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Cost-Plus Pricing: The Safe Foundation
Before you set a price, you MUST know your costs. If you don't, you are gambling.
The Formula:
Total Cost + Profit Margin = Price
What is "Total Cost"?
It's not just the cost of the item.
- COGS (Cost of Goods Sold): Purchase price + Shipping to Nigeria + Clearing.
- Overheads: Packaging (nylon/box), Data, Electricity, Transport to courier, Rent.
Example:
Shoe cost (₦5,000) + Shipping (₦2,000) + Packaging (₦500) = ₦7,500 Total Cost.
If you sell for ₦8,000, you only made ₦500 profit. Is that worth your stress?
The Formula:
Total Cost + Profit Margin = Price
What is "Total Cost"?
It's not just the cost of the item.
- COGS (Cost of Goods Sold): Purchase price + Shipping to Nigeria + Clearing.
- Overheads: Packaging (nylon/box), Data, Electricity, Transport to courier, Rent.
Example:
Shoe cost (₦5,000) + Shipping (₦2,000) + Packaging (₦500) = ₦7,500 Total Cost.
If you sell for ₦8,000, you only made ₦500 profit. Is that worth your stress?
Value-Based Pricing: The Profit Maximizer
Cost-plus ensures you don't lose money. Value-based ensures you make more money.
The Concept:
Price based on the value the customer gets, not just your cost.
Example:
A bottle of water costs ₦100 in traffic. It costs ₦500 in a 5-star hotel. Same water, different value (ambience, service, glass cup).
How to apply:
If you sell "Urgent Delivery" fashion, you can charge double because the value is "Speed," not just the cloth.
The Concept:
Price based on the value the customer gets, not just your cost.
Example:
A bottle of water costs ₦100 in traffic. It costs ₦500 in a 5-star hotel. Same water, different value (ambience, service, glass cup).
How to apply:
If you sell "Urgent Delivery" fashion, you can charge double because the value is "Speed," not just the cloth.
Psychological Pricing: ₦9,999 vs ₦10,000
Human brains are funny. We read from left to right.
Charm Pricing:
- ₦5,000 feels expensive.
- ₦4,950 or ₦4,900 feels like "Four thousand something."
Bundling:
Don't just sell a wig. Sell a "Wig Care Kit" (Wig + Stand + Spray) for a higher price. Customers love "Complete Packages" because it saves them thinking time.
Charm Pricing:
- ₦5,000 feels expensive.
- ₦4,950 or ₦4,900 feels like "Four thousand something."
Bundling:
Don't just sell a wig. Sell a "Wig Care Kit" (Wig + Stand + Spray) for a higher price. Customers love "Complete Packages" because it saves them thinking time.
Handling "Last Price" & Haggling
In Nigeria, haggling is a sport. If you say ₦10,000, they will offer ₦6,000.
The Strategy:
1. Add a "Haggle Margin": If you want to sell for ₦10,000, list it at ₦12,000. When they beat it down to ₦10,000, they feel like winners, and you get your target price.
2. Firm Pricing: If you run a formal website/store, put "Fixed Price" clearly. Justify it with quality guarantees.
The Strategy:
1. Add a "Haggle Margin": If you want to sell for ₦10,000, list it at ₦12,000. When they beat it down to ₦10,000, they feel like winners, and you get your target price.
2. Firm Pricing: If you run a formal website/store, put "Fixed Price" clearly. Justify it with quality guarantees.
How to Raise Prices During Inflation
With the Naira fluctuating, you cannot keep 2024 prices in 2026.
How to do it without anger:
1. Announce Early: "Due to rising costs, our prices will change on March 1st. Order now at old prices!" (This also boosts sales).
2. Explain Why: "To maintain the quality you love..."
3. Add Value: "We are increasing prices, but we are also improving our packaging/delivery speed."
How to do it without anger:
1. Announce Early: "Due to rising costs, our prices will change on March 1st. Order now at old prices!" (This also boosts sales).
2. Explain Why: "To maintain the quality you love..."
3. Add Value: "We are increasing prices, but we are also improving our packaging/delivery speed."
Chinedu "The Prof" Okeke
Economics & Pricing Analyst
4
Chinedu advises retail brands on pricing strategies that maximize profit without hurting sales volume. He hates seeing businesses run at a loss because they "forgot" to count the cost of packaging.
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