Kagando Stove

Multi-Saver Stove, Uganda, 2008.

 

Africadev - Self Help Developments for Africa

   

Selling:

 
SALES AND MARKETING

Sales and Marketing is a key part of any business.  A business may make a fantastic product, or provide a first class service -  but unless they can sell that product or service they will fail.  And unless there are people or groups that want their product they will not sell and will fail.

Where to sell?

-              To friends and family, and other people you meet.  (High selling price, zero selling costs).

-              Beside the road, or outside meeting places, such as schools, hospital, etc. (High price, zero costs)

-              At local markets.  (High price, low selling costs).

-              By opening a shop.    (High price, high selling costs).

-              By selling to a shop keeper.  (Lower price, zero selling costs,).

-              By asking a shop keeper to sell on a commission basis.  (Low price, zero selling costs).

-              By selling to a trader.  (Low price, zero to medium selling costs).

Selling costs will include a fee for a market stall, or rent and other costs for a shop, transport to the place of sale, and the time required for selling.  If you can sell from home, or place of manufacture, or beside the road close to home then you may be better off.  If the product is heavy and difficult to transport then it may cost you significantly to sell in the market, and to return with unsold goods – but maybe you could earn more by charging for delivery.

What price to sell at?

The selling price must be something above the minimum, and below the maximum. 

The minimum, the lowest selling price, is the total cost to produce.  I stress the total because every cost must be included:  materials, fuel, transport, buildings, land, labour, training, sales, marketing, storage, insurance, finance or loan costs, and time.  Even the lost opportunity to involve yourself in some other activity, such as growing crops, or a paid job, should be considered, and the lost opportunity of investing your money in a bank or finance institution.

The maximum selling price is the highest that enough people are willing and able to pay.

How to fix your selling price?

Start with the cost to manufacture?  Include every cost.  Let us assume it costs you 50 cents to produce each item.  Add an amount to cover all those hidden costs that you forget about – so maybe increase the cost to $1 per item.

Then consider manufacturing and selling time: how much time and effort is involved?  How many can you produce in an hour, a day, or a week?  You have to sell enough to earn yourself a decent wage.  If the current wage for someone like you is, say, $2 per day, if you could get a job earning that rate, then your business has to earn that much and more – say $3 per day.  So if you only produce one item per day you have to sell for $4 each, at least ($1 to cover costs, $3 for your wages).  But if you can produce and sell 5 per day then your selling price can be lower, at under $2 (5 x $1 costs, plus $3 wages = $8, divided by 5 products, gives a selling price of $1.60).  Generally the more you can produce the lower your costs will be, and so the higher potential for profit, although there may be extra costs for transport, workers, etc.  But if you can’t get a job at any rate, then even earning less then $1 per day running your own business may be an improvement.

Also consider the value to your customer: does your product save your customers time and money?  If so then people should be more willing to pay a higher price.  If a clay cooking stove uses 50% less firewood, and if a family spends $8 per week on firewood, then they would save $4 per week – so they should be able and willing to pay much more than $4 for a stove, as it will save them money, and time, and bring many other benefits.  If a stove lasts for say 2 years then even a price of $100 would be a bargain – users would save $400 over the life of the stove ($4 x 52 weeks x 2 years), so effectively what started as a huge cost for them will actually cost them nothing, or less than nothing.  If people don’t have $100 they cannot and will not buy at that price – but they would be better off if they did.

But what is the highest price you could sell for?  Maybe people would be prepared to pay $20 – maybe the richest would even pay more, say $30.  If so then consider selling for this higher price – maybe sell your best products at $30, slightly less quality for $20, and the poorest quality for less. 

Maybe charge extra for delivery, for those that can afford it and don’t want to or can’t carry the goods home.

If lots of people want your product, but you can’t produce enough, then you could charge a higher price and only sell to the richer people.  Or you could employ others, pay others to help you, maybe just with one part of the whole task, maybe transport, or selling – anything that saves you time and enables you to produce more.

Selling Strategy

If your price is too high and people can’t afford to pay, could you maybe allow payments in installments?  But that will create new problems of collecting the money, and the possibility of losses.  The poor may not be able to pay full price on the day of purchase – consider letting them pay part of the price now and the rest later:  so long as the first payment covers all your costs you wont loose even if they fail to make the final payment.

