,5
Once the Mark-up is found, you must multiply this percentage by the Product Cost (CV). So:
PV = 2,5 x 57,00
HP = 142,50
As you can see, the selling price you should enter in your online store for this product is 142,50. To generate more competitive prices in order to beat the competition, simply lower your profit margin a little or – if you want to be a little more radical – reduce your expenses, which you can do by optimizing your business's value chain.
To perform calculations more quickly, it's advisable to obtain and use a markup spreadsheet or management software that can be integrated with your e-commerce platform. These technologies will provide you with much more automation and speed in calculations, saving you time so you can dedicate yourself to your key activities.
