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Saturday, September 19, 2020

How to Price a Product Through Comparison-An Example of Buying a Horse

 Buying a horse is no joke and it takes some time to figure out what to look for and how to price compare. Price comparison allows you to take a more systematic approach. While you may trust the person selling the horse to you it is always good to know and understand price comparison. While Escanaba Polo Mallet Company is a good works business that sells mallets and hopefully equestrian gear it also seeks to raise awareness on how to run a manage a micro manufacturing business. Price comparison will be a big deal and difference in better understanding what you are willing to pay and what you are not willing to pay when selling a horse. 

Price is somewhat subjective and is influenced by the market (i.e. the need for a price comparison) and your personal preferences. So to understand how much you should pay you will need to sort of think of what you are looking for. 

Target Market Average

Having one large pool does little unless you want a very loose and inaccurate prediction of price at say 70 different horses in the area with an average price of $3K. That includes old, young, rideable, and un-rideable horses in the same pot. Thus if you break down by your target market you might get a more accurate description. So in Bella's case I might look at the Midwest any any city within 7 hours drive. People who are interested in a particular horse may be willing to travel that far. The further you go out however, the more likely your price will drop as people are naturally going to look closer to home first to reduce effort and cost.

By Target Market avg. tm = $3K

Breed Average 

Since Bella is an Arabian-Quarter Mix she isn't going to be in the general category and therefore we might consider looking at Arabians. Once we have looked at all of the Arabians listed in multiple sites from my target region we have an average of $8K. Many of the ones listed as Arabian appear to be mixed in my search so it will make it difficult to find Arabian-mix unless we clean the data by removing terms like "Thoroughbred". 

By Breed avg. b=$8K (Likely a little lower)

It is important to remember that people don't have the time to widdle down to a finite category unless they are in the high end "horse trading" business. Most people want to give horses to their kids, take classes, have a farm, etc... Thus, they may be interested in Bella the Arabian-Quarter mix or they may be equally willing to pick another breed for pleasure riding purposes. So you will need to price based on the functional value of competing categories. For example, Bella would have to be priced in a way that is not too much over, or too much under what the average person is willing to pay to own a horse (unless you are in a specialized market).

Training

What I also noticed from the listing sites that there are difference is price for training. Those horses that have a lot of training and functioned in a competitive capacity are worth more than those who are only partially trained. Bella has had professional training and regular riding but hasn't competed much. The plan was to compete with her this coming year. Yet all of the ground work is mastered which makes her a good ride for most people and she also has the foundation to be competitive in hunting, barrels, etc... So the higher trained horses are 10K+ while the lower trained horses are around 2K. In this case I might place Bella in the 6-7K range. She would appeal to someone who wants to ride pleasure but also perhaps move into competition as well.

By training average Low Range Training LRT = $2K and average High Range Training HRT= $6.5K

Other Differentiation

You can choose whatever differentiation and factors that you want.  The problem you will face is that not all of the data is available. If you were a serious horse hunter you would look at all of the different factors and narrow yourself down to a few in your region you would seriously consider. Eventually, it will make no sense to break down the categories any more. There simply isn't enough informational value learned from the exercise. 

What is Bella Worth on the Market?

We have a range that would work when we consider our target market $3K , breed $8K, and training 6.5K. This is where one has to use their strategy. I'm focusing on the younger rider that wants to do some competing but still needs to work with the horse a little to find their particular groove. I would put this value around $6K. If I was going for a different marketing I would have a price based on the needs of that market. 

$6K isn't our final answer.....

4 P's Product, Price, Place Promotion

Before we list Bella for the wrong price lets weigh and balance against the 4 P's Product, Price, Place Promotion. 

Product: 8 Year Old Mare Arabian Quarter, Trained, Ready-to-Ride, w/ Performance Potential.

Place: Markets that are within 6 hours drive. (I would discount our $6K by at least $1K for people who are driving. The value declines the longer they have to put effort, gas, etc... into it. So people who want to buy Bella might get a $1 K discount at time of purchase if they are over 2 hours drive away. It is hoped the incentive raises the value.

Promotion: The location is dependent on our market but in Bella's case it will be online forums as the easiest way to reach potential customers as well as local Word-of-Mouth. Bella is well liked at the stalls and there is some interest in her as she is gentle for children and still able to jump and canter making Word-of_Mouth WOM likely.

Price:

If we do a little calculation we will find........

$6K -1K (driving discount)=$5K

Our competitive price for Bella based on her offerings and worth is $5K. That price would not be out of the reach of many of the casual riders and might be just under the starting level for competitive horses. Thus, if someone want to buy for casual riding they could or one could buy to train for competition. It allows us to maximize our customer base by being close to both by understanding your product. The goal is to increase the likelihood of sales while if we raised the price we would have less sales but more profits (scarcity and value).

Trust as Essential to Sales

There is one more value component I would like to discuss and that is "trust".  People want to trust that the information on the product they are considering to buy as worthwhile. Thus, being open to phone calls and allowing interested parties to discuss issues with the trainer is helpful. They can ask direct questions and obtain direct responses. 

Even with an informative and positive conversation it can be difficult to trust if you have to travel or pay for a horse that may have problems a few weeks down the road. They call it "horse trading" for a reason and some of the people are not honest. I build my reputation as much as possible on being honest; even when its not in my best interest to do so. So in this case I might offer a type of guarantee. 

That guarantee would come in the form of a Health Certificate from our local veterinarian. Once the potential buyer shows interest and is willing to put down a $200 deposit I will obtain a health certificate. If they fail then I eat the cost, if the horse has a positive evaluation and the buyer purchases the horse it is paid for, but if it receives a positive certificate the buyer backs out I keep the $200. 

 Based on our very simplified quick price comparison expect to pay $2-4K for a pleasure horse you can ride right away and over $8K for a horse you could use for competition. Bell is in between those ranges and would have a fair market value of somewhere around $5K  (that is assuming I'm not missing something).

Bella 

  • Arabian-Quarter Mix
  • 8 Years Old
  • Professional Training-Starting Competition
  • Easy to Ride for Beginner-Intermediate
  • Light to Touch
  • Western
  • Talk with Trainer
  • $6K -$1K (For people traveling over 100 miles).
  • Health Certificate Evaluation with $200 Deposit (Optional if Both Parties Want or You can Just Make Purchase) Come and Try Her
  • Murad 619-540-0501 escanabapolomalletcompany@gmail.com

A video I played with and created. I was actually doing it for something else but thought it turned out well. Cost me like $3.99 at ClipChamp. Not bad.

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