Be prepared to reduce your price, to haggle and strike a bargain.  If a particular item isn’t selling, whilst others do, maybe reduce the price of that one item – maybe it doesn’t look as good, or is damaged.

The selling price must always be significantly above the cost price – overall.  It is OK to sell a few cheaply, even to give away to a few key people,  ‘movers’ or ‘trend setters’ in the community, or to others to test the market and product.  But long term the business must cover all its costs – else it will fail.

Target market

Be aware of your target market – who are you trying to sell to:  rich or poor, young or old, male or female.  Try to sell where those people are.

Is your product an essential item everyone needs (this could increase the price), or something that saves money (this increases the potential price), or is it a luxury item just for the rich (you might get a high price, but need access to those rich people to be able to sell)?  The rich will usually be able and willing to pay the most, but it may cost more to produce a better product, with more expensive packaging and marketing.

You could target a product either for a mass market to everyone (bigger quantities, lower price, so lower cost and quality of product) or for a discerning richer market (fewer sales but a higher price).  It depends on many factors, including the type of product, your aims and ambitions, the potential market around you, your access to that market, how many you can produce, and at what cost. 

Test the market and price

Maybe try selling some products, especially the best quality you can make, at a high price, more than you might hope for.  You might be agreeably surprised!

Usually your total costs will be higher than you think, especially at the start of a new venture, so try selling for more than you think.

If you start asking a higher price, you can reduce the price if necessary;  then your customer will be happy, thinking they got a bargain.

Start small, with small quantities, to test the market and product and your ideas.  Then you can expand and grow as you learn what works – and have not lost too much if it fails.

Advertise and Promote

The first stage of selling is putting your goods on display, or otherwise letting people know you have goods for sale.

A poster might help, as shown on the right.  It will inform people of the advantages of your product, and attract them to your shop or stall.

Maybe advertise a high selling price of say $30, with a sale price, an introductory price, of $15.  That will encourage people to buy now, before the price goes up to its ‘full’ price. 

Possibly the best way to promote your product is word of mouth – if you believe your product is good then tell everyone you meet how good the product is, and encourage friends and family and existing customers to do the same.  You could even offer a commission if customers persuade others to buy from you.

 

Target the key people in your community.  Get them on your side and they may help you sell more.  If selling dresses then maybe try to sell to the local chief’s wife, or local politician etc.  If selling cooking stoves, try to sell to someone in the main street, where they cook in full view of others passing by – so people will see your product in use and be persuaded to buy from you.  Even consider giving a stove, or selling at half price, say to a café where they currently cook over a fire, so long as the cook will advertise your stove, and maybe let you put up a poster.

Every person who buys from you is a potential help.  If they are happy with your product and tell their friends word may spread and others come to buy from you.  Even someone seen walking home carrying your product may create new customers.

Make sure your product is seen – even if people desperately want your product, if they can’t see you are selling it then they can’t buy off you!

Competition

Competition is sometimes good, sometimes bad.  If the market is very large, wanting more products than you and others can provide, then competition is no problem.  If your competition is selling every item they produce maybe they will agree to sell yours too – for a commission.  But if your closest market is already saturated, with someone else meeting all the demand, then you may need to go further afield to sell – otherwise both you and they may get a lower price, or be unable to sell all your stock.

If you compete with someone already in the market then you may upset them – so if you can at little cost to yourself go elsewhere then it may be better.  But competition is fair, and ultimately good for business as it encourages everyone to run an efficient business since the best will survive.  If you are competing with another producer then you will have to provide your product to a better quality, or at a lower price, or have some other good feature that persuades people to buy from you rather than others.

If you go some else where your product is unique and wanted then you may get a higher price and sell more easily.

Real life example from selling stoves

We are trying to promote the manufacture and sale of clay cooking stoves in Uganda.  The richest people in the cities will not be interested – they will already use electric, gas, or oil stoves – they are not our target market.  Many of the poorer people, especially in the rural areas, currently cook over open fires – they are our target market.  Amongst that target group the very poorest will not be able to pay anything – but could still benefit from seeing the stoves, and learning how to make them for themselves;  but many will be able to pay something, and the richest will be able to pay the most.

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