How to think about Pricing
Pricing is only one side of a sales transaction.
The transaction is an exchange for the benefit of both parties.
Goods flow one way, and money flows the other.
If both parties do not benefit, the transaction is a bad one, or it doesn't take place.
Why does the transaction take place?
To solve needs. If there are no needs, there is no transaction.
(What are the buyer's needs?) (What are our needs?)
From our side,
We buy merchandise at a cost.
We sell merchandise at a higher price.
The higher price pays our bills, and pays us so we make our living.
From the customer's side, it is identical.
They buy merchandise from us at a cost.
They sell merchandise to others at a higher price.
The higher price pays their bills, and pays them so they make their living.
In between, there are many other considerations, but it all boils down to that.
And price is only one component of the exchange.
What are other components of the buyer's needs?
- availability?
- how long will it take to get it?
- how badly do we need it?
- how much will transporting it cost?
- will it get here in sellable condition? (What else?)
What are some other less tangible components of the exchange?
- Can I trust them to do what they say?
- Are they reasonable to work with?
- Can I do better buying somewhere else? (What else?)
What are our needs? (Tell us!) (I think it is a long list.)