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PriceHow are product prices decided?
How are product prices decided?
When the goal is creating access, the pricing structure must allow for the highest possible usage while also compensating the service providers appropriately. This is a continuous balancing act. A volunteer-driven model is unsustainable because no one is compensated, and volunteers’ motivation will wane as other priorities take over. Conversely, pricing products or services too high may boost income in the short run, but it cannot create broad access.
With the MCM, prices are established by the implementing organizations after they test how end users perceive the value of products. If prices are too low people see the product as cheap; if prices are too high no one can buy it. The entrepreneurs’ needs for compensation are also key. Prices must maintain a balance between providing broad access for villagers and sufficient earnings for sellers. We have found that establishing a price point at the start and stating it on the advertising materials is a better strategy than allowing entrepreneurs to set their own prices. Because revenues must be divided at monthly meetings, MCM entrepreneurs cannot charge less than the stated price for the products. Admittedly, they may sometimes charge more for their products without our knowledge, but because we set goals for sales volume, these altered prices do not hinder usage for two reasons. If a woman is charging a higher price but is reaching her volume goals, then there is no actual problem: she earns more and all the goals are met. But if she is charging more than people will pay, she will not meet her volume goals. Then she will lower her price to achieve the volume goals and start earning profits. In either scenario the outcome is positive.