The Price is Right!

One of the biggest challenges facing any future small business owner in the Philippines is determining exactly how much to charge for a particular good or service. Setting the price for your various goods or services really can make or break your business. And while there are various ‘rules of thumb’ you can use to set initial prices, chances are you’ll find that getting to an appropriate price takes time, and is influenced by a wider range of factors than you think. In other words, setting the price for your goods and or services becomes more of an art than a science.

Before developing any pricing strategy, you must first determine who will make up your intended customer base. Knowing what to charge has a lot to do with knowing who are your customers! What may appear to be a bargain price for a product to one particular customer may be an absolute extravagance to another customer. If you target higher income earners, you can adopt a strategy of charging a premium. In return you offer high quality products and services with very personalized service and in as exclusive and as attractive environment as possible. If your target market is made up of mostly lower income earners, you can instead adopt a strategy that allows customers to stretch their Peso. In this case you can offer less expensive alternatives to high end products. Sales volume is most important in this case, and keeping costs very low is what allows for a high sales environment. In exchange for discount prices, customers agree to no frills service and a very basic transaction environment. The key is to know exactly who is your target customer. You must not try and offer a premium product or service with a matching premium price AND expect to cut corners. Affluent customers notice small details, so don’t disappoint by thinking you can cut back and it won’t be noticed. Similarly, don’t offer too many extra services or perks if your strategy is to target the cost conscious consumer. Your small margins won’t allow for it. In other words, stick to a strategy that your customers expect. No more, no less.

Once you have determined exactly whom you want for customers, you can begin to come up with a pricing strategy that will match with their expectations. You will have to now determine whether your business falls into the price-maker or price-taker category. Contrary to popular belief, these are your only two options. Your small business will either be one of many other such providers of your good or service, in which case you are competing for your niche in the overall market and need to follow a price-taker approach to pricing. Or your small business is the very first of its kind in a particular market, in which case you will need to be the one to set the price of your products or services.

If yours is a typical small business and you offer a product or service that other merchants are offering, you will be a price taker. The market will already have a set, generally acceptable range that your pricing must fall in line with. There will of course be some variation in price based on different levels of actual service or convenience, but prices cannot vary too much or customers will switch to another provider. Your ability to charge more than the norm will depend on your small businesses’ ability to offer a more comprehensive service package than that of your competitors. If you can offer additional useful services, you can push the price upwards. If you cannot, you will need to compete by offering lower prices, or by keeping your costs lower than that of your competition.

If yours is a pioneer industry in your market, you will be responsible for setting the price of your goods or services. As a small business, you will likely either choose a standard markup when pricing, or look at introducing a cost-oriented price. A standard markup is usually a percentage added on top of cost of goods or services sold and all overhead costs. Some businesses apply a single markup across the board, while others have different markups for each sales category. Cost-oriented pricing is different in that prices are set individually for each product based on the cost of the goods or services sold, the overheads, and a desired profit that is set differently for each and every product line sold. For example, if you sell electronic equipment, instead of say a 50% markup across the range of DVD players sold, some brands will have a 50% markup, while others maybe more or less.

Lastly, I’d like to offer a few final words on pricing for your small business in the Philippines. Be very careful in computing markups, as it is easy to shortchange yourself. Many small business owners make the mistake of forgetting to include all the typical expenses when computing a final markup figure. The result is potential profits eaten up and margins squeezed so tight you have little or no room to move financially. As a rule of thumb, make sure your markup covers all administrative expenses, all selling expenses, and all losses resulting from merchandise discounts, theft, or product damage. In addition to this you need to add in a profit margin.

In addition to watching markups carefully, you may want to consider other ways to compete in the market place. If you are a pioneer business, try setting your prices on the higher end at the beginning with the intention of dropping prices over time as the product becomes more widely accepted and as competitors jump on the bandwagon. You may also want to try price bundling. In this strategy you can bundle for sale two or more products or services together and sell them as a package. Sales can be boosted because you can entice buyers into buying higher markup products if they also receive a lower markup product that is included at a discount. Overall you lose a small measure of profit, but you may be able to boost sales of higher markup products and increase cash flow in this manner.

