agricultural microeconomics lesson 2: pricing and revenue considerations
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Agricultural Microeconomics Lesson 2: Pricing and Revenue Considerations. - PowerPoint PPT PresentationTRANSCRIPT
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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
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/
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
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Revenue and Pricing
Revenue =Price per unit x Number of units sold
Profit =Revenue - Costs
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
The Price is Right
How much would YOU charge for your product?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
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
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Piedmont Farm Revenue
Revenue from sale of 30 head of grass fed beef (total of 10,800 pounds):
ProductPrice ($/lb)
Quantity Sold (lbs)
TotalRevenue
Bulk Sales to Grocery Store
$7.00 7,560 $52,920
Packaged sales at farm
$8.00 3,240 $25,920
TOTAL REVENUE: $78,840
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Important steps in setting price
• Know your costs• Know your customer• Assess your competition• Review your pricing continuously
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
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?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Price Sensitivity
Retail price per pound $7.00 $8.00
Number of pounds sold 100 75
Total Revenue: $700 $600
Scenario 1: Customers are VERY price sensitive
Scenario 2: Customers are NOT price sensitive
Retail price per pound $7.00 $8.00
Number of pounds sold 100 95
Total Revenue: $700 $760
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
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?
Photos by: Nancy Ranney, Ranney Ranch. Used with permission
Optional Exercise
How much would you PAY?
Presentation Title
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
“Cattle at Sunset” by Andrew S. Gray Photography, Creative Commons CC BY-NC-SAhttp://www.andrewsgray.com/2012/07/cattle-at-sunset/
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