![Five Questions To Ask Before Choosing Your Selling Price](https://kingsleyndimele.com/wp-content/uploads/2023/11/images-1170x700.png)
Before you launch fully into the market, you must get your pricing right. A customer’s physical appearance or the number of social media followers should not determine your selling price. You don’t determine your selling price based on your feelings or how desperate you are for profit.
Remedying a pricing error is easier said than done. Price is a major factor that the average African consumer considers before making a purchase decision. Even in emergency situations, many Africans are still price-conscious.
If your price is too high, you will scare away your prospective buyers. If you are not adjusting your prices as the market changes, you may run into financial troubles too.
Pricing determines how customers perceive the value of your product and the legitimacy of your business. If your price is too low or cheap relative to your competitors, prospective buyers will become suspicious of you and your product.
This does not mean that you cannot sell at a lower price. But you must ensure that you don’t undercharge your products or use excessive discounts to win every customer.
There are 13 pricing strategies that can be applied when determining the selling price for your product or service. Nevertheless, there are major factors that must be considered before deciding on a strategy.
- Are you targeting multiple customers?
If you want your product to appeal to various segments of customers, you have to clearly adopt a tier-pricing model. Even five-star hotels still have rooms that are affordable to stringent-budget customers. In most bars and beer parlours, there are packages for regular customers and an exclusive package for the high-net-worth segment of customers.
Businesses that want to serve both trenches and rich kids should make use of the tier pricing strategy. Mind you, the rich kids are not necessarily paying for luxury, they are paying for a premium offer (additional benefits).
There must be a significant range of difference between your regular price and your premium price, or else your premium price may become the new regular price.
If your premium customers enjoy laundry pickup and delivery services for a ₦100 extra price, sooner or later, all your customers will switch to the premium package.
In pricing, different customers value the same product in different ways. In a country where over 120 million people live in poverty; I am sure Don Jazzy was not targeting the hungry man on the street who cannot afford one meal per day to patronize his ₦12,000 Jazzy Burger excluding ₦4,500 delivery fee.
₦12,000 to buy a burger seems too much for the average Nigerian low-income earner. That same ₦12,0000 burger is neither a premium nor luxury price for a particular segment of target customers. It is a regular price for those who can afford it. Most of those complaining about the burger price are not his target customers. And this is fine too.
- How strong is your brand?
You may decide to choose your price based on cost, based on marketplace price, or based on customer’s perception of value. Branding increases the perceived value of your product or service.
Branding is the only reason why customers will pay a higher price for an average product. Branding is the reason why sellers or service providers who are not as good as you are charged a higher price than an unbranded business.
This is why as your build your business; you should also grow your brand. Branding is beyond names, logos, colours, and fonts. The caliber of customers you serve can increase your brand. This is the secret of Yinka Ayefele.
The location of your business can increase your brand. If you have your head office in Victoria Island or New York, the perceived value of your business will increase.
Your online presence can increase your brand. This is the secret of Aproko Doctor on Twitter. What people say about your business can increase your brand. This is the secret of PiggyVest.
Certifications, awards, recognitions, membership, and licenses increase your brand. A CFA charterholder will charge higher than an uncertified Finance expert.
Winning the Grammy Awards will increase Angelique Kidjo’s brand and performance price. Being a member of Forbes’s Coaches Council will increase your perceived value. NAFDAC-licensed honey will cost more than roadside honey along Ife/Ibadan Expressway.
How long you have been in business can increase your brand. Tope Alabi is a household brand in the Nigerian music industry because of age long presence, consistency, and evolution. Alibaba is a stronger comedy brand than Woli Arole because he maximized the first mover advantage.
TECNO is a strong brand with respect to centrality. The iPhone is also a strong brand with respect to luxury. Although both are strong brands, a luxury brand is more expensive than a central brand. It does not mean that the central brand is a weaker brand.