Clearly there is more to pricing than one might have initially thought. If you are opening a small business in the Philippines, or are already in business and about to launch a new line of products, try to remember the above tips and suggestions. They just may help you get and stay on the right pricing track!

Heads Must Roll!

It seems to me that when something goes wrong in the Philippines, someone gets fired and possibly prosecuted. There was a jail break in Bogo City on Sunday and one of the escapes ended up dead when police shot him a couple of days later. Read more

Estafa — Are You Aquainted?

I better start this post with a definition.  Even though I lived under the same legal system as many of you, and even worked as a researcher for a lawyer for some years , I have to admit I never heard this word before I came to the Philippines:

Estafa is committed by a person who defrauds another causing him to suffer damage, by means of unfaithfulness or abuse of confidence, or of false pretense opt fraudulent acts. For the existence of the crime of estafa, two elements are indispensable: fraud and damage.2 In other words, the essential elements of estafa are: (1) The deceit employed to defraud another; and (2) the injury or damage caused thereby.

I surely have heard this term a lot in just my first few years here in the Philippines.  And like the differences between slander and libel laws I wrote about a week or so ago, if you are new to the Philippines you might be very well advised to make estafa’s acquaintance also. Read more

Filipinos vs. Poverty

Last year, the Philippines had the most number of people who stood up against poverty in the Stand Up Against poverty campaign, according to Minar Pimple, United Nations Millennium Campaign deputy director. To achieve 15 million people who would stand up and take action against poverty for this year in order to sustain the country’s first place position, President Arroyo led the campaign at the Asian Conference on Religion for peace at the UST (University of the Santo Tomas) in Manila last October.

This year, the National Commission for Culture and the Arts followed up this achievement and supported this campaign for global mobilization to end poverty and inequality.

I would be the last, who wouldn’t support such campaigns and events. But, will they bear fruits?

The National Statistical Coordination Board (NSCB XI) released data here over the weekend, showing us that at least 14 of the country’s 20 poorest municipalities are in Mindanao. The town of Siayan in Zamboanga del Norte is the poorest in the country, with a poverty incidence of 97.46 (!) percent.

The NSCB data also indicated that in Southern Mindanao, five of the poorest towns are in Davao del Sur. These are Jose Abad Santos, Don Marcelino, Sarangani, Malita and Sta. Maria.

But with all these poorest towns, Kidapawan City in North Cotabato emerged as Mindanao’s richest municipality, with only 12.46 (!) percent poverty incidence. Other areas in the list of Mindanao’s 10 richest municipalities are General Santos City (13.98 %), Polomolok (14.29%), Davao City (14.94%), Tagum City (15.42%), Cagayan de Oro (15.50%), Korondal City (16.18%), Digos City (18.22%), Padada (21.99%) and Hagonoy (22.60%).

Filipinos vs. poverty… . How looks reality?

What do you think?

Big Sky Mind

For everything indie, or beatnik, or rock, there’s Big Sky Mind. Hiding in a corner along E. Rodriguez Avenue, New Manila (right across McDonald’s), this music bar is the perfect place for rockers and rollers, for artists and dilettantes, for drinkers and dabblers.

Oozing with the atmospheric feel of Pinoy underground art culture, the joint isn’t for everyone. And it’s certainly not for non-cowboys. When at its liveliest, Big Sky Mind is where you’d find visual artists, rock musicians, and independent filmmakers moonlighting and mingling with each other. The bar-cum-art gallery, without any pretense to art deco, is bathed in saturated orange glow, and its walls are plastered with promotional posters of circuit gigs and concerts.

