If the products and services sold include aspects that are highly valued by customers and our prices have evolved below market rates, it means that it is feasible to raise marketing prices.
Ariel Banos, founder of Fijaciondeprecios.com, describes the signs that should be analyzed by businessmen at the moment of applying an increase in the prices of the products and services marketed.
Fifteen months after the beginning of the health and economic crisis, Guatemala, Honduras and Nicaragua are the economies in the region with the highest inflation rates, a behavior that was influenced by increases in fuel and transportation costs.
In the second quarter of 2020, a period in which the countries of the region were going through a severe economic crisis caused by the Covid-19 outbreak, inflation levels were low and in some economies negative variations were reported.
During 2020, it is estimated that the average price of a ton of steel increased 19%, a rise that impacts the construction industry and is explained by the increase in logistics costs and the suspension of the extraction of the material due to the outbreak of covid-19.
Central American businessmen report that during last year, which was marked by the sanitary and economic crisis, the average price per ton of steel increased by $130, going from $670 to $800.
Segmenting customers by prices they are willing to pay, showing the value of the product or service to charge higher prices and being careful when applying discounts are some of the recommendations from experts to avoid losing money.
Ariel Banos, founder of Fijaciondeprecios.com explains some of the myths that exist among business leaders when building a pricing strategy, and what could be the alternatives to not lose money.
In order to reach customers who, have great uncertainty at the time of purchase and to improve the unit margin of the products sold, flexibility must be offered in the cancellation conditions to increase the probability of successful sales, even at higher prices.
In difficult times, such as the current scenario generated by covid-19, the companies that win will be those that provide greater peace of mind to their customers, even if they sell their products at higher prices.
At the end of last year, the Consumer Price Index in the country reported a 6.1% year-on-year variation, an inflationary rhythm that is higher than the 3.9% registered in December 2018.
After not publishing for several months the information on the behavior of prices in the country, the Central Bank of Nicaragua (BCN) decided to report that in December 2019 the annual inflation was 6.1%.
As a result of the tax reform implemented in February 2019, at the beginning of 2020 the prices of beverages increased, mainly soft drinks sold in plastic containers.
In February of last year, the Ortega regime approved the reform of the Tax Agreement Law, which consisted of increasing income tax from 1% to 2% for medium sized companies with higher incomes, and from 1% to 3% for large taxpayers.
Charging tariffs consistent with the positioning of the brand and communicating its differentials with respect to the competition, is essential to stop competing for price and redirect the strategy according to the value of the product.
Ariel Baños, specialist in price management and founder of Fijaciondeprecios.com, explains three strategies to avoid competing only for the price factor, because in these struggles there are no winners and only attract the least loyal customers.
Convincing the sales team that the increase in the price of the product is necessary, and that they are able to convey the message to customers correctly, is essential when it comes to increasing prices when production costs rise.
Ariel Banos, specialist in price management and founder of Fijaciondeprecios.com, explains five strategies to increase product prices successfully, maintaining profitability and ensuring the viability of the company in the face of rising costs.
Making real sales projections, segmenting prices and designing savings options are some of the strategies that companies can use to protect their profitability in contexts of inflation and recession.
Ariel Baños, price management specialist and founder of Fijciondeprecios.com, details techniques that could help companies avoid negative effects on their finances, when faced with scenarios of rising prices and low dynamism in economic activity.
During June, the Consumer Price Index reported a 5.6% year-on-year variation, an inflationary rhythm that is lower than the 6% registered in May.
From the Central Bank of Nicaragua report:
The June Consumer Price Index (CPI) showed a 0.09 percent monthly increase (0.44% in June 2018), mainly explained by the behavior of prices in some goods and services of the Food and non-alcoholic beverages divisions (0.63%); Restaurants and hotels (0.60%); and Diverse goods and services (0.74%); which together contributed 0.333 percentage points to the observed variation. On the other hand, the division of Recreation and culture showed a 4.37 percent decrease, for a negative contribution of 0.167 percentage points.
Since June 1, there has been a 3% increase in the average selling price to the final consumer in the country, going from the cost per megawatt of $219.8 reported in March to $226.5 from this month.
The increase was officialized in La Gaceta on June 18 and the new price per megawatt is applied to each tier that makes up the tariff sheet, which includes residential, commercial, industrial and irrigation tariffs.
In May, the CPI rose 6%, reinforcing the upward trend that has been reported since February.
In February, the indicator stood at 3.3%, in March it was 5.1% and in April, 5.8%. The May figure reinforces the upward trend that is likely to continue for the rest of the year.
The Consumer Price Index (CPI) for May showed a 0.77% monthly increase (0.55% in May 2018), mainly because of the behavior of prices in some goods and services of the Food and non-alcoholic beverages divisions (1.12%), informed the Central Bank of Nicaragua.
During the third month of the year, the CPI registered a 1.82% monthly variation, mainly because of the prices of alcoholic beverages and tobacco.
In cumulative terms, domestic inflation was 1.84%, year-on-year inflation was 5.09%, 0.25% higher than in March 2018, while base year-on-year inflation was 5.25% (4.20% in March 2018), reported the Central Bank of Nicaragua (BCN).
In December, the FAO food price index fell 4% compared to the same month in 2017, explained by the decline in prices of meat, dairy products, vegetable oils and sugar.
From FAO's monthly report:
The FAO Food Price Index* (FFPI) averaged 161.7 points in December 2018, nearly unchanged from its November value as lower dairy and sugar quotations were largely offset by firmer cereal prices and somewhat higher prices of meat and oils.