Product Pricing Can Be the Differentiator for your Business
In the last few weeks, I have been out on the shopping enclaves in Accra feasting my eyes on the latest electrical brands. Whilst it was evidently clear that those days, electrical brands become outmoded in the market only in a few months (possibly because of the fast rate at which manufacturers are innovating), one thing that I also observed was the slight increment in pricing. The difference in pricing amongst some producer lines were margined and obviously talking to both customer and shop floor managers, the conclusion was that the product pricing was a key differentiator in their sales numbers recorded.
In the tight world of marketing today, where there isn’t much difference to choose from product specification—wise local manufacturers/service providers in Ghana can only best benefit from the cost of pricing of their goods and services whilst every small business owner wants to charge as much as consumers are willing to pay, it behooves on the businesses to also find the right price they and the customers can agree upon.
In the world of pricing, albeit other constants, the ideal price for any product or service I the one that is acceptable to both buyer and seller.
From the local into ‘’Hausa koko‘’buyers standpoint, the right price is a function of the local porridge delicacy and other competitive choices such as ‘ekuagbemi’ or ‘’rice water’’ (porridge) in the market place.
Indeed from the vantage point, the basic concern for almost all small businesses is to price products to maximize both the sales and profits. In doing this, they cannot lose sight of the fact they need to provide enough margin to take care of applicable marketing and overhead expenses.
As a business operating on the local front, one key advice in deciding on the cost of pricing in marketing your product will be to consider deeply the market size and composition. The business’s ability to estimate closely the volume of potential sales, based on a reasonable assessment of its forecasted market share is key to establishing the best price for the product.
Knowing the size of the existing market is critical to determining if there are enough customers to establish and grow a business.
On another front, another key point for determining the cost of pricing for products, is to always for the businesses to remember that only unique offerings can support premium pricing. The closer your product resembles competitive products, the smaller the price differences that buyers will tolerate. I found out during my window shopping which I talked about earlier, that the less the product differences between brands, the greater the probability that the category is price-elastic and that brand switching will occur when products go on sale.
Undoubtedly, I have over the years as a marketer realized that it is not enough for a product to be unique to attract premium pricing. The sources of product uniqueness must be both recognizable and valued by buyers. For example, fast foods in Osu have many distinct and unique attributes. Buyers or food lovers patronize their services because they are often looking for new unique service—‘’something out of the ordinary.’’
I never once thought the life cycle of a product could affect its cost until I had a personal experience some few years ago.
Personal computers and software, for example have shorter product life cycles. If I am not exaggerating it takes almost six to twelve months before new technology and products are introduced in their category. As a result, for a local PC company like RLG, for example, product pricing cycles have also accelerated to match, with introductory pricing decreasing to significantly lower levels only seven months later. It really makes it difficult for such local companies in Ghana to recover development costs, accurately predict volumes, afford planned and effective marketing support, and in effect price products accurately in relation to a competitor’s product.
Ghana is largely an import driven economy. Flagship markets such as Makola (Accra), Kejetia (Kumasi) and Aboabo (Tamale) are awash with streams of wholesalers of largely import household and fast moving consumer goods. These wholesalers and retailers need to consider the issue of markups in their pricing structure for the few local manufacturers and awareness of the average markup in their industry is key.
This becomes necessary because as a product wends its way through a distribution channel, each step during this journey adds markup before sending the product to the next step.
In addition to the basic goal of making money, a business can have varied pricing objectives. Larger companies may utilize product pricing in a predatory or defensive fashion, to attack or defend against a competitor.
As a business, if you have a premium-quality product, with premium packaging and unique features and benefits, perhaps a premium price is necessary to reinforce the premium brand image. Higher margins than normal may be one benefit. High prices confirm perceptions of high value in consumer minds.
A good pricing strategy will also indicate guidelines for action in the case of price increases or the contrary. A business for example may decide to price at or near the mark et leader’s pricing on a per unit basis.
On another front it is also advisable for businesses in certain category of industries to consider temporarily delaying necessary price increases driven by supplier price increase. If competitors are increasing prices and your company decides not to, this could be a temporary advantage for your company since sales volumes may increase.
As I have always maintained and advised, especially small businesses, be sure to consider variations that may come up to affect your pricing.