was going for Kshs. 80,000 shillings. And
that is after a 20 per cent offer. Not cheap.
The guy removed a debit card to pay. The
guy at the till threw a spanner in the
works. Card payments attract an extra 5
percent charge. The guy was miffed and
walked away. He got a good reason not to
buy.
As most Kenyans do, I got interested in
that drama even though I had nothing to
do with it. I just wanted to help. I called for
the manager. I asked her a few questions:
Aren’t you cheapening your products by
asking for a 5 percent extra charge for a
varied form of payment? Why not factor
in that charge in the price? Why give a 20
percent offer and charge 5 percent for a
payment option?
When I worked at Unga Holding,
distributors favored competitors’ due to
trading terms. I went to one distributor
to ask why. He told me they buy and
sell a competitor’s bale of flour at 1,250
shillings. They get a monthly rebate of 75
shillings as distribution allowance and
another 25 shillings for self-collection.
That totals to 100 Shillings per bale.
Why is it that these
rich people want to
wriggle out every
coin with a bargain
from a poor hawker?
These are the same
people who give five
hundred shillings as
a tip. These are the
same people who may
give one hundred
thousand as tithe to
a church. These are
the same people who
walk into a restaurant
and pay 2,000 Shil-
lings for a meal.
I was bemused. What was the difference
with us? There was no difference. We
sold and delivered our products for 1,175
shillings and distributor was supposed to
mark-up 75 shillings per bale when selling.
Ideally that would give them 100 shillings
same as competition. Why then were they
unhappy? The competitor was giving them
a lump sum at every end month. They
psychologically felt they were getting
some income from competition and not
from us. We changed to self-collect and
gave end month rebates. Sales went up by
25 percent.
At Bidco Land O’ lakes (BLOL), a similar
scenario played out. A distributor called
me and told me they prefer competitor
trading terms than ours. At BLOL, end
of month rebates was credited into their
customer accounts. That meant we paid
them in form of products and not hard
cash. That is good for the company because
the conversion time and risks are borne by
the distributor. When we changed to start
paying rebated in cash, distributors were
excited and motivated.
Price discounts also go a long way in
offering
psychological
satisfaction.
Customers always get more satisfaction
when they pay a discounted rate. Discounts
must nevertheless be graduated based on
volumes and credit days. Cash and volume
customers should get best price.
Discounts and free things are good, but
they should have an extent. Being able to
afford something and paying for it satisfies
a psychological need of worthiness. People
want to feel they have sacrificed something
for a reward.
When I worked in Kisumu for EABL,
selling beer, customers always wanted a
discount on Tusker Malt and complained
that beer was generally expensive. But
there was a reprieve, why not drink a
cheaper beer like Senator? When I asked
one customer that question, he retorted:
“but that is for the financially disabled.”
Price as a sales and marketing tool is
versatile and multipurpose. When used
wisely price can trigger more sales, price
can increase perceived value, and price
can arouse psychological satisfaction.
Whichever way you use price, and pricing
tools, make sure customers feel they have
received a bargain. Make them feel they
have won a deal. Make them feel they
have paid less than the true worth.
Conversely, make them feel valued. And
that is irrespective of affordability of your
products, or the economic profile of the
customer.
Herman Githinji is a seasoned
marketing practitioner and law
graduate from the University Of
Nairobi. Currently the CEO Bidco
Land O’Lakes Company that makes
quality Animal Feeds using American
Technology. You can commune with
him on this and related issues via email
on: [email protected].