CategoriesPricing

Yet another price increase

Price premium of coconut oil packs have been increased to about 10% as compared to other mass brands in the market and at par with a premium brand.

We have a sales officer Mr. Nandakishora who has strong opinions about pricing and 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 price but about fine tuning it as per our marketing strategy. Because after so long we have a 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 PremiumThen 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, Association was tending to keep the price low to discourage price rules violation.

It was not very smooth for 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 taking decisions. But bold decisions had to be taken, that is what has made me an entrepreneur in the first place. By now everyone got adjusted and were expecting further price moves by 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 in 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 association stopped fixing the price as the members had already stopped strictly following the prices. Fearing price fall due to competition we still had to increase our price premium to survive. Price fluctuations weekly were another big problem to tackle as it caused disturbance to members in our trade channel. This meant we cannot reduce prices immediately, we have to give 1 week notice to distributors before reducing price. A couple of times, we didn’t reduce 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 price 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.

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