TON

IG HT
6 th De Biz with
cemb Liz
er 20
16

= More profit (less loss)

Pricing = Pro-active (less re-active)
 Business Process Flow

Why do you choose your price?

tsh
Sell

The
Mak
Plan Business
Process e

Buy
Main Pricing Principal Total COSTs for 1
Decide 7,390tsh
2,610tsh
Saving for a machine Sell
To grow business 7,390tsh
10,000 co sts
el li ng
s
Price 1050

The
Mak
Plan Business

S Ts
Process e 1540
CO earn
500
Buy
0
0
1000
1000
0
50

18
 Only after
you know all your costs, can
you can set prices

400
,00
0 4
Better Decisions

Decisions about which products or services to focus = profit

Make
XMake Make
XMake Make
$6 profit $2 profit $8 profit $0 profit $3 profit
each each each each each
5
 How
Howdodo
businesses
GOODsetbusinesses
prices? set prices?
1. STUDY Market conditions

2. Use their SALES strategy

- based on their capacity and ambition, finances, knowhow, and competition

3. Make their Costings as tight as possible

4. Make Price decision

5. Trial their Pricing

- using marketing skills to maximum
How do GOOD businesses set prices?

1.STUDY Market Conditions

a) Decide your scope/area
b) Look at every competitor in that area– study their 4 Ps
c) Do they do a good job? (rank their performance, against your own)
d) Do they have many Customers/ Good sales?
My market Price conditions, review of my position against my competitors
Score your competitor for the 4Ps
Competitor 1 Competitor 2 Competitor 3 Competitor 4 ME
Price
Product – choice
Product -quality
Place
Promotion

Write your PRODUCTS and the PRICES you all charge (you and your competitor)
Product & Competitor 1 Competitor 2 Competitor 3 Competitor 4 ME
Prices

Review your prices and products and decide to make improvements

Sales per week Profit per week Earnings per week

Price now

Lower price

Higher price
What did Reda find out in her LUNCH pricing survey?

What is the market condition for Lunch service in and around nane nane?

Chukula Outside Outside Garden Auto fundi Yellow gate

house up down mama Mama food house
PILAU 2,000 2,000 2,000 x 2,000 3,000
CHAPA 300 300 300 300 300 300
TI
Chipsi 2,000 2,000 2,000 x x 2,000
mayai
Wali 2,000 2,000 xx 1,500 1,500 3,000
maharag plus Plus +
we more Self serve
food
The competition is strong =
customers have choice of
product and price points
LUNCH Market NEW Vegetarians are
Actors in the market say……….. being ignored

Bites
I wanted to give healthy Auto fundi Mama
option, so I get business I have to keep my
Garden Mama
from the ones who want prices low but I
I am just trying
to stay at work. Fruit Chukula house earn a profit. I am
to make
plate I have many staff, open for breakfast
money.
that means we can and go around and
I am cheaper
cater for large temp/ask people
and offer
cheaper groups. Our
Friherton options customers feel
We think we get comfortable at our
customers because eating tables. We
we offer more can satisfy all
quantity /value. We members of
are seen groups
from the road
 What did Reda find out in her LUNCH pricing survey?

What is the market condition for lunch services?

Chukula Friherton Outside Garden Auto fundi Fruit bites
house down mama Mama

Price 6/10 7/10 6/10 10/10 7/10 10/10

Product
Choice 9/10 7/10 8/10 5/10 7/10 3/10
Quality 8/10 8/10 8/10 9/10 8/10 8/10
Place 8/10 7/10 9/10 6/10 6/10 6/10
Promotion 7/10 7/10 8/10 1/10 4/10 5/10
Market Conditions
Business strategy -set prices –

Stay in business
- Cover costs

30
0, 0
- Make profit????

00
tsh
How to set Prices

A. Review market conditions

B. Consider three methods

1.Cost plus

30
2.Sales volumes wanted

0, 0
3.Meet market prices

00
tsh
COSTs 7,390tsh +20%
=10,000

End of day
30
30

0,0
0,0

00
00

tsh
tsh
3.Meet market prices method
Use your costs as a base and put margin to meet market prices

e.g. All ring cakes are $1 - sell at $1

We don’t recommend this method - copy pricing

 Q
Let's compare ?

Meeting market prices Cost plus strategy Liz sales strategy

Product Total Market = Liz Profit = Cost Profit = Liz Profit
Costs condition market plus strategy
s similar Price Price Price
products

Pendant $21.52 $35.00 $35.00 $12.48 $24.00 $2.16 $30.00 $8.48

Necklaces
Round $28.52 $50.00 $48.00 $18.48 $32.00 $2.85 $45.00 $16.48
Necklaces
Pendant $14.42 $25.00 $25.00 $10.58 $16.00 $1.44 $20.00 $5.58
Bracelet
$100.00 $64.80
Shell $35.20 $- $100.00 $64.80 $39.00 $3.52
Necklaces
Meet Market - Sells low amount % mark up Sells right amount
little, not enough $ profit, difficult to get
--- works too slow right good $ profit,
rewarded
Note - another Marketing strategy

Big ideas shop

Sales volume /market share

Some businesses set their prices low enough to;

"gain market share" (for a certain time period)

• destroy competition
• enjoy a marketing position with little competition

Small businesses without good systems o

buying skill may not be able to lower thei
prices ( to meet competition).
They go out of business
 Note - another Business strategy For manufacturers

Cover overhead /Break even

Enough income to cover all costs, -no profit

Getting close to break even point?? TAKE ACTION, eg.

a) increase manufacture of best Sellers
b)reduce making other unpopular items
c)Work harder, lower costs

Break even for this tailor is $10,016 enough income to cover costs, but no profit

Total income Total costs

should be smaller than
bigger than total income
costs ;) is good ;)
Micro business -
$100 income
$68
Costs Profit $32 a day

Reme
Sell 100 a day
mber

If Suzie sells 100 Ring cakes a day,

Returned costs per day

$0.40 $0.02
Buys tomorrows stuff
$0.25 $0.01 All
Pays herself Pays bills pays herself
Costs
for 100
$40 $25 $1 $2
2
4
$68
1 Direct 3
Direct Indirect Indirect
Labour Costs
Material Costs Costs Labour Costs
 Test
Cost and Price Decision
What do you want to do?
1) Make high profit on each item
your
• with lower sales?

