Setting your price is very important. Most customers choose primarily on satisfaction experience, and after that, price becomes the next important factor.
Here are some guides to set pricing for your business.
- Guide 1. Feel free to ask us questions. It is a really simple process.
- Identify your goal. It could be simplicity, revenue maximization, customer acquisition or asset utilization. It could be a combination of any of these goals.
- Don’t be rigid. Feel free to play with your strategy. Move things around to keep your most loyal customers but be careful to not overuse your assets or drive away new customers.
- Remember, Pricing is not the number 1 factor that drives customers. Your service is the number 1 factor.
- Plan for up to 100km coverage within Lagos. Iju Road to Pan-Atlantic University in Ajah is 96.4km. See map
- Feel free to ask us how it all works. We are available to help.
We have compiled some best practice pricing strategies.
We will start with a fictitious company called XYZ logistics.
To come up with a pricing strategy, XYZ looked at its last 3 requests, and calculated the average per km charged.
This can be more than 3, could be 10, could be less. In our example, the value is N10/km.
Watch out to make sure that your company remains profitable nevertheless.
Pricing Strategy 1
Goal: Simplicity
Fixed Price (Fixed charge for service request: N0)
O – 10km. Provider XYZ charges N10/km, that is N100 for the first 10km.
Or provider XYZ can choose a midpoint at 7km, and it will be N70 for the first 10km
Pricing Strategy 2
Goal: Maximize Revenue
Fixed Price (Fixed charge for service request): N20
Provider has an initial fixed price of N20. That’s like saying before provider leaves to fulfil, provider will charge N20.
Cost of fulfilment will then be lower than N10/km, for example N8/km.
So 0 – 10km, will be N20 + (8*10) = N100
Pricing Strategy 3 (Reducing Cost)
Goal: Customer Drive
Fixed Price (Fixed charge for service request): N0
Cost reduces gradually as coverage distance reduces.
Assume most requests are over medium to longer distances e.g. Customers in Ikeja might go drop off packages themselves if the destination is also in Ikeja.
If the destination is in Yaba, customer decides to use LogAgg.
With this strategy overall, the provider is cheaper than everyone else for the majority of the deliveries.
So for Ikeja to Ikeja, XYZ charges N100 (similar to strategies 1 and 2)
Ikeja to Yaba, XYZ charges 200 – 10 = N190 (instead of N200 in strategies 1 and 2)
And Ikeja to Lekki, XYZ charges 300 – 20 = N280 (instead of N300 in strategy 1 and 2)
Pricing Strategy 4 (Reducing Coverage)
Goal: Asset Utilization
Fixed Price (Fixed charge for service request): N0
In this case, instead of playing with cost as with strategy 3, provider is playing with distance.
If the assumption that most requests are over medium to longer distances hold, the provider is setting a single price over a larger but close distance.
So if XYZ is in Ikeja, XYZ are setting the same price from Ikeja to Yaba (for example 25km). For example, charging N150. Therefore, provider is more expensive for Ikeja to Ikeja, but cheaper for Ikeja to Yaba.
For the second range, XYZ sets for a shorter range, instead of 25km, range is now 20km, hence from 25km – 45km coverage.
Then He can charge at this medium range optimally.
At even longer distances, provider becomes even cheaper but more profitable, because the range is now 15km.
The coverage keeps reducing that way
