101 Pricing Is Choking Your Business
#56: Lack of Price Transparency (Pricing as a Secret)
Yesterday i went on a road trip with a car club of a German marque automobile. We drove to the foothills of mt. Kilimanjaro (literally) some 163 km south of Nairobi to a windswept border point called Namanga. The sun baked black asphalt snakes through iron red scorched bush lands of the Maasai plains sandwiched between two national parks the Maasai Mara on the West and Amboseli to the east, such sights to behold.
Over the past 5–10 years there has been an exponential increase in the number of cars from Germany marque brands on our roads. Most of those are used car imports from Japan and Europe. As most of these are between 7–8 years old and outside age warranties in the source markets, they do come with heavy requirement for service and replacement parts, a fact that made many shy away from owning German marques before.
Among the lads and lasses and out to enjoy the whistling wind and asphalt were sales reps from the local dealerships of the marque. Their stated brief was to get us to show off (case) the latest technology and maybe get us buy a unit or two (in the future). But I suspected their core mission was to get us to buy parts and consumables since that aligned with our immediate needs (given our cars age history) and their needs to keep the lights on in the short term.
Until recently, the dealers and other parts suppliers had a captive market. As a result they had perfected the art of pricing in a near monopolistic markets. A trip to the dealerships was akin to the search for the holy grail (a pilgrimage even). Their price list was treated as some Intellectual property that was only be communicated on demand, it changed at the whims of the dealer. Consequently car part purchases were quite a pain, one trip to discover the price, a few days to mull over whether to replace the part or push a few more kilometers and then another trip after resigning to fate (or talking to the bank) to go get the part!
Luckily the winds of change have swept the land . With the proliferation of eCommerce it has become increasingly easy to source for car parts directly from wholesaler shops in Europe, the Middle East and the Americas for a fraction of the cost locally. e-Commerce has increased transparency of price, product and place while spoiling the customer with choice and upended the local customer journey. Nowadays one starts their search online and then calls the dealer to compare prices. The only advantage remaining with the dealers is time — can i afford to wait for the 7–21 days it will take to ship in my parts?
This lack of price transparency has damaged their price positioning in the market. It surprises many that the dealer is actually cheaper OEM vs. aftermarket brands on some parts. As a result they are losing out on customers who could either buy they all or part of their orders locally where the dealer is price competitive — i could buy my brake pads but never any of the 70 something sensors in the car from them (i will need to sell one arm for that). On the flip side nasty surprises await if you try take your car for servicing, you are never quite sure what they are charging for. Why did it take 8 hours to replace the air filters which Mike down the road could have done in 20 minutes. These kind of uncertainties leads to a poor overall customer experience and damages your brand loyalty and not only does it cost you current customers (they stop coming back) but also make it harder for you to recruit new ones — word of mouth work very well against your brand in this case.
Businesses must embrace price transparency as a means of influencing the customer journey and growing their revenues and profitability. although it seems counterintuitive but the more your customers know about how you price (do they need to know my margins :-) ) the more they are likely to understand and focus on the value proposition in your product offering. e.g. should i pay Ksh 15,000 for OEM brake pads or Ksh 11,750 for an aftermarket brand?
