Definitely, prices are relative (22)

I am loyal to simple food. Not just me. I met a famous advertiser who enjoyed beef tongue with peas and mashed potatoes.

For instance, I like ground beef—in meatballs, pastry, or a well-seasoned stew. A cappelletti soup with green seasoning and ground meat pastry in winter is superb.

One day after work, I went to the nearest supermarket to buy ground beef. Today’s deals were frozen beef rump at $27.00/kg and chilled beef drumstick at $28.00/kg.

Ok, but since I wanted ground beef, I asked its price.

– $30.00/kg – replied the butcher.
– Could you grind other meat? – I questioned.
– We can, but not the rump because it is packed. Not even the drumstick on offer, as they are steaks – he argued.

I remain meditating, trying to understand the logic behind these prices. The packaged frozen rump has much more moisture, sales at usual prices (around $35.00/kg) must be weak, and its expiration date was slipping away—it made sense. However, the higher cost of ground beef than that of drumstick steak was weird.

I gave up on the purchase. Returning home, I stopped at a butcher’s on the way. They had top-notch ground beef for $27.00/kg. I bought it.

Well, the supermarket manager likely decided the price of the beef offers without considering the relationship between them, which in pricing is controversial.

Every pricing manager needs “to put themselves in the buyer’s shoes”. Some customers do not decide on price, but most continually compare and analyze its cost-benefit ratio—not only between prices of the same supplier but also with others.

Price is often not the problem, as happened in the case cited in marketing classes that dealt with introducing instant coffee in the North American market.

At the time, the manufacturer (we will not mention its name) faced enormous resistance to its acceptance. Despite its advantages, the sales of the new soluble coffee did not take off.

Then, the manufacturer hires a research agency to investigate the causes of this non-acceptance. The answer was that the American housewife saw the new and practical instant coffee as a lack of attention to her family; the issue was not the price.

Based on that conclusion, the manufacturer promoted an advertising campaign that associated instant coffee with special consideration from those who offered it, which was successful.

In short, putting oneself in the position of who needs to make the purchasing or consumer decision will lead to better pricing.

C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.