In my last blog post, I shared my recent experience on unfair pricing and my journey to building a sustainable and ethical business. Today, I had to summon my team again to access their understanding of the subject. The look on their faces showed they were still confused as they did not understand why I declined the offer to increase our price. I had to share my learning on fair Pricing to help provide more clarity.
I decided to write more on the subject in today’s blog.
Let’s Get into it.
What is Fair Pricing?
Fair pricing is when a price paid for a product is commensurate with its value. It can also be seen as a price that is acceptable to both parties.
Key factors to consider in fair pricing are
1. Cost of a product.
A business is established to make a profit and profit can only be made when the cost of running a business is lower than its revenue during a trading period. Before you set your pricing, you must consider all costs associated with creating the product. The price has to cover the cost of making the product. The product’s price is usually cost plus markup price for profit.
Fair pricing is not only related to the buyer but also the seller. Most times unfair pricing is associated with the buyers alone when they feel the price is high without considering the seller in terms of production cost. The price must reward the seller for the effort he or she put into making a product.
Therefore “Cost” is one factor you must consider in fair pricing.
Market Price :
This is another factor to be considered in fair pricing. The market price is the accepted value of a product by different people and active participants in the market. All factors that are likely to affect the supply and demand of products are also considered by these people. For example, if They speculate that there will be an increase in demand, the prices tend to increase and if there is a decline in demand the prices tend to decrease.
In fair pricing, it is important to consider the current market price of the product. This will serve as a guide to knowing the amount you can charge for your goods.
Consumer/ Target market
The consumer should also be considered when placing a price. It is important to consider the income and lifestyle of your target market and create products within the cost they can afford. For Instance. A
restaurant’s price in a remote village will be different from its price in an urban city
In building a global business, it is ethical reconsider your pricing strategy. Evaluate the factors behind your pricing and ensure fairness.
