PRICING IS ART, PROCUREMENT IS SCIENCE
Call it professional deformation bias, but I am always intrigued by why certain products are priced the way they are. Take this gift basket from Zucchini, normally a store where I like to shop because of their high quality fresh produce at prices that often beat my open market.
If I were to shop for the items individually, I would save as much as 50% — so why would Zucchini sell this gift basket at double the worth? The answer is: because they can! You see, the customers interested in buying gift baskets are likely not the type to research prices and their time is more valuable than going to different stores to buy the items themselves (hmmm, I guess I am giving away something about myself here too).
The same logic can be applied to how customers shop for toilet paper: strangely enough, buying ten roles in one pack is 15% more expensive than buying ten individual roles… at least in Kenya. Again, why? Because customers who can afford a “value pack” will compare prices in that range, but will not compare to that individual role…
Both the toilet paper value pack and the gift basket are priced at customer expectation.
SPARK OF THE DAY
I could make this spark about value, customer segmentation and taking margin where you can, but as an entrepreneur you are a customer too, with expenses taking up a high percentage of your revenue — just a guess…
So I want to turn the table: what segment have your suppliers pegged you into? And how savvy are you with checking the competitiveness of your costs?
When it comes to cash, don’t depend on assumptions, but check the facts!
I wish you a perceptive rest of your day…