💵 How to Price Your Products & Services Correctly as an SME in Africa

Introduction

Pricing is one of the hardest — and most important — decisions for any small business owner. Set your price too high, and you scare customers away. Set it too low, and you barely cover costs (or worse, run at a loss).

Across Africa, many SMEs use guesswork:
👉 “I’ll just charge what others charge.”
👉 “I’ll lower my price to attract customers.”
👉 “I think ₦500 is fair for this.”

But pricing isn’t about guessing. It’s about balancing costs, customer value, and competition. Done right, good pricing can:

• Maximize profits.
• Attract loyal customers.
• Position your brand correctly.
• Build a sustainable business.

This blog will break down:

• Why pricing is tricky for SMEs.
• Common mistakes business owners make.
• Step-by-step methods to set the right price.
• Practical tips for African SMEs.
• How digital tools like VONO help track and adjust pricing.

Why Pricing is Hard for SMEs

1. Informal Competition
   • Many competitors don’t keep proper records, making pricing unpredictable.
2. Cost Blindness
   • Many SMEs don’t know their true costs (rent, staff, utilities).
   • Prices are set below break-even without realizing.
3. Pressure to Undercut
   • Fear of losing customers → lowering prices too much.
4. Seasonality & Inflation
   • African SMEs face price shocks (fuel, food, FX).
   • Hard to keep consistent margins.
5. Customer Expectations
   • Customers want value but also fairness.

Common Pricing Mistakes SMEs Make

• Copying Competitors Blindly → ignoring own costs.
• Undervaluing Services → charging too little for professional time.
• Ignoring Hidden Costs → e.g., delivery fuel, mobile money fees.
• Not Adjusting for Inflation → costs rise but prices stay the same.
• Inconsistent Pricing → charging different customers different amounts, creating confusion.

Step 1: Know Your Costs

👉 Before setting a price, you must know exactly how much it costs you to provide a product or service.

Direct Costs:

• Materials, stock, packaging, ingredients.

Indirect Costs (Overheads):

• Rent, utilities, salaries, licenses, transport.

Hidden Costs:

• Mobile money or POS transaction fees.
• Wastage/spoilage.

Example:
If you sell a plate of rice:

• Ingredients = ₦300
• Gas + utilities = ₦50
• Staff = ₦70
• Packaging = ₦30
  True cost = ₦450

If you sell it for ₦500, profit is only ₦50. If you sell at ₦400, you’re losing money.

Step 2: Decide on Your Margin

After knowing your costs, decide on the profit you want.
👉 Typical SME margins range from 10%–40%, depending on industry.

• High-volume, competitive products (like bread or rice) = lower margins (10–15%).
• Specialty services or unique items (like custom cakes, consulting) = higher margins (30–50%).

Formula:
Price = Cost + Desired Profit Margin

Step 3: Research Your Market

Look around your community:

• What do competitors charge?
• What do customers think is fair?
• How much are they willing to pay for quality?

👉 Example: If all restaurants in Lagos sell jollof rice for ₦800–₦1,000, charging ₦2,000 will push customers away — unless you add extra value (delivery, premium service).

Step 4: Consider Customer Value

Sometimes, customers don’t just pay for the product — they pay for the experience, trust, or convenience.

• A haircut in a roadside stall = ₦500.
• A haircut in a modern salon = ₦2,000.
  👉 Same haircut, different value perception.

Tip: If you want to charge more, add visible value: faster service, cleaner environment, better packaging, loyalty programs.

Step 5: Test and Adjust

Pricing is not fixed forever.
👉 Best Practice:

• Test prices for 2–4 weeks.
• Watch sales and profit margins.
• Adjust if needed.

Example:
A café in Nairobi tested coffee prices at KSh 150, then raised to KSh 200. Sales volume dropped slightly, but profits increased overall.

Advanced Pricing Strategies for SMEs

1. Bundle Pricing
   • Combine products/services into a package.
   • Example: Meal + drink combo at a slight discount.
2. Psychological Pricing
   • Use prices like ₦999 instead of ₦1,000.
   • Feels cheaper but keeps margin.
3. Tiered Pricing
   • Offer different versions (basic, standard, premium).
   • Lets customers choose based on budget.
4. Seasonal Pricing
   • Raise prices slightly during high-demand seasons.
   • Offer discounts during slow periods.
5. Subscription / Loyalty Pricing
   • Give discounts for repeat or bulk customers.
   • Keeps cash flow stable.

Tools to Help with Pricing

Pricing requires tracking costs, sales, and margins. On paper, this is hard.

👉 With VONO Daily Finance & Bookkeeping Suites:

• Record expenses by category (stock, salaries, utilities).
• Track sales and compare to costs.
• Generate reports showing profitability per product.
• Adjust prices based on real data, not guesswork.

Case Study: A Tailor in Kampala

Sarah is a tailor who charged ₦5,000 for custom dresses. She copied this price from other tailors.

Problem:

• Her fabric costs rose.
• Rent increased.
• After paying assistants, her profit was almost zero.

Fix:

• Tracked all expenses with VONO.
• Realized true cost per dress was ₦4,800.
• Increased price to ₦6,500 but added value (better packaging, on-time delivery).

Result:

• Fewer customers complained.
• Profits grew by 30%.
• Sarah finally had enough to reinvest in better sewing machines.

Why Pricing = Survival

For SMEs, pricing isn’t just about covering costs. It’s about:

• Positioning your brand.
• Keeping your business alive during inflation.
• Building credibility with lenders and customers.
• Ensuring every sale grows your business, not drains it.

👉 Wrong pricing = slow death. Right pricing = growth.

Conclusion

Pricing is not guesswork — it’s strategy. By:

• Knowing your costs,
• Setting profit margins,
• Researching the market,
• Adding customer value, and
• Testing & adjusting regularly,

… African SMEs can stop selling at a loss and start pricing for growth.

And with VONO, pricing becomes easier:

• Track true costs.
• See profit margins in reports.
• Adjust prices with confidence.

💡 Don’t guess your price. Know it. Grow it. With VONO.

‍

‍