Have you ever felt remorse after buying or selling a product because the price was too low to sell or buy at a price that quite expensive? In the bid process, the decision rejection for buying and selling product as part of dynamic transaction process. Quite dynamic, because of many factors that affected with its weight respectively. It could be the same product, but done by the other party, at different times and places, wouldn’t give same effect.
The product price remains an important concern for buyers and sellers. Generally the price is used as an indicator of the important decisions in the transaction. Transactional process ideally leads to proportionality price for both (the buyer and seller). Proportional condition relate to the price achieved at the scale is not too high or low and close to the suitability of the value of the product.
The product value is strategic part of its transaction. Direct implication toward price, uniqueness, authenticity, the benefits offered by the seller and also buyer desire. Mapping the price of the product by the value of benefits, quite much common approach in buying and selling process known as value proposition. This approach maps the domain price toward how big the benefits achieved. The aspect of the value of the product was significantly contributes to price’s structure with the following formula:
Price = Cost + Value + Profit
The price elasticity setting depends on how dynamic variable of cost, value and profit set according the following scenario:
– Minimum Profit. Price set to minimum level as long as meet the minimum profit.
– Cost adjustment. The cost reduced by producing optimum number of product that meet the minimum production quota.
– Value Optimization. The value of a product can be set based on knowledge combined within ability and also sensitivity to the value proposition.
The ability to calculate the product value could not be separated on knowledge of the characteristics of the product and its value. The value of the product can be measured up to particular value. The example of product value that measured universally, such gold, fuel, oil, mining and various commodities. These product values are relatively segmented as unique items, antiques, artwork, historical value goods, commodities etc. The variable of the product value represented aspect of benefits, uniqueness, authenticity, momentum, and also deals with supply and demand.
Assessment sensitivity of the product value helps in determining the appropriateness of a product at particular price range. Simple overview of case studies below with examples of variable values are included and also ignored in price calculation.
A fisherman found the plate when fishing around deep sea. Then the plate offered in the flea market at a price as common used plate price. At the same time a scuba diver, also found similar plate in the seabed. Back to home, that plate examined precisely under consultation by the expert. Final conclusion, the plate is as a plate antique treasure of Ming Dynasty’s fleet that sank. Armed with the information about history of that plate, the price offered could be much higher than the selling price of the previous fisherman. Variable knowledge of these values contribute to the difference prices offered between two plates.
Even premium product remains attractive to buy if offering exceptional product value. Resell it at a competitive price is not quite difficult, as long as the privilege value well maintained, especially if you manage to give value added, and become another ‘special product’ and offer to the right target market.
The ability to calculate product value including cost structure, of course, supported the process of learning (learning by doing) from time to time. Armed with the experience and ability to dissect the structure of costs, the value of the product as well as comparison of prices offered by competitors, will assist in the determination of a reasonable and competitive price of the product. Ability exact calculation and realistic for the combination of those above variables, will impact on the price elasticity of product’s ability to compete in an increasingly dynamic market. Of course also be a complements the competitive aspect of you as a business person.
*This article originally appeared on jmzacharias.com/kuasai-nilai-produk in bahasa Indonesia.
*image credit: renjith krishnan-freedigitalphotos.net
About the author: JM Zacharias (@jmzacharias) currently works as a business strategist, professional career in the fields of product, sales and marketing more than a decade. His professional career experience in various industries including retail, consumer electronics, information and telecommunications technology both Business to Customer (B2C) and Business to Business (B2B). Having diverse experience in national, multinational companies, and startup; in the areas of technology, marketing and sales management, cross-culture climate among nations in his career portfolio in the Asia Pacific region and Southeast Asia helped him enrich and widen preperspective to continue to learn and share. Communicating ideas and business strategy are some of his activities beside writing article,delivering training and consultancy activities. Detailed information can be viewed on www.jmzacharias.com. You can also contact him through this link