Making Sense of Pricing – Part 2

Following on my previous post regarding the apparent lack of any logic in the pricing of a leading brand of automatic dish-washing soap products, I can now confirm that there appears to be a complete lack of interest in what the consumer thinks! I received no response to my e-mails to the retailer and the manufacturer so I thought that I would follow a different route.

First I phoned the Customer Care line of the manufacturer (probably better described as the “Customer Don’t Care line”) and asked if they could explain the logic to me. “Sorry we don’t discuss pricing”, I was advised.” you need to speak to the retailer”.

So I went back to the chain store and asked the manager to explain the logic behind the fact that smaller packs of the dish-washing tablets were cheaper per unit than the larger packs. Once he had wiped the amazed look off his face, his first response was “the smaller packs must be on a special offer”.

“Not so”, I said as we traipsed off to the aisle to check – sure enough, not on special!

“I will have to check with Head Office” said the Manager.

“Fine – I’ll be back tomorrow to hear the answer” I said.

On my third return visit (he had forgotten the first time and claimed that he had not heard from Head Office the second time) he informed me that he could not get any explanation from Head Office nor from the rep from the manufacturer.

“So, I said, you are happy to keep ripping off consumers in your store?” I asked.

This at least provoked some reaction – albeit a very defensive “How can you say that?”

So I asked him if it made sense to him that I should pay 10% per unit more for the dubious “privilege” of buying a 25% larger quantity of one of his products. After he had grudgingly admitted that it probably didn’t really make sense, I asked him if the same applied to say, mealie meal or rice or sugar or any other product that perhaps less discerning or less educated consumers may purchase regularly. Or would it make sense that you charged me R50.00 a kilo for sliced ham if I buy 250 grams and R55-00 a kilo of I buy 500 grams?

The comparison of course is ridiculous but I was trying to get him to understand the principle!

So the bottom line is that I cannot explain the logic in the pricing of this product and I am now actively seeking other similar examples.

I am aware of the principle of “Caveat Emptor” or buyer beware. But I have also a concern that we, as consumers, are unsuspectingly being exploited. By whom, I am not certain at this point in time.

How many busy working people have the time to “do the math” on every supermarket item when we rush in to do a quick shop on the way home from work. How many consumers do not have the wherewithal to do this?

I do know that some supermarkets are moving in the direction of displaying unit prices on their shelves but these are in the minority. I am now hell-bent on finding similar examples of how we are being “ripped off” and if that term is too harsh for you, how about systematically milked!! Of real interest to me, however, is that no one has yet leapt to the defence of the retailers and FMCG manufacturers. Nor apparently felt as strongly about this as I do and added their tuppence worth. Apathy reigns!!!

Watch this space!!!

Making Sense of Pricing

I have just sent off e-mails to both the manufacturer and the retailer of a well-known brand of dish washing tablets for automatic dish washing machines. My question to them was how they could explain the differences in the pricing of the various sized packs in which they supply their product. I am not often moved to go as far as taking up cudgels with retailers and/or manufacturers (although I know that I should become a more active consumer particularly when I see something that smacks of ripping off the consumer!)

Let me start from the beginning – I went into a leading national chain store to buy tablets for my automatic dishwasher. Thinking that it is something that I would like to have to remember to purchase as infrequently as possible and that commonsense dictates that the larger the quantity you purchase, the lower the price should be, I automatically grabbed the 60 tablet box and put it into my trolley. Happily, as I did so, I ran my eye over the prices of the other smaller packs and an alarm bell went off in my head. I then started to do something that I seldom have done in the past but will most certainly make a habit of in future – I did the maths to see whether I was getting a good deal.

To my shock and horror, I discovered that I was being ripped off!! The largest pack of 60 tablets worked out at R2,08 per tablet – the next size of 45 worked out at R2,22 per tablet and the smaller size pack containing only 30 tablets cost only R1,99 each!! Go figure? My immediate reaction was to question my own mathematics – but established that I was actually correct. I then checked to see whether the smaller pack was on special and that was not the case. So why the difference? I wish that I knew. My reaction was therefore to look at other brands to find one where there appeared to be some logic in the pricing and, having done so, I changed my brand from a product that I have been using for years to one that is, at least for me now, untested. But I certainly felt better for it.

I am looking forward to receiving the explanations from the retailer and the manufacturer but the bottom line is that they will have to be pretty convincing to persuade me to go back to my original brand of choice.

So what is the Marketing lesson? Well, the first one seems to be that in these tough times, consumers are becoming more discerning – if I extrapolate from a sample of one! But research has suggested that this has been a trend for some years. The second one is that if you are a supplier, you had better be able to explain yourself if you are guilty of this sort of practise. And the third very clear marketing lesson for me is that you need to ensure that whatever you do (to the consumer) you know exactly what the impact is going to be. For my part, I am going to follow this one through and “name and shame” if I have to – I would be guilty of dereliction of my duty as a marketer to let it lie. I am also going to look very much more closely at the relationship between pricing and quantity when I buy in future and I am going to be finding more and better ways to find out from my customers whether they are convinced that they are getting value for money.

What I am also going to do is take a while to get over my sense of being ripped off – and if that applies to other purchasers of the same product, then perhaps the fact that I will no longer support them will be irrelevant as they will find themselves going out of business.

PS:  If you have a story to share please register for our Business Forum and look for the Pricing Issues thread, you can have your say there and learn lessons from others.

Business Dreamers – Where Are You?

Where have all the business visionaries gone? As we celebrate 40 years since Neil Armstrong landed on the moon much has changed.

