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Business Studies for Secondary Schools
Step 2: Add the desired profit (a) Customers are willing to pay
margin between TShs 4,000 and TShs
Justine wants to make a 30% profit on 6,000 for a quality cup of coffee.
each t-shirt. (b) Competitor coffee shops sell
Profit per t-shirt = 30% of 8,500 = a coffee cup for around TShs
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TShs 2,550 5,000.
Step 2: Analyse costs and set a
Step 3: Determine the selling price competitive price
Selling price = Total cost + Profit Michael calculates his costs per cup of
Selling price = 8,500 + 2,550 = TShs coffee:
11,050
(a) Coffee beans, milk, sugar = TShs
Final price: 1,500
Justine should sell each t-shirt for (b) Labour cost per cup = TShs
TShs 11,050 to cover his costs and 1,000
make a 30% profit. (c) Overhead costs (such as
electricity, rent, and packaging)
= TShs 1,500
Customer-based pricing method: This Total cost per cup = 1,500 + 1,000 +
is a method in which the business sets 1,500 = TShs 4,000
the product price by considering the
customer-perceived value of the product. Step 3: Set a price based on
The common pricing method in this customer perception
category is the perceived-value pricing Since customers expect to pay
method. between TShs 4,000 and TShs 6,000,
and competitors charge TShs 5,000,
Example 2: Michael owns a small Michael sets his price at TShs 5,500 to
coffee shop in a busy area. He wants to position his coffee as slightly premium.
set the price for a cup of coffee using Profit per cup = Selling price − Cost
the customer-based pricing method.
Instead of just calculating costs, he Profit = 5,500 − 4,000 = TShs 1,500
considers what customers are willing
to pay, competitor prices, and the Final price:
perceived value of his coffee. Michael prices his cappuccino at TShs
5,500, making it competitive and
Step 1: Understand customer profitable while aligning with customer
willingness to pay
Michael surveys customers and checks expectations.
competitors’ prices. He finds that:
7 Student’s Book Form Three
