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Selling food
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Following, an actual conversation. A new price set. I asked, walk me through the process on how you got to this price. - Well... I grabbed the cost and factored it in.
+ Ok. What did you factor?
- Well... on the standard.
+ What standard?
- The standard for the industry.
+ What kind of industry?
- In the distribution / reseller.
+ For what kind of industry?
- Well... companies like Lidl, or like restaurants. I factored in 30% and the price is good.
+ Are you in the food industry?
- Erm... no.
They're in high-accuracy instrumentation for laboratories. A deeper issueThat new price could have been / still be an acceptable price to charge. At the end of it all, it's above the costs, so it should be a good deal. Unless not all of the costs are factored (utilities, labor, admin costs, financial transactions, expenses, delivery, etc.) making margins thinner. It shows something deeper, though. It's safe. Traditional. Uncomplicated. Because, if it's in the restaurant industry, why not charge 10-20X more? Have you paid for a cocktail at a high-end restaurant? If it's in the distributor/reseller, why not add the premium? And my impression is that they're afraid of being expensive. They're afraid of driving people away with the price. And that's the thing with cost-plus pricing: it tries to build a price based on what it costs, and then there has to be a way to justify the price with a rational. All so that there can be a good-enough reason to bring the value at the end. Cost-plus pricing drives your fear. And leaves (a lot of) money on the table. It makes you be in survival mode, where any money is good money. And that's no way to make a business thrive. |
Rod Aparicio
Get one tip, question, or belief-challenge that just might change the way you market, to help your customers buy. A *daily* email for b2b founders on improving your business —without the bullshit.
"If you have to have a prayer session before raising the price by 10%, then you've got a terrible business" — W. Buffet Which begs the question: will you be able to double your prices without a prayer session?
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