Prime
Getting pricing decisions right
Mr Charles Ocici.
What you need to know:
- Choosing a pricing strategy requires you to consider key factors, including your target customer, monitoring how much competitors are charging, and understanding the relationship between quality and price.
- Prosper magazine’s Tom Brian Angurini interviewed Mr Charles Ocici on how to decide whether to raise or lower your prices. Excerpts below:
How does one get right prices for goods and services?
Pricing is an amount of money at which goods are sold and bought. It is a reflection of two things what a customer perceives to be the value for his or her money so that there is value for money.
How do you know when the price is right?
Ask yourself what it costs to deliver in the market. These costs are of different types. There are variable costs and direct costs of producing some products which involves so many things from purchasing, production, customer care and taking care of the business premises. There are also over heads which are fixed costs where you have to pay rent and workers whether you have sold or not.
You need to know your costs on a daily, weekly and monthly basis so that it gives you a hint on what the problem in your business is. Once the loopholes have been identified, work on a solution fast.
If the solution is not working, do a research which might make you realise that your neighbours are selling the same product and maybe they have been in the market way before you.
Find out what price they are selling. Before you start competing with them, find out what type of ingredients they are putting in their product.
Another thing know that your product is for a particular consumer who will not go to another place because he or she might not have that financial muscle but because coming to your place is okay since the plastic plate you serve him on is okay and person serving so keep clean.
Does under-pricing win?
There are so many strategies of pricing. One of them is under cutting but before you do that, go back to your homework of what you spend on purchasing this product.
Do not under estimate the power of the consumer who can check on your cheapness which will make them realise that what you put in your product is of less quality. So rather than selling cheap, better sell value for money.
Under cutting will make you lazy. It is not suitable because your competitor will take advantage.
Why is it complicated to figure out the right mind of a consumer?
Many times people underestimate the ability of a customer getting information about your product before consuming it. Knowing customers, noticing their tastes and abilities to purchase and ensuring value for money will help keep them to you.
Pricing...The right price
Ask yourself what it costs to deliver in the market. These costs are different types. There are variable costs and direct costs of producing some products which involves so many things from purchasing, production, customer care and taking care of the business premises. There are also over heads which are fixed costs where you have to pay rent and workers whether you have sold or not.
