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The Psychology of a Price Tag

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Marketing is a great profession. The bests in the field understand how to present their product offerings to customers to get them buying. Irrespective of the quality of the product or service, a very poor marketing campaign could be very disastrous. This field is full of psychology. They focus on mastering the behavior of man under his limited scarce resources. He must make choices and bring that concept of opportunity cost in action; and making sure your product wins in this choice makes you a start marketer.

The best marketing strategy begins with pricing. Pricing is such a very huge aspect of microeconomics and the all important topic of demand and supply. Depending on products and markets, a manufacturer could go with price-based pricing or cost-based pricing. In most cases, I prefer the former as the seller could win big provided he understands the potential customers very well.

Under price-basing pricing, you are examining the ability of the customer to pay. So, it opens the door to super high profits or possible losses just to keep your market share. For instance, you want to introduce a new brand in a market and your feasibility studies show that your customers cannot pay more than a certain amount that will enable you to break even. Yet, you move ahead because presence in that market provides future prospects for growth and profitability.

Pharmaceutical companies do that a lot when they are moving into developing economies. The prices they ask for their products are aligned with the power of the patients to pay than what the products cost them. Through that, they increase market share as more patients buy their products. This implies that a drug that sells $200 in Florida could be sold for $1 in Botswana by the same company. Simply, it is using the purchasing power of the market to drive the marketing dynamics.

The other one- cost based pricing- looks at setting price that will give you a certain profit level. You look at your fixed and variable costs and based on those arrive on the price of the product. This method may not be ideal in most cases and I think it is weaker strategy. Marketing is a behavioral science and having rigidity could hurt you in the market. It is better to know your break even point and possibly ascertain if you can take advantage of the purchasing power of your customers.

In a commodity market where differentiation is very limited, cost-based pricing could win. Irrespective of your pricing technique, it is vital you know your production cost before you map how to market your products. Some markets command great mark-ups while some do not. If your product is elastic, you must approach the market understanding the behavior of price to your customers.

Similarly, for high entry barrier markets like pharmaceuticals, cost-based pricing will never win. The products are so important that consumers rarely have choices than to buy within the industry. That is why the Big Pharma could make profits in excess of 2000%.

Now, how do the marketers get you into the business of buying? They work your brain. Look at it this way with basic examples. You visit a grocery store and see a big markdown in price; say 60% off. The reality is that there may not be a markdown. The seller simply understands that you will think of a bargain when you see big markdowns and then open your wallets.

In short the propensity to pay $20 for a trouser after the original price was marked down by 80% is higher than paying $18 for a very similar trouser without a markdown. The latter does not communicate winning in our brain, while the former gives a feeling of success and win. But in reality, you lost, financially, in the former by $2. Have you ever wondered why a grocer is stocking a product for the first time and immediately marking it down by 30%? They also try to give a relative time stamped pricing like “was $200, now $50” or they yanked a product very high, mark it down immediately and use that old price to give an impression that price was cut.

That brings another point where some airlines will tell you that bags could be transported free and then charge high ticket fees to cover that cost of bag. Others will charge for bags, but their ticket fees are lower. Which one is better? It depends if you carry checked bags when you travel. The one that charges for bags could be more efficient as the price is not shared by all customers. So if you carry checked bag, you pay for it, otherwise, no worries. The other one distributes and subsidies the costs of the bags for those that carry bags and then make ticket fees more expensive for those that don’t. However, you may be stuck with the theme that your bags were not paid in one without realizing that your ticket fee was higher.

Psychology of pricing is in everything we do. Government wants out taxes to be withheld and then at the end of the year, they send us tax refunds. Though this is really a very inefficient system to us the payers since the government is not paying interest on the money we have “loaned” them, we tend to think we made a gain. Simply, any time you get a tax refund, it means you have not invested your money very well. You gave government free loan accumulated over one year; that money might have yielded some interests if invested.

But what can you do? Nothing, because it is government and in most cases, it can be designed to look like government just did you a great deal while in reality they used your money for free and not paying any interest.

Pricing is very important and making customers to feel like winners is very important. If you know how to do that, you will have a great career. That is why understanding your customer matters. So, if you think it is easy to be a marketing director, try to become a psychologist first as those price tags you see in Wal-Mart, Giants, Sears, etc are not just the works of accountants; many things are into them.

