Quick Read
20 min
Learn practical strategies to balance quality, organizational sustainability, and affordability for customers
Derrick Muturi
East Africa Acumen Fellow
Irfan Keshavjee
East Africa Acumen Fellow
Chad Larson
Acumen Portfolio Company
East Africa Acumen Fellow
East Africa Acumen Fellow
Acumen Portfolio Company
For pricing, it all starts with what's valuable for the customer.
Because we were trying to displace their kerosine spending, we had to make sure that our daily rate was less than what our target customers spend on kerosine so they could actually feel those savings.
But also when you price, you can't obviously just take the customer's needs into account. You have to take the company's needs as well.
We also needed a down payment, and that was not for the benefit of the customer. That was for the benefit of the company. We would not get the proper skin in the game from the customer unless we had the down payment. But you wanted to keep that as affordable as possible, but not more so. It had to be something that the customers could really reach.
I think you never know when you have it perfectly right. You just have to be willing to change it.
Initially, we had very different price points. We tried to be about 30% cheaper than the market. People were very concerned about the quality. They were like, "Why is your meat this cheap?"
Then at some point we were like, okay, let's increase the prices and we did about a 60% margin. People were like, "Why is your meat so expensive?"
So I'm like, okay, let's find a good middle ground.
I think over three years, we've been able to find that middle ground. We've been able to see what price range people are comfortable buying things at. That they seem to have a perceived value in terms of quality, but also good value for money as well.
Advice to entrepreneurs for setting their prices is, you've got to look at your cost-based pricing. What does your company need to deliver to make sure you pay the bank and your investors?
Then there's looking at a market-based structure where you look at your competition, see what their value proposition is, see how you can differentiate, and try and price accordingly.
Then there's looking into the customer's mind, how the customers perceive the competition versus you. What is the perceived value proposition and perceived price?
Again, it's not about your pricing. It's about the customer's perception of your pricing and the customer's perception of the value proposition. And that is more about telling the right story, giving the right message, than actually saying, "This is what my price is."
Balance customer affordability with company needs and remain flexible to adjust prices
Find a middle ground that balances perceived quality with value for money
Factor in how the customers’ perception of the product or service will influence their willingness to pay
Quick Read
20 min
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10 min
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15 min