Why The Same Goods Have Different Prices Around The World?

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By: Site Engineer, Staff

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Price Changes

There are some situations which may cause the entrepreneur to consider changing his prices. Some of these are:

  • Change in competitor’s behavior
  • Substantial changes in the cost
  • Sharp increases in demand
  • Changing prices as a deliberate marketing strategy

Price Cutting

An entrepreneur can decide on deliberate price-cutting due to the following reasons:

  • If he wants to increase sales urgently.
  • To achieve lower prices by expanding sales.
  • To drive out marginal producers.
  • To increase distributors’ turnover and hence encourage support by them.
  • To correct an imbalance in inventory or to introduce a new product.
  • If he wants to have immediate cash.

Possible Customers’ Reaction to Price Changes

The price reduction that would normally attract more customers may mean other things to them:

  • That the quality has deteriorated.
  • The item is about to be superseded by the later.
  • The firm is in financial trouble and may not stay in business to supply future parts.
  • The item has some fault and not selling well.
  • That the price will eventually come down even further and it pays to wait.

The above are the possible customers’ reaction to price changes.

Problems of Pricing Goods in Africa

The following factors are the major problems in the pricing of goods in developing countries:

1. Pricing Instability

Prices change very rapidly in a certain community. For instance, goods sold at $5.00 in the morning can cost $8.00 in the evening in the same market. This rapid fluctuation in prices enables the sellers to exploit the buyers who patronize their stores.

2. Pricing Differentials

Although a price differential is a necessary pricing strategy in developing countries, the practice is discriminatory. A buyer is made to pay a high price if he happens to be a weak bargainer or is ignorant of the selling price of the goods he intended to buy.

3. The Absence of Negotiated Price System

Price haggling is the commonest method of bargaining for goods in Africa. A lot of time is spent on haggling with the result that buyers no longer accept fixed prices.

4. Irregular Supply of Goods

Businessmen take advantage of the manufacturers’ irregular supply of goods they sell to charge exorbitant prices. They create artificial scarcity in order to extract unfair prices from prospective buyers.

5. The Absence of a Reliable and Fair Pricing Policy

Generally, a price policy sets the approach to be used in specifying individual product price; but in Africa, there is no reliable and unfair pricing policy.

Businessmen are faced with the problems of:

  • Meeting their operating costs,
  • Meeting up the expenses they incur for personal and family matters, and
  • The uncertainties of supply and demand for their goods.

6. Pricing in Relation to Quality

In Africa, quality is rarely used as a criterion for determining the price of a commodity. The following factors have been known to influence African consumers:

  • Country of manufacture, namely, foreign or local.
  • Brand, whether original brand or substitute brands.
  • Whether the product is bought by the majority of people and whether the color or design is very flashy or dull.

7. Varied Channels of Distribution

Retailers receive their goods from many and varied channels. This variation in the channel of distribution has resulted in a wide range of prices for the same commodity in the market. Price in the market depends on how he bought the goods he is selling.

Problems associated with the pricing of goods are many and varied. These problems are commonly identified with the occasional scarcity of vital commodities and the seasonal nature of many African producers in which case the pricing mechanisms become erratic as a result.

Examples of Non-price Competition

Although, price competition is important in marketing non-price competition dominates. About 10 percent of the cost of all goods and services is spent on the non-price competition.

Non-price competition is the competition that exists between two or more businesses to attract customers from each other on a basis other than price. This is usually accomplished through various sales promotional, advertising activities.

The entrepreneur is therefore faced with some examples of non-price competition to help him promote his products:

1. Coupons

Manufacturers to induce the customers to buy the product use coupons. They normally entitle the purchaser to a few cent reductions in the regular retail price. Coupons are always placed in the newspapers and magazines adverts or in the packages, which the customers may use on their next purchase.

2. Sampling

Sampling normally involves providing a small size of the firm’s product to the consumer for “try out” purposes. The samples may be delivered through the mails, it may be distributed door-to-door, or it may be given away in retail stores. Example of such products includes small cans of deodorant, small tubes of lipstick, drugs etc.

3. Trademarks and Brand Names

A trademark is a distinguishing word, emblem, symbol, or device used to identify a manufacturer or distributor of a particular product. Brand names and trademarks are important devices that aid in the sale of a manufacturer’s product. Example, “Guinness” identifies a particular brewer’s brand name etc.

4. Window Displays

The manner in which the merchandise is displayed in the window of the store will also aid the customer informing his impression of the store if the displays are neat, clean and attractive, the customer will think of the store as a good place to do business. On another hand, if the display is dirty or sloppy the customer’s impression of the store will be bad.

5. Advertising

This is used to bring the name of the product into the doorsteps of the consumers and to persuade them to buy.

6. Premiums

A premium is a product that is usually offered free or at a reduced price to encourage a customer to buy the promoted product. A towel that is enclosed in a box of laundry detergent is an example of a premium.

7. Trading Stamps

Trading stamps are a form of premium. They are important enough in retailing.

8. Contests and Games

Retailers also use contests and games as a means of increasing customers’ patronage. The major users of these sales promotion devices have been the supermarkets. Example, in Bingo contest and game, a bingo card is issued to the customer. In order to win, the customer must collect five numbers in a row on his card during a given period of time, such as one week, making him make at least five visits to the store during that period.

9. Leaders

Often, through cooperation with a manufacturer or a wholesaler, a retailer can obtain some article of exceptional value or attractiveness that can be offered to the public at less than the usual market price; such an article is referred to as a leader.

10. Special Events

Retail sales promotion includes may special events, which are sponsored by the retail store for the purpose of attracting customers. Included in this category are such things as style shows, entertainment shows, demonstrations, and exhibitions.

11. The Exterior of the Store

There are two areas of concern to the merchant when he considers the visual impact of the exterior of his store. These are the storefront and the window display. But of these will aid the customer in informing his initial impression of the store. The front of the store should be distinctive enough that the customer can easily identify the store.

12. Special Sales

Special sales are sales that take advantage of a particular current event or special occasion for the store. Examples of this type of sales include Back-to-school and various holiday sales.

13. Clearances Sales

Clearances sales are held at the end of a selling season or just before taking inventory to move merchandise that did not sell during the season. Sometimes sales are planned for certain days of the week to coincide with the habits of local customers.

14. The Interior of the Store

The interior of the store is just as important to the merchant as the exterior. After the customer enters the store he forms a clearer image of that store. If the merchant is trying to create the impression of quality and prestige he should have wide aisles in the store and the merchandise should be displayed on low fixtures, which allows the customer to view the whole floor at once.

There are four basic types of displays that are in visual merchandising today.

They are:

  • Open displays – counter and racks displays
  • Closed displays – inside showcase displays
  • Wall and edge displays – on the wall display
  • Model displays – facsimile displays etc.

The entrepreneur should have a knowledge of these entire interior visual merchandising and indeed of all other non-ricing competitions, so as to be relevant in this fiercely competitive world.

 

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