There’s a second floor, too, decorated with nothing except for glass tables, low sofas and framed photographs of the musicians who’ve played there (Ely Buendia, Cynthia Alexander, Sammy Asuncion, Louie Talan, Up Dharma Down, and so on). The bartenders move as swiftly as you please; they serve as soon as you order your liquid drop of choice. Occasionally, and if you’re lucky, you’ll catch enthralling live performances of today’s most original bands or the debut of a new music video. If you’re not, well, there’s still plenty of San Mig and Red Horse to pass the night by. And contrary to what might be a possible misconception, it’s not noisy or excessively loud at all. The sound booming as you sip your amazingly-priced liquor is at once beautiful to the ears and conducive to conversations.

While not an intensely professed rocker myself, I find Big Sky Mind’s quirky simplicity suitable and fine. It represents one of the many faces of the young, talented and dynamic Manilenyo, and if you’ve been there (and are one of them), you can’t really argue with that, eh?

We've been here before

It’s a great feeling isn’t it?  P50 for every dollar! Imagine, just a year ago, the dollar was only worth 40 Pesos, and now we have made a huge jump back to P50.  We are not all the way back to where we were a couple of years ago, but it seems to be headed that way.  Remember, we peaked out at a little over P56 to the dollar.  As far as I can recall, we never quite made it to 57, but we got into the mid-56 range before the bottom fell out.

So, indeed, we have been here before.  This is not new territory for us.  But, we should not forget that even when the dollar was at it’s peak, things were not rosy.  The falling peso does create some inconveniences for us expats too.

How is it bad?  Let’s think back and see.

When the Peso was this weak before, the prices of imported products skyrocketed! Of course, how could those prices not skyrocket?  After all, when items are imported from abroad, they must be paid for in foreign currencies, usually the US Dollar.  It is more expensive to buy those dollars now with pesos, so that makes the price of the import higher for us.

In fact, I believe we are about to see a “double whammy” when it comes to import prices.  How?  Let me relate a little story about a particular import that I used to enjoy several years ago.  It was a bottled juice which was imported from the USA.  They had all kinds of flavors.  I particularly enjoyed the cranberry juice and the grapefruit juice.  Those are two types of juices that you cannot get a local equivalent of.  There are lots of good juices here in the Philippines – mango, pomelo, pineapple, etc. – which are all locally harvested and produced, but some of the juices that I drank regularly for most of my life are not available here, and I enjoy having some from time to time.  So, if you want some cranberry juice, you buy an imported product.  On this particular brand of juice, it came in a 1.9 liter bottle.  When I first started drinking the stuff it was just slightly over P100 per bottle.  It rose dramatically as the peso declined in value.  I remember one time when a bottle of this juice was P150 per bottle or so, and in two weeks time we went back to buy more from the same store, and it was P220 per bottle!  That is nearly a 50% price increase in just two weeks.  When it hit P220, I decided that it was a luxury item that I could do without.

Back when the Peso was at it’s weakest, we pretty much decided to give up on almost all imported products and chose to go for local products as much as we possibly could.  Economically, it was simply the way to go.  On some products you would give up a bit of quality by doing this, but in most cases there was not much difference.

As the peso gained strength over the past 2 years or so, a funny thing happened.  Prices of US products did not drop.  Logically, it would seem that these imported products were now cheaper to buy for the merchants, since the peso was worth so much more, so the retail price should go down.  It never did, though.  That P220 bottle of juice stayed at P220 instead of going back down to P150 or so.  I mean, if a product costed $1 for a Philippine company to import, that means it used to cost them P56, and then it only cost them P40, so selling it in Pesos should have reflected a lower retail price too.  They didn’t lower the price, though, electing to take a larger profit instead.

Now that the Peso is at 50 again, do you think that prices on imports will go up more? I think that it’s a virtual certainty.  That’s why I am calling it a “double whammy” – because the import prices were already adjusted for a Peso at 56, never brought down, and now will be adjusted upward again!

So, yes, overall, I am very happy that the dollar is regaining strength against the peso.  But, don’t forget there are downsides too.  Luckily for us, we don’t use many imported products any more, so we won’t be greatly affected.  It’s something for you to watch out for if you live in the Philippines and use a lot of imports.

Happy Thanksgiving!

