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Do research on market pricing and costs

We should all check the basis of pricing. FILE
We should all check the basis of pricing. FILE PHOTO | NMG 

Price is a perilous matter when information is in short supply and games are afoot. Yet when it comes to pricing, we in Kenya are working to a set of rules, and plagued by a row of games, that are causing a lot of mess.

Take bargaining. Oftentimes, buyers will look at a quoted price and aim to get it to one third of the same, no matter what - almost as if it were simply a matter of personal pride and rightful behaviour.

Now, sometimes, sellers have second guessed this class of buyers and tripled the pricing, ready for the slashing – but not always.

There are times when a supplier prices according to the real and actual going rate, or on solid realities like materials and labour at cost and some overheads, and yet they still hit the one-thirders. So the deal is dead.

No opportunity exists to look at the make-up of that price in that negotiation. If the price falls to one third, can the bricks be bought for a third, or are we building now with only a third of the bricks and replacing the rest with mud? Slicing two-thirds out of a serious, experienced budget is to make a house fall over.

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But on it goes as a game

And it can work the other way too: sometimes a buyer is expecting a serious cost-based quote and hits a three-timeser, who has tripled the real price: and the buyer pays, delivering a windfall for the supplier.

In this, incomers to Kenya, investors, are particularly prey. To whit, one of the UK’s most prestigious agencies, entering Nairobi after a huge contract win, ended up for years in offices on the edge of Kibera after paying millions of shillings for a consultant to locate them ideal premises. They were paying way too much too – a rent that would have bought them Grade A space on Riverside or in Upper Hill. Yet they sat in a grotty house conversion with slums outside. Someone was laughing.

But individual winners in the ‘fleece-the-investor’ game cost us all.

I shall never forget sitting with a geologist who told me Kenya had just as many precious natural resources as any other African nation. ‘God didn’t leave Kenya out,” he said. The problem was that in Kenya the efforts to ‘eat’ off a mining prospect had seen most fail before they ever began, unable to pay the inflated prices in every direction.

Yet the key to resolving and reviving all our stillborn transactions, felled on stupid pricing, is referencing.

In our labour market, I remember discovering that some companies were paying their in-house CPA-qualified accountants Sh30,000 a month, and some were paying them Sh300,000 a month – same profile, no market information. Now we can check for average salaries for that job.

But wherever we cannot yet check we are still suffering. And we also have another attitude, which maintains us as a developing country, beset with low quality work, and that’s the cheap is always a bargain approach – no matter how cheap it gets.

We have an expression in English, which is as famous as our clichés such as ‘cool as a cucumber’ and ‘a stitch in time saves nine’, which goes ‘pay peanuts, get monkeys’. If you want serious professionals, or walls that stand up, cutting the cost too low isn’t a bargain at all.

It’s a building that falls down, or a marketing campaign that fails taking a business with it, or a product filled with dangerous faults, or bereft of safety checks or features.

If we truly want to climb and climb fast straight to middle-income status and then beyond, then we actually need to invest in ourselves. The attitude that every shilling spent is one shilling too many will see us starve to eternity. It’s known as an economy of scarcity – it never leads to abundance.

For sure, we should all check the basis of pricing, and be sure we haven’t hit some shady person charging us three times the price to outwit some potential one-thirder protagonist. But once that is out the way, we will, in fact, get what we pay for. Every time.

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