Ololade Asake ticket sold for ₦70,000 for VIP standing in December 2022. Wizkid’s ticket sold for ₦30,000 and Victony sold for ₦3,000. Despite the higher price, Asake’s concert was sold out first.
Even if Asake charges ₦1 million, some people will still pay. Although Asake is not the biggest African artiste, his brand was the rave of the year 2022 and this was reflected in his ticket price.
Learn to reject some offers no matter how broke or desperate you are, especially if you have built a brand of excellence. Charge with your full chest. You deserve to be paid well for building a strong brand.
- What is your motive for selling?
Not all businesses exist purely for profit. Some businesses are focused more on the impact than monetary gains. This is why your pricing decisions must align with your business goals.
You have to know what exactly is your motive before choosing a price strategy. It will be foolish for a profit-focused business and an impact-focused business to engage in a price war. Their motives are different.
The Life Series is an event organized by Mrs. Ibikun Awosika to discuss personal growth, business, and career. One would expect that the entry fee would be $10,000. No! She charged ₦10,000 for physical entry and ₦7,500 for virtual access. It appears too cheap for her worth. Right?
While other high-ticket businesses focus on massive profit, Ibikun Awosika focuses on impact. Those who run a premium model should never talk down on those who run an impact model.
Some businesses want massive impact plus massive profits. Some businesses want massive profit only. Some businesses want to impact very few only and make massive profits. None of these models is wrong or superior to another. It’s first about your selling goals and motives.
- Where is the location of your target customers?
A Chinese restaurant located in Nigeria will cost more than a Chinese restaurant located in China. A textbook sold at Covenant University will cost more than a textbook sold at Obafemi Awolowo University.
A shirt sold in the Airport Boutique will cost more than a shirt sold in the Dugbe market. Most hotels on the Island cost more than hotels on the mainland. Location is a major factor before determining your selling price. Considering where your target customers are located is a wise pricing decision.
- What is the prevailing economic condition?
At the peak of the recession in 2016, Coca-Cola and Pepsi hiked their 50cl plastic bottles to ₦150. Bigi Cola launched into the Nigerian market and sold its 60cl bottle for ₦100. Coca-cola responded by launching the 35cl Solo Coke bottle for ₦100 and 60cl Bigger Boy for ₦150.
More Nigerians switched their loyalty to Bigi Cola. Coca-cola hit back with its 60cl Zero Coke for ₦100. More consumers found more value for their money in Bigi Cola’s 60cl for ₦100. Coca-cola dropped the price of its 50cl to ₦100 and Solo coke was gradually withdrawn from the market.
Pepsi also launched 60cl “Long Throat” bottle for ₦100. All these moves were because they wanted to win the hearts of many Nigerians who have become more impoverished due to the crashing economy. It takes a tactical approach to raise your price without losing your customers.
In 2022, when the economy dwindled more, Bigi Cola introduced a 35cl bottle for ₦100 and changed from 60cl to a 50cl bottle for ₦150. The market embraced it. La Casera and Maltina lately joined the queue.
Customers are not loyal to any brand, especially when the economy is down. All they want is the same quality at a reduced price, even though the quantity may be reduced a bit.
When the economic condition is bad, business owners are left with the option of increasing prices or reducing quantity. Only smart entrepreneurs maximize the third option of reducing quantity while retaining price and quality. Many businesses launch a sachet version of their product during an economic recession.
When you have the option to either increase your price or reduce your quality during an economic downturn, choose the former. When you increase your price, you lose some customers temporarily, but when you reduce your quality, you lose most of your customers forever.
In conclusion
Before you increase your price, notify your customers ahead of time. If you are not offering quality and satisfying your customers, raising your price may have a negative effect on your customer relationship.
Provide options that will suit their budget. Customers are usually more likely to accept higher prices if they believe they are getting something extra in return.
If you raise your price without a prior explanation, your customers may be angry and conclude that you have become greedy or extortive. But if you take your time to clearly communicate to them the reason for the price increase, they will embrace the change easily.
© Kingsley Ndimele
Your Reliable Consultant