Hi Everyone in the States or People that live all over the world that celebrate Thanksgiving. Happy Turkey “GOBBLE” to all. We havw a lot to be thankful for to God. Well in our household we celebrate Thanksgiving on Saturday, since the kids has school on Thursday, the kids usually come home around 4:30 in the afternoon. It’s really late and short time for them to sit down and have dinner with us. We want them to really enjoy the Thanksgiving Day so we made it Saturday since we lived here in the Philippines.

We really prepare the American tradition of Thanksgiving. We will have turkey butterball of course. Bob will help me make the stuffing and gravy. I will prepare mashed potatoes, beans, the yams I will make it with our local sweet potato (Camote), we made that a lot and it turned out good. It is hard to find ready to cook yams in a can here that were imported from the States. So why not make our very own camote here. Also pumpkin pie, the other day I tried to use the local squash to substitute into pumpkin for my pie and it turned out good. Bob and the kids liked it. I think because its almost thanksgiving its hard to find imported pumpkin in a can here. So I decided to make pumpkin pie out from squash and Bob told me that he can’t tell the difference anyway. The thing is its cheaper too.

Our turkey we have arranged for it to be roasted (lechon style) in our local lechon house. It’s really good. Honestly its not even dry inside. I prepare the turkey in the morning of Saturday. I rub with butter and salt and pepper inside out. Then put some lemon grass (Tanglad) inside the turkey while its being roasted. The smell of the tanglad will remain. Gosh, while typing now my mouth is drooling.

I hope each and everyone of you have a good Thanksgiving Day. Travel safe you guys. Happy Eating Time!

HAPPY THANKSGIVING DAY!

SIR: In Group

SIR is the basic system that guides Philippine Society, it is the foundation of Filipino Culture.  SIR stands for “Smooth Interpersonal Relations.”  Continuing on with my series of articles about SIR, today I want to look at the first Value that comprises Sir:  In Group.

“In Group” is also known as “Kita” in the Bisaya parts of the country, in other areas it is also known as the “Barkada” system.  Basically it means that Filipino hangs out in a group, rather than individually.  It also means that the individual tends to take on the group dynamic, rather than the group taking on the personality of it’s members.

The study material that I have defines the “In Group” concept this way:

Americans tend to value privacy and individuality.  Filipinos, on the other hand, stress the importance of the group.

When it says “Americans” you can substitute “Westerner” for that.  This study material was written by a Filipino, and the tag “American” tends to apply to all westerners.  I believe that it is true that Europeans and Australians tend to match the Americans when it comes to valuing privacy, and prizing individuality, so making the word substitution is not a big leap.

Because of this group culture, the feeling of the Filipino is that if you shame one person from the group, you shame the whole group.  To cause shame for a Filipino is the worst thing you can possibly do to him.  Now, think about this.  The worst thing that you can do to a Filipino is to cause him shame, and if you cause shame to an individual, you have shamed the entire group.  Let’s say that the group is 10 people.  If you are out in public somewhere and you do something to somebody to cause him shame (i.e. cause him to lose face), you have just shamed this entire group of 10 people.  Suddenly you have 10 people against you!  At this point, each and every one of those Filipinos feels a need to save face, or to recover the pride of the group.  If you are in the wrong sitaution, or against the wrong group, this is a potentially very difficult situation for you.  It could be life threatening, so you need to look out.  Your best thing would have been to avoid this sitaution all along – SIR.

Part of this whole group concept is known as “Pakikisama” which comes from the Tagalog word “kasama” which means companion.  Pakikisama means companionable – in other words the individual conforms to the will of the group so that he can become companionable.  Individuality goes out the door, and the group opinion takes the lead.  The Filipino will do all he can to maintain pakikisama.  However, Pakikisama is really more closely tied to the second tenet of SIR, which we will talk about next time.

