Definition of Product Positioning

by Pankaj Gupta
(Delhi)

I want to know what is the definition of product positioning?

Response from Kris at More-For-Small-Business.com:

Product positioning aligns the product with the target market. For example, if you plan to sell luxury items you need to position your product to a market segment that is interested in, and can afford, high end luxury items.

A common method of positioning is by product attributes or characteristics: for example, the product's safety characteristic, or quality and long-lasting characteristics. Or you could position by price (high cost and high value compared to low cost and low value). You could also position your product by use: a gas fireplace would be an environmentally friendly alternative to a wood burning fireplace.

How to Build a Price?

by VJ
(India)

I'm starting a new construction company. I need help with the cost of building materials and how to work out the cost of labor. This is so that I can build a price for customer quotes. Can you help?

Response from More for Small Business:
Building a pricing structure is more complex than you might initially think. You need to make sure that you cover all of your costs (expenses), build in a margin for profit, yet still be competitive on price (so that the customer decides to buy your services).

When building a price, look at the cost of materials to you (but make sure you negotiate a good wholesale price from suppliers - do not pay the retail price); add expenses such as your vehicle (including gas, maintenance, insurance)and your office and/or building rent, computer, phone, internet, light, heat, tools, legal, photocopier, etc. - but only those costs on a proportional basis (for example, if you spent $20 on gas for the week and this job would account for half of your week's driving then only $10 could be charged to the job); and the time and people resources to do the job (that is, the number of people, the hours they would spend on the job, and the wages you would pay them for those hours).

Typically in building price quotes for construction jobs it's the labor costs that are most changeable - you need to ensure that you are accurate in your time and labor estimates because you can lose money if you get that wrong (customers are unlikely to pay you more simply because you quoted wrong).

When you build your price quote, show the customer the breakout in materials, expenses and labor: not each detail on the expenses - a summary is fine there - but certainly provide a list of the materials and their costs, and the hours for each 'type' of work (e.g. foundation, framing, windows, flooring, carpentry, etc.).

Also include in your costs the range of costs by material - for example if your quote includes ceramic tile for the bathroom and kitchen but the client wants more expensive marble tile then you have a problem - unless you've already indicated in your quote what your price is based on.

To make pricing easier, more consistent, and more accurate, track your job costs as you go along (that is, keep a list of what you quoted and compare against actual costs). Another consideration may be to build a mark-up fee to account for your expenses outside of materials and other direct costs. For example, perhaps you add 16% to cost of materials and labor to cover the cost of your vehicle, tools, office, etc. Work with a bookkeeper or an accountant to help you build a stronger understanding of how to manage your cash and how to build a price that is not only competitive but is also profitable.

Kris, More for Small Business