Presentation on theme: "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 COSTS 2.TYPES OF COSTS PRICING 3.PRICING POLICIES 4.THE."— Presentation transcript:
4 new frontier s e r v i c e s 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)
5 new frontier s e r v i c e s 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
6 new frontier s e r v i c e s 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
7 new frontier s e r v i c e s Examples: FIXED COSTSVARIABLE COSTS Telephone, internetRaw materials RentInventory StationeryPackaging RepairsSalary commissions Social securityShipping Staff trainingUtilities Wages and salariesAdvertising for a special promotion AdvertisingMaterials DepreciationAdditional electricity (mixed costs)
8 new frontier s e r v i c e s 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...
10 new frontier s e r v i c e s MARKETING MIX ProductPlacePromotion Price
11 new frontier s e r v i c e s 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
12 new frontier s e r v i c e s Break-Even Point: After this Point there is Profit; before this Point there is Loss Source: Business Tools Pro 2009
13 new frontier s e r v i c e s There are many issues to be considered, such as: A.Customers and Demand B.Competitors C.Image D.Subsidies E.Costs and Profit margins
14 new frontier s e r v i c e s 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?
15 new frontier s e r v i c e s 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?
16 new frontier s e r v i c e s 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? Its 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...
17 new frontier s e r v i c e s 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?
18 new frontier s e r v i c e s 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
19 new frontier s e r v i c e s 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. QUALITY MANAGEMENT: International Organization for Standardization (ISO) 2010
20 new frontier s e r v i c e s 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.