Author: Ndubuisi Ekekwe

Partnership Scheme – Up to 20% for Job Referral

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Fasmicro Partnership Scheme (FPS) – Make up to 20% on us

All services and products in our brochure are covered in the FPS.

Some of our generic proposals are here. You can use them to develop markets. And if you need a customized one, contact us!

Considering a job opportunity or more income? Now, you have found one! Fasmicro has introduced Fasmicro Partnership Scheme (FPS) that enables our nationwide partners to tap into the amazing opportunities our company provides.

Through this program, Fasmicro pays up to 20% to partners when they bring jobs to us. Potential partners will sign our partnership document. As they execute and bring jobs, they will climb the partnership levels.

This scheme is open to anyone – company or individual.


How it works


 

1. You will register with us as a partner – free
2. Sign agreement to abide by our FPS rules
3. Refer jobs to us and earn commission from 5% – 20%

We have Four Categories of Partnership


 

1. LEVEL 1  1st level when you join us) : 5% in all jobs referred
2. LEVEL 2  Refer 5 jobs to move to level 2) 10% in all jobs
3. LEVEL 3  Refer 5 Partners and 5 Jobs) 15% in all jobs.
4. LEVEL 4  At least 2 partners from you gets to level 3) 20% in all jobs.

Download the documents here (pdf) (word) or visit FPS site

 


 

You will be among our contacts in your locality. This applies to all parts of Nigeria.

What We Do

We have the following products and services. Notice that we train on Android, embedded systems and web design services and we have an innovative ICT Division. From recruiting people for our training to getting web design customers, from microelectronics center design customers to Android app customers, from software development to consulting services, ete, etc, you have more opportunities to profit with the experts.

Email info@fasmicro.com to indicate your interest in this program.  And visit fps.fasmicro.net to register and start earning.

Social Investing and Social Enterprise in Africa

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Africa Investor in association with the United Nations Office for Partnerships, Business Call to Action, Dalberg, The Coca Cola Africa Foundation, UN Millennium Campaign Africa and SPESA will host an Investors’ Summit on Social Enterprise and Social Investing in Africa and the Sukuma Afrika awards scheduled to take place 3rd May 2011 in Cape Town, South Africa. The Roundtable and Awards will take place on the eve of the World Economic Forum Africa in Cape Town. Please find attached the program and registration form.

This one day event will bring together the Private Sector, Foundations, Impact Investors, Microfinance Institutions, Philanthropists and Social Entrepreneurs.  During the event, facilitated partnership broking will take place and one-on-one meetings will be arranged on the fringes in order to identify and isolate opportunities to be capitalised on. This is the first international event on Africa to create a knowledge and project marketplace that includes all the active players. The Summit represents a unique knowledge platform for Foundations from around the globe that support economic development in Africa and will host a unique marketplace facilitated with partners from the United Nations to match inclusive business models with Foundations and social entrepreneurs. The Summit will also host the 2011 Sukuma Afrika Young Entrepreneurs MDG Awards.

Some of the Confirmed Speakers Include:

1.       Hon Jacob Zuma, President, Republic of South Africa

2.       The Rt Hon Morgan Tsvangirai, Prime Minister, Republic of Zimbabwe

  1. Herbert Yusimbom Boh, Deputy Head for Africa, World Bank

4.       William Kempner, Executive Director, Aspen Network of Development Entrepreneurs

5.       Thierry Sanders, Managing Director, BiD Network

  1. Charles Akelyira, Director, UN Millennium Campaign Africa
  2. Kerrin Myres, Director: Centre for Entrepreneurship, WITS Business School
  3. Stephen Hayes, President, Corporate Council on Africa
  4. Dr Iqbal Surve, Chairman, Sekunjalo Investments
  5. Kojo Parris, Visiting Fellow, University of Leeds and Honorary Consul of Guyana to SA
  6. Simon Berry, Founder and Director, ColaLife
  7. Dr Vincent Kouwenhoven, Founder, eVA Fund
  8. Patrick Scholfield, Co-Founder, Streetwires
  9. Natalie Africa, Programme Manager, Business Call to Action
  10. Stephen Olabisi Onasanya, Group Managing Director/Chief Executive, FirstBank of Nigeria Plc
  11. Dr Darius Mans, President, Africare
  12. Dr Victoria Kisyobe, Managing Director, Sero Lease and Finance

