In October of this year, Canada will initiate its second wave of marijuana legislation. While the full scope of this impact is still being determined, there will be an increase in products available, including edibles, cannabis-infused beverages, and a variety of other products.
If you are in the marijuana, cannabis or hemp industry you are sure to have an influx of new customers. So, what is the right way to determine your marijuana prices?
Read on to learn about two of the most common ways to set your legal weed prices.
How to Set Your Marijuana Prices
While there are two main approaches to pricing. The first piece is to know and understand your customer. Your customer's buying habits ultimately impact your ability to sell to them.
You can combine components of both of these approaches to reach the price that works for you.
Cost Approach
The cost approach focuses on the costs that go into creating the final product. This is everything from costs for source material through the cost of taxes.
Below are some typical costs associated with your final product.
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Local, Provincial, and Federal Taxes
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Variable Costs: wages, marketing costs, packaging costs, etc.
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Fixed Overhead Costs: rent, utilities, security, Point of Sale (POS) software, and hardware, etc.
The cost of your goods is the driver in this approach and you want to look for two things.
First, you want to make sure you are not forgetting a major cost, such as shipping. Second, you are looking for your break-even point. This is the number of transactions that cover all your fixed costs.
Because this is new legislation there is still a lot to be discovered. A consultant that specializes in this industry can provide valuable input. Engaging their services will also save you time and money in the long run.
Market Approach
In the market approach, you look at what others are doing. It may be helpful to look at costs in the United States or other European countries to try to predict the end market cost in Canada. You will want to look at both the highest and lowest price to determine the market price range.
Keep in mind in this approach you don't want to be at the top or bottom of the price range. Your goal is to be slightly below the middle so you can capture more of the market share.
Consumer Buying Patterns
More than likely, even if you know your customers, you will learn as time goes on more detail about their purchasing patterns. Use your POS to determine what is selling, and what is not.
Have your staff listen to customers. If they are avoiding a product because of the price, you may do better to drop it to meet their desired price point.
There is a science behind setting the right prices for your marijuana or cannabis products. Don't rely on your gut or "instincts" to determine the right price for your goods.
Do You Need Help Entering the Cannabis Business in Canada?
We are here to help you find the right solution for your cannabis company, including finding the right source of raw materials and determining your marijuana prices.
As a team of professionals, licensed dealers, consultants, and marketing gurus, we are here to help you find the right solution for your cannabis company.
When you contact us we focus, you can expect the utmost in professionalism and industry knowledge.