Pricing

People - let’s talk about PRICING. I admit I never took this class while in business school (can’t fit everything in!), but it’s been on my mind the last few weeks and I wanted to write a post about it.?

So several weeks back, I went to a talk given by my former classmate. My classmate leads one of the major diagnostic health care companies in the US, and one question that he got was why did they charge so much for COVID testing kits, and why didn’t they want to make testing as widely available as possible?

And this is where PRICING comes in. My classmate responded since testing kits became available, they wanted to be the low price solution, so everyone could have access to testing, and they priced their kits at $5 wholesale. I went into CVS last week and paid $25 for this kit - a 500% mark up.?

It got me thinking of a similar situation that I am in. I’ve tried to offer TSUMo Snacks at an affordable wholesale price, because I want consumers to be able to afford our products. But the standard retail markup for dispensaries is 250%. And I still get asked for discounts. I have one retailer that’s currently selling my product for an 800% markup - I nearly choked when I saw the pricing on their menu.?

Which oddly enough puts me in the same boat as my friend. Unless I’m selling direct to the consumer, I have virtually no control over my end retail price. The problem is those high prices reflect directly on my brand, and the typical customer has no understanding of how that final price was determined. Their response (and I don’t blame them) is “who does this company think they are, changing this much for their product??” Sure, I can choose NOT to sell to certain customers, but then that limits by distribution, and further reduces access to consumers.?

In cannabis, this is further complicated by the fact that I must sell through a licensed retailer. Our industry has started to have some DTC sales through companies like Grassdoor, but it’s still new and the volume can’t compete with large retailers. So what to do? If my friend can’t come up with a solution for a multibillion dollar healthcare company, then how does a tiny company like me answer this question? I welcome your thoughts and feedback.?