It is no big deal to set an MRP (Maximum Retail Price). All the battles are fought between competitors regarding wholesale prices. MRP is only a maximum, retailers can sell at any rate below it. Set it a little high so retailers can sell at any desired price. It is only about printing on the package. There is no apparent consequence. Taxes are only on the selling price, not on MRP. But, we at Cocoguru look beyond the obvious, beyond only the retailer’s interest. That is in the interest of consumers. Retailers may sell at any price, but there is a paying consumer. Manufacturers may sell to wholesalers or retailers, but the brand ultimately sells to the consumers. Brands must not leave too much flexibility to retailers to dictate their prices to consumers; it must be limited.

Retailer’s interest

• Higher margins are the reasons retailers do business or sell a product. They look to maximise their returns on their efforts, i.e., sales.
• Flexibility to set price—Not all consumers are the same. They buy different quantities and need different levels of services. Retailers also have differing levels of sales and cost of operations. To manage this, the retailer should be able to get suitable margins by selling at his desired prices.
• Give discounts to consumers—Retailers like to woo consumers through discounts without sacrificing their profit margins.
• Pay commissions—There are many spice shops in tourist areas like Dharmastala and Subramanya. The shops rely on tourist operators to bring customers to their shops. In return, the driver demands a commission from the spice shop for the transaction. The margins from the transaction should sufficiently cover this commission, and still, the spice shop will be left with a handsome margin.
• Not be guilty – Retailer looks for additional margins without being guilty himself. If a consumer complains about the high price, he can always point to the MRP set by the manufacturer and pass the buck.

There is nothing wrong with protecting retailers’ interests as long as it doesn’t exploit consumers or hurt the brand and its reputation.

Consumer’s interest

• Low price—Obviously, but the reason for stating this explicitly and in the beginning is that the brand must consider this fact while setting MRP. The lower the MRP, the lower the price at which the consumer gets the product.
• Discount—The consumer feels happy with the retailer when he gets the product at a significant discount to MRP. Consumers should be mature enough to look at the absolute price rather than the discount on MRP.
• Consistent prices – The price range in which he gets the product should not vary too much depending on the place and shop from where he buys

Challenges to brand

• Price fluctuation—The cost of raw materials keeps changing, especially when they are commodities. This results in changes in wholesale prices and MRPs. To better serve the market, every player in the supply chain needs to maintain some stock. Changes in MRPs create confusion in the stock supplied and billing rate.
• Variations in nature of the market – Different markets have different consumption patterns and costs of retail operations, and hence, the cost of supply
• Favour retailers – To a brand, the consumer is the end, but retailers must reach the consumer. If retailers are unsatisfied, they will only supply to those consumers who ask for the brand and sell whatever they like to others. When the brand doesn’t enjoy sufficient pull, it can ill afford to ignore retailers.

Conclusion

Different MRPs – Coconut oil is used for cooking in coastal Karnataka, so per capita consumption is higher. The cost of retail operations is low as the towns are more minor. The supply cost is also low as they are closer to our factory. So, we have kept a lower MRP here. Price sensitivity is very high. Coconut oil is used only for hair and skin in the rest of Karnataka, so per capita consumption is low. The cost of retail operations is high in big cities like Bengaluru due to high rentals. The cost of supply is high as they are far away from the factory. So, we have a higher MRP there. Price sensitivity is lower.

Minimum mark up Cocoguru is no ordinary manufacturer, we are a brand that care for the consumers. So, we look to protect interests of consumers even at the cost of being not too favourable to retailers. So, we keep a tight MRP that is a maximum of 25% mark up to wholesale price.