2) Sell a lot
market
• at lower profit per item

• more profit in a day … ?

for
price
• Work hard and earn more ?
 

point
? Sue
Betty sells 70 a day
sells 45 a day

$4.50
or 2 for
$5 $9.00
Profit per pudding =$2.55 Profit per pudding =$2.05
Profit per day =$114.75 Profit per day =$143.50
Labour Earnings = $79.20 Labour Earnings = $123.2
Cost and Price Decision
What do you want to do? Test
Who
makes
more
sales Sue
sells 70 a day
income
Betty
sells 45 a day

300
or 2 for
500 600
 Pricing test Education
Should Stephen sell
a)20 places at his preschool

10 r c h h
,00 ild
Pe ont
b)30 places at his preschool?

0t a
m
c)Put his prices up?

sh
For every 20 children he needs to have 1 teacher

His costs to run the centre are;-

Teachers pay 8,000 a day
Overheads 2,000 a day
Food per child 300 a day

My recommendation is to
……………..

22
Copy Pricing
Best dress
10,000tsh Best style
Fundi
i dresses
Dresses Gown
,0 00 tsh 10,000tsh
made 10
10,000tsh

Who has a good business ?

23
Market condition example -Parrot Petrol Test Te
A small Island of 300 families has 1 petrol sales depot called Parrot Petrol st
There are 15 boats on the island.
There are opportunities to sell petrol to 10 neighbouring boat owners . There are
no passers by - so the market is a total of 25 boats owners to service.
The Boats owners can buy petrol from the main island, when they take trips, at
12.50per litre
Each boat owner buys an average 50 litres petrol a week

Parrot Petrol buying costs and all costs for their business come to a total of $9.20
per litre.
1. What is the maximum total Petrol market size? (litres a
week)
2. What is the total Parrot Petrol profit if they sell at these prices, per week ?
$12.00 $15.00 $13.00 $14.00

Could another petrol depot make a living on this island, is the market size big
enough?
24
Remember Pricing ….
…………..does not have to be fixed e.g.
 
• Cheaper at the end of the day
Specials
• Include extra things-
– Delivery Today

– Special packaging
• Special deals for more volume -2 for $8
• It's in your hands, your voice, your words Bags
• Create interest every time you go selling 3 for $20
Judge….
If you cannot make a profit at Market prices, there is a problem somewhere along the way.

• Your costs are too high ….?

• Maybe long time to make ?
• Maybe not clever buying ?
• Maybe your Methods of making are slow?
• Timing of selling is too long?
• Your selling technique?
• Transport frequency?
 

bus
in e ss?
Profit
window x
his Cost indirect labour Market
ed to t
ou suit price
e y Cost indirect materials
Ar
?
em
obl
Cost wages

r
 

rp
Cost Transport

yo u  

is
here
Cost Packaging

W
 

Cost Printing
 
Cost Raw materials v

  v

v
Judge….
Market price is your BENCH MARK

If others can do it, you should be able to do it

However;- You can lower the bench mark

Lower the price (make more sales)
Increase quality at the same price

This activity is called - being competitive

The more competitive you are -
THE BETTER YOUR BUSINESS

Market
 

price
$30
 Your Price decision
 

I don’t know what price

to charge, so I just copy
Don’t copy,
work out you COSTS and
know what price
to charge
Your Price decision
e.g. All ring cakes sell at $1 -is that good for you? What volume do you want??

Do they have Waste?

Do they all make Profit?

$1 $1 $1 $1
 Lower Price decision
I know I am different ,
- More sales but I need to make a
- living , this is my
More wages
business , my children's
- More security-loyal customers life

$0.80 $1
$1 $1

Johann's
Ring
cakes

Home made today

Delicious!
Only $1.80

Johann's
Ring cakes
Delicious!
Higher Price decision
Bigger profit- per product sold
Special skill
Unique product
Very attractive
Volumes? - skill

$1.50 $0.80
$1

Johann's
Ring
cakes

Home made today

Delicious!
Only $1.80

Special Johann's
tasty jam Ring cakes
ring cakes
Delicious!
Customer Thinking ?
Which shop do they prefer?
Do they go for cheapest
Do they go for convenience
Do they go for cleanest , nicest
Do they go for Happiest -best service
Do they go to see what's new

$9 $10
$7
 Costing and Pricing recap

  o b Cus
ns j to
rso me
s pe rs
es BUY WISELY job
s i n
Bu Understand your COSTS check prices + buy value
SELL the volume you plan CUSTOMERS CHOICES
DETERMINES WHO HAS A GOOD

Remember
MAKE PROFIT RETAIL BUSINESS
to fund your business Prices stay lower

Hard work will be rewarded with good profit

Price
Profit

Costs

Costs

Costs
 Price per tray 30
00….200….300….400….500….600….700….800….900….1000, 1200

Profit Grow
your business
COST wages

COST Transport
CostsNew hen stock
COST

COST feed, trays,

string
Costs

COST rent and

utilities

COST Cages, equip,

amortised
Remember - count your costs – review

Set effective
  prices

Then you can dance -using the profits you make