Since the outbreak of the pandemic in 2019 and the Russo-Ukrainian war this year, the global economy has been battling high inflation rates. This has led to a huge increase in domestic and industrial raw materials. You could go to a mall at the beginning of the week to window shop for a pair of sneakers, and by the weekend, after much fundraising, you chose to buy the product only to learn that the price has quadrupled. This is what economists define as the inflation rate. This situation can be not only surprising but also frustrating for buyers and businesses alike.
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This situation has persisted since the pandemic. Retailers always check the current exchange rate on the black market every morning and raise product prices accordingly. According to studies, product prices have increased by 60% in the past 12 months in Nigeria. This is followed by the skyrocketing prices of gas and fuel. Hence, sales forecasts are likely to become more unpredictable as prices change not only monthly, but also weekly or even daily. Unfortunately, the purchasing power of customers is not growing as fast as costs, and the incomes of shoppers in Nigeria are falling.
Moreover, the cost of doing business in Nigeria is rapidly becoming much more severe and burdensome due to rising inflation, exchange rate volatility and rising energy prices. Most companies find it difficult to set up the right pricing strategy.
Pricing is an important aspect of doing business and can determine your customer flow. Some companies have lost customers to their competitors because of pricing. Experts, therefore, argue that companies need to integrate themselves into the entire ecosystem to get their pricing strategy right. In this article, I discuss the main ways companies can derive the right pricing strategy.
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Hear From Customers and Regulators
Businesses that don’t listen to their customers’ voices when setting their prices will be resented by their customers. Recently, Netflix lost nearly a million subscribers after introducing “extra home charges” that drove up service prices. Many Nigerian banks have lost a large share of their younger clients to new FinTech startups due to extra costs. As long as the Nigerian business ecosystem is concerned, the customers are very important and they like to be heard. Lately, cable networks such as Dstv and Multichoice have been complaining about their losses due to extra charges. Therefore, involving both the public and regulators in the pricing process for a company operating in Nigeria can save a lot of business calamities.
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Study Your Competitors’ Price And Cost Structure
After you know your cost structure, it is very important to study those of your competitors. This will serve as a guideline in restructuring your price in your favour. For example, not all noodle brands sell for the same price. Recently, some supposedly unknown noodle brands are rapidly taking a large share of the market share from category kings. Business experts noted that you can have a price advantage if you use market intelligence to observe shipping, distribution, and service costs that are beyond a competitor’s control. This knowledge can help you determine when to raise or maintain your prices in response to competition. Similarly, studying the factors of your competitor’s pricing structure, such as packages and metrics, can provide opportunities for differentiation. For example, in 2003, to beat competitors, Globacom Limited disrupted Nigeria’s telecommunications industry by introducing per-second billing instead of the usual per-minute billing used by its competitors.
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Brainstorm With Your Channel Partners
In setting prices, you need to consult with another important member of the business ecosystem – your channel partners. In doing business in Nigeria, you can’t set prices without assessing the responsibilities your partners carry out for the end consumer. These service tasks come at a cost, and channel partners vary in their capacity to deliver products at an acceptable price. Create the value drivers that your channel partners contribute to your pricing process. Let your channel partners participate in pricing discussions. Inflicting costs towards your channel partners can obliterate connections important for providing customer value in the long run.
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Modify Your Brand Portfolio Policy
One of the greatest undoings of a business owner in Nigeria is passing costs directly to your customers when their purchasing is decreasing. Hence, it is important to step back and look at the bigger picture by reviewing your pricing pattern. For instance, premium brands tend to increase or retain the prices of their goods based on demographics. They might add higher price charges for premium customers, marginal increases for mainstream customers and zero increases for low-end customers. Some brands might engage in promotions and bundle strategies. For instance, rather than buy a unit of a product for a price which might be expensive, you may encourage buyers to buy three units for a discount.
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