I am loyal to simple food. Not just me. I met a famous advertiser who enjoyed beef tongue with peas and mashed potatoes.
For example, I like ground beef—in meatballs, in pastry, or in a well-seasoned stew. A cappelletti soup with green seasoning and ground meat pastry in winter is superb.
One day, I went to the nearest supermarket to buy ground beef. Today’s deals were beef rump at $26.00/kg and beef drumstick at $28.00/kg. Ok, but since I wanted ground beef, I asked its price.
– $30.00/kg – replied the butcher.
– Can you grind other meat? – I questioned.
– We can, but not the rump because it is in the package. Even the drumstick on offer, as they are steaks – argued.
I remain meditating, trying to understand the logic behind these prices. The packaged rump has much more moisture, sales at usual prices (around $35.00/kg) must be weak, and the expiration date was slipping away—it made sense. However, the cost of ground beef being higher than that of drumstick steak was weird.
I gave up on the purchase. Returning, I stopped at the butcher’s on the way home. They had top-notch ground beef for $27.00/kg. I bought it.
The decisions regarding these supermarket prices likely did not consider the relationship between them, which is definitely a mistake in pricing.
The price manager needs to put himself in the buyer’s position. 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.
Many times, price is not even the problem. The proof of this is 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.
The manufacturer’s solution was to hire a research agency to investigate the causes of this non-acceptance. The agency answered 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 answer, the manufacturer promoted an advertising campaign that associated instant coffee with special consideration from those who offered it, which was successful.
Conclusion: putting oneself in the position of who needs to make the purchasing decision will always lead to better pricing decisions.
C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.