So You Can Sell Ice to Eskimos, Congratulations.



Although you have only completed one part of the equation, see selling ice in the Antarctic is easy, no storage, no refrigeration and it never goes off. Even if you sell less volume each day it doesn't really matter because short of cutting the ice to suit peoples needs its almost all profit!


What about if you sold ice in Alice Springs. The need would be higher based on the temperature, but your cost of sale would also be incredibly high compared to the arctic.


Why? Because you need to store it and refrigerate it so it doesn't melt. Plus you have to now ship it to the destination because as you know, Alice springs isn’t known for their ice shelves. They are more well known for being in the middle of the desert and 40+ degree heat.


So what's my point in this strange story I'm telling?


That just because it’s that same product you are selling, doesn't mean that it costs the same to you, you need to factor in more than the actual raw cost of your product or service.


Using the analogy above you can see the same product in a different place is vastly different.

So when you are pricing your products or service, think about what you are doing and ensure your margins are correct. For example


I sell lemonade for $5.00 a bottle. I started selling it locally and it costs me $1.00 to produce and market. So my profit is $4.00.


Now I have people asking if I can deliver it to three suburbs away, of course I will as I want to expand my lemonade empire.


So each week I get in the car and deliver 10 bottles to the customer. So am I making $4.00 profit from each bottle, short answer is no as it costs $5.00 dollars in petrol to deliver them.


So now my profit has been reduced by $0.50 per bottle.


What is the delivery needed to be driven to another city? I’ll let you work that one out.


“Same product, different circumstances, less profit in your pocket”


Now these are simple numbers but it’s the thought process in pricing that is important here. When you have a plan for your business and know what you are going to do over the next period of time you can factor in all sorts of scenarios that might impact the price of your products or services.

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