The price premium of coconut oil packs has been increased to about 10% compared to other mass brands in the market and is at par with a premium brand.

We have a sales officer, Mr Nandakishora, who has strong opinions about pricing and is in favour of traders.
While discussing he said, “We have reached the final stage of our pricing evolution, haven’t we?”.
I countered, saying, “No, there is still a long way to go!”.
He was worried, “With great difficulty, we have increased the price premium to this stage, and you still want to increase it further?”
I swayed his concerns, “From now it is not going to be about increasing the price but about fine-tuning it as per our marketing strategy. Because after so long, we have control over our pricing.”

How did we reach here?
November 2014 – 1 Rupee Premium – Association was formed and prices were fixed by them. We used to supply to shops directly with our own vehicles.
January 2015 – 2 Rupees Premium – Then we changed from van sales to distribution system. Distributor was given at association wholesale rate which was 3 rupees discount to retailer rate. With 2 rupees premium, we gave distributor 5 rupees margin.
July 2015 – 3 Rupees Premium – This was because the Association decided to reduce the wholesale discount by 1 rupee to just 2 rupees. We retained distributor margin by increasing retailer price.
November 2015 – 5 Rupees Premium –The Association was tending to keep the price low to discourage price rule violations.

It was not very smooth with every price increase. We lost a couple of distributors, a few wholesalers and many retailers. Even those who continued buying from us raised serious questions. I used to get very nervous before making decisions. But bold decisions had to be made, and that is what made me an entrepreneur in the first place. By now, everyone had adjusted and was expecting further price moves from us. We were left with only loyal customers; retailers kept our brand only to give to those who asked for Cocoguru. Still, this customer base was substantial to help us survive. We gained confidence as these are the customers who we have rightfully earned.

April 2016 – 6 Rupees Premium –. To supply to distributors we introduced as super stockist and his margin of 1 Rupee was added to price.

By now, the Association stopped fixing the price as the members had already stopped strictly following the prices. Fearing a price fall due to competition, we still had to increase our price premium to survive. Weekly price fluctuations were another big problem to tackle as they disturbed members of our trade channel. This meant we could not reduce prices immediately; we had to give 1 week’s notice to distributors before reducing the price. A couple of times, we didn’t reduce the price even after 1 week, and hence, the premium increased from 6 to 7 to 8 to 9, back to 7 or 8 and then to 10. While our competitors change prices weekly, we don’t change our prices unless there is a major change in raw material cost.

This has enabled the distributors to purchase confidently without worrying about price fall after their purchase. We have successfully differentiated ourselves from competition and I can peacefully enjoy my Sunday without worrying about their price. Now, we have gained great control over our price, we will fine tune it further.
Two thoughts on “Yet another price increase.”