Individual products can be analysed in terms of their ability to cover their direct costs and contribute to overheads. Here the nature and extent of competition will have a major influence on the price. If a product is faced with direct competition from similar products the price will be restrained. In contrast, when a product is faced by indirect competition from products in different sectors of the market there will be more scope to vary the price. This provides the possibility of using different strategies.
Pricing can be a useful tool for pursuing short-term marketing and sales targets.
When a new variety is launched higher prices can be set, providing the opportunity of earning higher returns from those farmers willing to pay the higher prices before seed becomes more widely available. Lower prices may be linked to promotional activities such as boosting sales of established varieties, creating interest in new ones, reducing high stocks and encouraging farmers to buy early. Distributors' margins There are no fixed rules to apply, but the basis for setting a margin will depend on what is expected of the distributor and the acceptable final price to the consumer. Clearly, if the distributor is going to be actively involved in selling the seed and is expected to take a stock risk then the margin must afford adequate compensation. Seed margins have to be attractive enough to provide the dealer with an incentive to stock and sell.