The one unknown rule of pricing
Simply - "You'll never know all the costs that you can incur - No matter how long you‘ve been in a marketplace"
That is why you should really make it a point to sit down and write up a good business plan, or at least a spreadsheet (list) of all known and potential expenses that you may incur. This is true for any new business entrepreneur or long established business looking to enter a new marketplace.
Obstacles of pricing and selling
There are many obstacles that work against both your pricing and selling efforts. The basic obstacles are:
- Your own pricing structure that may be too high or too low
- Your competitions pricing and/or tactics (Such as stressing their integrity over others, or exploiting personal relationships with the buyers)
- Selling in the wrong marketplace(s)
- Changes in the marketplace
- Unforeseen costs and occurrences
Though these may seem very obvious and too basic to even mention to industry-wise sellers, they are not always so obvious when you are selling into a new marketplace or with new market conditions - and, not always easily resolved.
And, while there are business people and companies that do have much foresight and adapt quickly to change, there are others that cannot easily change - Especially those that have much invested in plants and equipment. And, that is why even a business with a long term presence in a marketplace may also have to develop a (new) business plan.
Low Prices Alone Do Not Assure Market Success
Even those that do adapt to changes in the marketplace do not always succeed in the long term. And, perfect examples of this are some of the companies that fairly recently changed to now primarily selling the lower priced goods from the low-wage countries. Though many companies are doing well with this change, there are also many that are finding that selling low priced goods can not sustain their economic structures - And, they are going out of business.
There can be many reasons for this. Perhaps some of these companies could not properly control quality or delivery issues that exist with sourcing from distant suppliers (Not only from low-wage producers - These problems can arise from any distant supplier). Or, perhaps they were selling products too similar, or the same, as others importing from the same sources - and, the consumers found nothing unique about them, or felt that they were unjustifiably higher priced than others.
So, even though these companies adapted to the changes in the marketplace, and they may even have been competitive with the pricing of their competition, there are obviously some unforeseen costs and occurrences that they were not prepared to handle.
Selling in a Wrong Marketplace Can Work Against You
Obstacles can also arise in your general marketing endeavors, or in a simple, singular endeavor. For instance, not doing a proper exhibition in a proper trade show, or in a proper location within that show.
Trade shows are significant - Many companies book up to 60% of their sales in trade show exhibitions. And, exhibiting in a popular trade show for a particular industry is a good investment for your business - if you fit in with the exhibition.
A seller may have a very good product, or group of products, that they can market at competitive prices. The idea of their exhibiting at the biggest and best trade show in their industry would seem like a very good idea. But, it could instead be a costly mistake.
They may be exhibiting among bigger or more diverse companies. And, with their prices somewhat less than these other exhibitors, they may find that the buyers attending the show will indeed be attracted into their exhibit by the low prices - but, they may not necessarily get any orders from them.
The reason for this is that many of the buyers attending the large shows will often be looking for many products. And, though you may be offering very good products at excellent prices, you may not be offering a sufficient mix of products to make it worth the buyers’ time to deal with you.
For instance, buyers from large retail stores - they are looking for known name brands, diverse products, more unique styles or designs (from long established designers). And, quite frankly, they may feel more secure working with their long term, long established, more diverse suppliers - even if their prices are higher. Equally important to these buyers is the fact that a diverse supplier saves them time and effort - they do not have to follow-up on production and delivery issues with numerous suppliers.
You may have more success at a smaller show, directly marketing to the larger buyers (outside of the large shows) - or, simplifying your life, and sub-contracting to the larger companies that would be exhibiting at the large shows (Which would save you much marketing efforts and expenses).
With any of these options, you must think long term about your pricing, and how it would affect your ability to market under these options. Developing demand for your products at the smaller shows and directly marketing to the larger buyers will require much public relations and advertising expenditures - a good reason to be in line with market prices (rather than being the lowest priced).
On the other hand, if you will be negotiating to sub-contract for the larger companies, you do not want to betray their pricing to the buyers (which you would do by improperly exhibiting at their trade shows).
Again, this is why I suggest that you develop a good business plan before you start to market your products. These obstacles, and others that would be unique to your own industry, should be considered and carefully reviewed.
