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The prices issue at the souvenirs market

In a concurred market like this, determining the price of a product or service isn't an easy task.

How to act in a so competitive sector as souvenirs and get profit? It's not an easy question, and much less, with a definitive reply, even because, exactly due to high competition, there isn't an index or definite price. For Jesimiel Seluque, director of Seluque, equipment manufacturer directed to the production of drawn resin souvenirs, any concept toward definition falls for land when there is competition involved. "The cost of production and the desired edge of profit do not pass of mere details without practical value. To aggravate the situation, the main competitor, many times, is outside of the country, but always able to the reach of a simple click of mouse. Today, the sales price is defined by the capacity to pay of the purchaser. And this capacity to pay passes, obligatorily, by what the purchaser judges to be the fair price and this does not have to do with the costs carried through for the salesperson/producer for the confection and the commercialization of the souvenir", he affirms.

Then we can say that, in a market economy, we are conditioned to the approval or not of the purchaser. Currently, and only in the case the product is very differentiated, it's him who defines if the price is fair or if it makes jus to the commercialized product/service. The challenge for the entrepreneur not only of the area of souvenirs, is to search a balance between the requirements of the purchasers and the costs of its production.

Alternatives

"As the sales price is set by someone that isn't from the company and the most of the companies doesn't have control on him - the purchaser - it remains, to the suppliers, work with the trinomial effectiveness, efficiency and reduction of costs", Mr. Jesimiel Seluque points out.

Searching, inside your production, ways of reducing the expenses, identifying material wastefulness, of energy and others, can be an alternative to dry the budget, without leaving the quality standards. See that the reduction does not mean to diminish the quality. For many companies, this seems the easiest way to follow, however, although some customers really get content with low cost and low quality, the market of souvenirs is attending more and more demanding clients, who search to print its marks in objects with quality.

Many times the renewal in the line of production, either by the automation or by different methods of work, can be sufficiently efficient in this process.

Planning

The fact of the company being in an uncertain territory like this, where the clients end up setting the prices, it isn't a reason for lacking of planning concerning this subject. Defining some parameters, evaluate previously until where we can go in this really war of prices get it possible to discuss, in a more awareness way, the prices table, the possibility of discounts, promotions, at last, the commercial policy of the company.

The "Brazilian Support Service to Micro and Small Companies (SEBRAE)" presents some directions that can help you to set the prices. First of all, the entrepreneur must answer some basic questions:

. What's the relation between the alternative basic prices and the structure of costs?
. What's the sensibility of the market to the several alternatives of prices of the company?
. What's the effect of the prices to be given by the company related to the product image and the company comparing to the competitors?

Situation that the prices decisions are very important

. When the company needs to set the price for the first time.
. When the circumstances lead the company to consider the possibilities to change the prices.
. When the concurrence starts changing the prices.
. When the company produces products with inter-related demands and/or costs.

Targets at the price setting

. Getting into the market: the company sets the price with the aim of getting great participation at the market.

. Select the market: the company sets the price aiming reach selective sectors of the market.

. Fast cash flow recovering: generally companies that have financial difficulties set a price that allows a fast cash flow recovering.

. Promote products line: in this case the price is used with the aim of promoting the sales of all the products of the line.

. Maximize the profit: the price is set aiming the maximizations of the return for the company.

. Eliminate the concurrence: the set price has the aim to eliminate the concurrence, using, in some cases, the "dumping" (exportation by inferior price than the current at the internal market to conquer markets or flow the offers excess; or sales by a lower price than the cost to move competitors).

Setting of sales price

Setting competitive sales price is a task that demands from the entrepreneur the knowledge of the components that origin the sales price. The definition of the cost structure is an important part in this process, once it'll get possible to the entrepreneur knows how much he profited.

Many companies do not select its costs and expenses in a precise way and the sales prices are gotten without evaluation. This company masks the costs and the profit of the company, causing many problems, such as:

. Sales price lower than the real, what decreases the profits of the company.
. Sales price higher than the real, what gets the sales difficult.
. Manufacture of products that give little profit in detriment of other more income-producing ones, occasioning in bad resources allocation.
. Sales efforts that aren't guided to more profitable products.
. Difficulties to identify and set actions for the reduction of costs and expenses, what can lead the company to operate with higher costs and expenses than it should.

As a consequence of one or more of these problems, the company will have a higher profit and ratability, consisting in a thread to its growing and even to its own economic-financial stability.

Source: SIGN SILK & BRINDES - NOVEMBRO 2006
www.signsilkbrindes.com.br