If you go to the mall, or go out anywhere around the Philippines, did you ever notice that it is rare to see Filipinos by themselves?  They are almost always in large groups, or at a minimum with another person.  In my business here, I often get frustrated that if I send a person to go to do a certain job for me, they always want to bring along another employee with them.  A job that can easily be done by a single person almost always takes two people, because of the need not to be alone.  Over the years, my employees and I have kind of reached a middle ground – I am more willing to let them do things in pairs (or more), and they are also willing to do things alone when need be.

If you go to a restaurant here, you always see big groups of people dining.  In the States, probably the most common sight in a restaurant would be a couple, followed by a single person, I’d say.  It is very rare to see a single person dining in a restaurant here in the Philippines.

Anyway, this is a look at the first part of the SIR system – “In Group”

What is a lie?

Now in the West we appear to judge a lie a little different from a lie here in the Philippines as the line between a lie here and the truth is so different.

In the Philippines the culture here is not to lose face and this in itself causes many misunderstandings and communication errors that we in the West get annoyed about and in the main the locals cannot understand what all  the fuss is all about.

Examples.

You have an appointment and no one shows,  despite you going out of your way to be there on time the answer is normally  that the person who did not show insists they said “maybe yes they will be there”, which after a while you learn it means I am not coming but I do not want to say the word NO outright.

Example

You have appointment and after twenty minutes they have not arrived so you call and they say they are on the way, you make several other calls over the next two hours and your blood boils as you cannot understand why a twenty minute journey is taking the person two hours as they are “on the way.”

Well here “On the way” here means that they intend to be leaving soon and if though they intend to do that they may have to do other things on the way, this does not mean always rudeness its just the way it is.

On the way means meet friends and have lunch pay the bills and go see a friend.

Example

The word “YES” does not always mean YES  as  especially with foreigners the locals always want to please you and will say YES to many things, even if they do not understand, or have no intention of doing that you must read the eyes and body language, this will help…sometimes.

Now if you are a Filipino and you have the  same conversation you will understand by body language and by years of  sharing the same culture that the person saying YES means NO,  but does not want to lose face in front of you, but has told you by his eyes and by other means and he knows you accept that as you do not want to embarrass him.

Confusing??..YES  will I ever get used to a little lie? I probably will not as in the West a mans word is what defines him, so our culture see a lie for whatever reason as a bad thing, but some lies here are ok, its understood and its fine. OR IS IT?

News Headline

Filipinos love to shorten words, come up with combinations of words and such in ways that make me crack up.  Frankly, I guess that some of the stuff that they come up with would crack up just about any westerner.  Most of the time, I don’t think that Filipinos make up these names and such in ways that are meant to be humerous, they just are not used to the same meanings for certain phrases that we are, and that is why we see humor, even when they are very serious.

Ever since we moved here in 2000, there has been a movement to modify the Constitution of the Philippines.  Mostly, a lot of people want to put the Philippines under a Parliamentary System of Government instead of a US-style Presidential system, which they have now.  So, the process to change the Constitution is also known (more widely) as “Charter Change.”

How do you think most Filipinos call Charter Change? Cha Cha! Yep, just like the dance!  I guess it makes sense… Charter Change.  Adds a little life to the process, don’t you think?

Now, under the Philippine Constitutions there are two methods that can be followed to Change the Constitution:  Constitutional Convention or Constituent Assembly.  Wait until you see how those two processes are shortened!

Here is a headline in a major Philippine Newspaper this past weekend:

“LP (Liberal Party) is for Con-Con, not Con-Ass”

Ha ha…  Con Ass? Yes, I kid you not.  Con Ass is the name commonly used for “Constituent Assembly”!  It cracks me up every time I read it.  And, it is used in all seriousness too.

Almost everything has a “code name” so to speak.  Just look at the short newspaper headline above, just in that one sentence there are three:  LP, Con-Con and Con-Ass.

The President is GMA.  The former Speaker of the House is JDV.  A City Government is called an LGU (Local Government Unit).  Compostela Valley Province is ComVal.  Everything has some kind of moniker.

Do you know some of these monikers that you find humorous?  If so, share them with us in the comments below, I’d love to hear them!

Let me just say this…. if the Con-Ass does come about, it will really be something to watch!