Where that event left us with an expectation of great futures filled with possibility and achievement, the water that has gone under the bridge since has definitely discoloured and become polluted, figuratively and literally!

History tells us that the companies that positively get out there and market themselves now; focus on improving their service delivery levels and introduce some cost effective new product/service offerings are the ones that will not only survive, but thrive. They’ll steal market share from their competitors who are too busy crying over spilt milk to do anything constructive.

Your customers and your staff need you to become a true leader and show them the way. Most of them can’t see the way forward because they’re so caught up in their own personal problems right now. Besides, if they were capable of seeing the way forward they’d be sitting in your chair!

Have you got a clear strategy for your business for the next 12 months? If not, why not?

Look at signing up for The Small Business Strategy Toolbox if you need assistance in structuring your thinking and ensuring you cover all the critical success factors. Usually outside, professional yet practical advice is just what’s needed when you don’t know which road to take and you don’t have the time or money to try several options before you find what works for you.

If you don’t have the expertise and experience to find the opportunities that already exist get help earlier rather than later. To call for help when the creditors are already shouting is too late, develop your plan of action now and ensure you are still in business this time next year.

Getting out of a Business Rut

Many small business owners are battling to see the wood for the trees at the moment. They have not invested a portion of their income for the rainy days that have now arrived and they are losing serious sleep because they don’t know if their business is going to survive the change in the economy.

Now, however, is the time for the small business owner to regularly check a few critical things on a weekly (if not daily) basis.

Pessimistic Attitudes:

People are drawn to optimistic, positive and cheerful people and since it is reported that about 68% of people change suppliers or stop supporting an outlet because of poor service now is not the time to be crying in your tea out the back. It’s the time to get out the front, smile and offer positive, friendly and efficient service that builds on the relationships you’ve developed over the last few years. Don’t leave this to your staff, lead by example!

Trading Environment:

People’s negative attitudes are starting to show within their companies. The reception area is not as clean and organized; the phone rings a little bit longer; the response time is not as efficient, all because people just don’t have energy at the moment. Now is the time to step up to the plate, re-establish the standards and, where you can, raise the bar. Again, lead by example and re-energise your team when their actions become sluggish. Yes it is exhausting, yes it’s got a hassle factor, but if you’re not doing it you can bet your last Rand (and that’s probably closer than you might like to acknowledge), no-one else is.

Systems and Processes:

Make sure these are working so well that people can consistently rely on you to get the job done time and time again. Without good systems you don’t have a business. In fact, good systems and processes is what fundamentally differentiates a self employed small business and a saleable, sustainable business. You cannot leverage your potential if you are doing everything yourself and not training others to make money for you. Put the systems in place and then crank the goals and objectives up a notch or two, you’ll be amazed at what you can achieve.

Your Own Energy Levels:

Be forever mindful that how you feel and how you treat others will positively or negatively affect how your staff treat your customers. You cannot let your fears affect your service delivery. Not ever, but not especially in a negative economy. Regardless of how you feel when you get up in the morning the show must go on and it is your job to lead, inspire, motivate and train your team to deal with the customer in a way that ensures their continued support. As the motto goes: Get Up; Dress Up; Show Up!

Often reducing sales happens because we let it. We withdraw and stop pushing the boundaries. Our mind plays games with us and we retreat into a corner. Don’t let that be you.

NEW – The Small Business Strategic Toolbox

It’s here! Yes, The Small Business Strategic Toolbox was launched and went live on Friday!

This programme has been written for all the small business owners out there that know they need to re-invent themselves and start looking at their entire business differently.

If you are finding “business as usual” no longer gives you the returns you’re looking for, or needing, then you need to go through this strategic programme to evaluate the opportunities and niches where you can carve yourself a sustainable place in the minds of your consumers, against increasingly stiff competition.

This vital addition to The Small Business Toolbox stable covers the key areas of:

Vision & Values: Where do you want to take your business? Before embarking on any change process you need to have a clear picture of the new destination. You wouldn’t jump in your car and decide to go on a three week holiday without knowing where you are heading to, so why do that in business? By giving careful thought to where you want your business to take you the remainder of the strategy suddenly has purpose and direction.

Stop, Start, Continue: In order to change course what needs to be cut out, begun or continued? There is no doubt that every human only has 24 hours a day to make things happen ( well, 10-12 if you are a business owner who knows that recharging your own batteries is critical! ) In order to change what you get, you have to change what you do. This Stop, Start, Continue exercise is a fantastic tool for you to use to refocus your entire team on what must be done to change the results you get.

Critical Success Factors (CSF): A dive into the key business areas to assess effectiveness. Have you ever looked at the key pillars of your business? The modules in the CSF series cover all the key elements that need to work together for you to really be effective. These are: Finance; HR; Marketing; Sales; Internal Systems and Processes. Without alignment and clear objectives in each of these key areas your business will not be balanced correctly to achieve effective results.

Prioritisation and Action Plans: Putting the strategy into action. No plan can be effective if it is not implemented and monitored against pre-determined outcomes. However, this is the part where most businesses fall down. The strategies are brilliant, in theory, but in practice everyone keeps doing the same thing they did before, which means you, the business owner, keeps getting the same results! You don’t want that so you need a structure for driving change within your company. The modules in these sections will assist you to commit to action plans that will take you places.

There is no doubt that a sound business strategy is critical. If you are working the same now as you did 12 months ago you’re playing a dangerous game!

You need to re-strategise how you do what you do if you have any hope of coming out of these times in a position to capitalise on the upturn, when it comes.

Don’t wait until it’s too late. Go to www.thesmallbusinessstrategictoolbox.com now and start putting the plans in place to ensure sustainability in the future.