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Story: Optimizing Pricing Strategy


Ms. Shyam Badan Shrestha is the Managing Director of Nepal Knotcraft Centre (NKC). NKC is a pioneer handicraft center founded 22 years ago to enhance employment and self-dependency for socially and economically deprived women in urban areas of Nepal . The Centre, which started with just a handful of women producing macramé goods, has now extended employment opportunities to hundreds of women in both rural and urban Nepal , and has expanded its product range to include ethnic dolls and gift items made from corn husks, recycled saw dust, and rice paper. NKC's latest brand product, Fiber Weave Nepal, promotes Nepal 's rich natural diversity while offering rural women employment opportunities that make them economically independent. NKC exports its products primarily to Japan and the USA .

BizMantra, the SME Toolkit in Nepal , holds promotional workshops at regular intervals to familiarize Nepalese SMEs with the Nepalese version of the Toolkit ( www.bizmantra.org ) and to help them improve their business processes. Ms. Shrestha participated in a BizMantra Promotional Workshop organized in association with Women Entrepreneurs Association of Nepal (WEAN).

Ms. Shyam Badan Shrestha, sharing her experience at a recent BizMantra Seminar

After the workshop, Ms. Shrestha visited the BizMantra Web site (www.bizmantra.org ). She went through the accounting and marketing sections of the Toolkit and was curious to learn whether her pricing strategy was appropriate and her accounting system effective.

Ms. Shrestha subsequently came to BizMantra for consultancy. She confessed that though she is one of the leading entrepreneurs in Nepal , her knowledge of accounting is weak. Mr. Sailesh Man Shrestha , a BizMantra consultant, reviewed the price of her products and found that her pricing was not optimal.

Ms. Shrestha and her team had calculated the cost of the products by including the cost of raw materials and wages. They then priced all the products with a 40% markup. However, they did not value for her time, R&D cost, and other miscellaneous expenses.

Mr. Shrestha explained that NKC needed to customize its pricing for each particular product line, and that in fact the company had under-priced some of its products.

With BizMantra's assistance, Ms. Shrestha considered all direct and indirect expenses (cost of raw materials, wages, R&D cost and other miscellaneous expenses) in calculating the full cost of each product. It was suggested that she lower the price of products that have competitive markets and those that have been in stock for a long time, and that she increase the price of unique and exclusive products by almost 300%. In the beginning, she was skeptical about increasing prices, but she adopted the new pricing policy as suggested by BizMantra. The r esult: growth in revenue, higher profits and no loss in sales volume.

BizMantra is now assisting NKC with overall management of the organization. Some of their recent achievements include:

•  BizMantra helped NKC to launch its showroom of fiber products in Kupondole, Patan.

•  BizMantra promoted NKC's products in two exhibitions:

•  A fair organized by the Federation of Nepalese Cottage and Small Industries (FNCSI) from Dec 9th – 12th, 2005 at Bhrikuti Mandap. In this fair NKC made total sales of Rs. 2770.

•  A fair at Patan which was held from Dec 16th – 19th, 2005 . Total revenue of Rs. 5499 was generated in this fair.

•  BizMantra designed and developed a website for NKC ( www.nepalknotcraft.com ), which they are updating regularly.

•  BizMantra guided NKC regarding how best to promote itself in the 7th Handicraft Trade Fair, which was held from 23rd Feb, 2006 – 27th Feb, 2006 . NKC generated total revenue of Rs. 19,090.

Ms. Shrestha explains, "BizMantra is a huge support for SMEs in streamlining management related issues."

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