Thisday.ng – The Power of .com and why .ng is not popular

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Thisday.ng over the last few weeks acquired Thisday.ng – the Nigeria internet domain structure that is poised to replace the  .com.ng or its equivalents. The problem is that when you type Thisday.ng, it redirects you to Thisdaylive.com

Thisday has http://thisdayonline.com/ and is mirrored to http://www.thisdaylive.com/

At the end, having a .ng has not gone very popular, not just for Thisday, but for most other organizations. The problem has to do with Google algorithm. I think it incorporates domain suffix in determining its ranking. There is no scientific study from us here, but we are very sure that Tribune.com.ng will do better in digital footprints if it was in tribuneng.com. The reason is that when Google robots see .com, it is biased to think it is a U.S site. and the material has a better quality.

Again, no scientific evidence on this assessment, just an observation! How? We took exactly the same news from Tribune.com.ng and posted those contents in a .com website. After two days, the news ranked higher on the .com than the original source with .ng. Of course, the previous history of the new domain could play a role here. However, there is a qualitative correlation that Google robots favor .com over .ng. There is a website maintained by a Nigerian blogger that aggregates most Nigerian newspaper contents. While other newspapers hold their levels when you type a topic on Google, that site defeats Tribune.com.ng in the algorithm. For instance, Vanguardngr.com’s articles will prominently show as Vanguard on Google though there are some aggregations everywhere.

That said, go and get your .ng as we need a digital identity. Yet, we recommend that you have a mirror to your .com. This is very important if your business depends on hits. Guardian continues to use its .com. It has two mirrors and that helps it. Sun, Vanguard, Punch, etc and even Thisday – none wants to live inside .ng now. It is about the robots and what Google thinks on ranking.

Think about it, when you see a book written by one professor in U.S and another by one from Haiti, there is this tendency to think the U.S. one is more authoritative. The robots act that way except that the only way to know is that suffix of .com or .ng. So thisday.ng will continue to redirect to thisdaylive.com after paying the big bucks. You better not eclipse your business in .ng – at least now.  Again, this matters if your business depends on hits and web traffics – if not, no need; .ng is Ok.

Get Startup Funds from Google

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Have a great tech idea?

The Umbono program will help transform your vision into a business. Your idea – probably web or mobile deployed – is exciting on many levels: for your future users, potential investors, and for the people on your team building it.

The Program

6 Months

The Umbono program lasts for 6 months—enough time for your team to get your idea formally off the ground or to prepare your existing business for its next round of funding. By the end of the program, you’ll be pitch-ready and have a business plan in place.

Seed Capital

Teams should expect to receive a minimum of $25,000 and a maximum of $50,000. Capital from Angel investors will be exchanged for equity (10%) and will be governed by standard terms of investment (the same terms for each team). Funding will be disbursed around milestones; a customized schedule will be drafted with each team upon program induction, based on your anticipated development schedule. It is up to you to decide how to use the funds.

The Space

We provide the furnished office space and bandwidth for the duration of the program. This is a collaborative space for all Teams in the program, providing a forum for mutual support, idea sharing and tech talks.

Business Skills Training

Umbono Teams will have access to the Bandwidth Barn’s VeloCITI program. This program covers all business topics relevant to an emerging business, from business model definition to market segmentation and pricing strategies. The 10 business modules and 4 additional financial modules are led by external topic experts and business leaders. The sessions will take place on a rolling basis and Teams can participate in all modules or only those areas where they would like to build up more skills specific to the stage of their product development and enterprise.

The Mentor Base

For the duration of the Umbono Program, Teams will have regular access to our extensive network of business and technology experts, many of whom are Googlers. Umbono’s Mentor Base is extensive, so we are confident that we can connect you with an expert for any coaching needs, be it marketing, finance or product development-related. (See our People page for some examples of our mentors). In addition to that, each team will be paired with a Google Power Mentor, someone from our Product Management team, you will be in regular weekly contact with them throughout the 6-month program for hands-on guidance.

Visibility

All great stories need a platform for advertising their success. Association with the Umbono brand and resulting awareness at our networking events, blog posts, and press releases will provide Teams with reach to additional funding.