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@ Boaz
2025-05-04 15:06:22
**Expanded Pricing Strategy for Boaz Trading PLC**
### **1. Cost-Plus Pricing Model**
**Framework**:
- **Cost Basis**:
- **Import Cost**: ETB 40/liter (includes crude oil, refining, shipping, and Djibouti Port fees).
- **Local Costs**: ETB 2/liter (storage, last-mile delivery, compliance).
- **Total Cost**: ETB 42/liter.
- **Markup**: 10% margin on total cost (ETB 4.2/liter).
- **Final Price**: **ETB 46.2/liter** (rounded to **ETB 45/liter** for competitive edge).
**Rationale**:
- Ensures consistent 10% gross margin while undercutting competitors (e.g., NOC’s ETB 50/liter).
- Simplicity in calculation reduces administrative overhead.
**Adjustments for Volatility**:
- **Monthly Review**: Recalculate import costs using a 3-month rolling average of Brent crude prices and ETB/USD rates.
- **Hedging**: Lock in 50% of forex exposure via forward contracts to stabilize costs.
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### **2. Tiered Discounts for Bulk Buyers**
**Structure**:
| **Monthly Volume** | **Discount** | **Effective Price (ETB/liter)** |
|---------------------------|--------------|---------------------------------|
| 10,000–49,999 liters | 5% | 42.75 |
| 50,000–99,999 liters | 7% | 41.85 |
| 100,000+ liters | 10% | 40.50 |
**Target Clients**:
- **Textile Factories**: Save ETB 250,000/month on 50,000 liters.
- **GERD Construction**: 10% discount on 100,000+ liters reduces annual costs by ETB 5.4 million.
**Terms**:
- **Early Payment Incentive**: Additional 2% discount for payments within 10 days (e.g., ETB 40.50 → **ETB 39.69/liter**).
- **Volume Commitments**: 12-month contracts with penalties for shortfalls (e.g., 80% of agreed volume).
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### **3. Competitor Price Benchmarking**
| **Product** | **Boaz Price (ETB/liter)** | **NOC** | **TotalEnergies** |
|---------------|----------------------------|---------|-------------------|
| Diesel | 45 | 50 | 55 |
| Gasoline | 50 | 55 | 60 |
| Jet Fuel | 65 | 70 | 75 |
**Psychological Pricing**:
- **Retail**: Use **ETB 44.99** at pumps to emphasize affordability (e.g., "Under ETB 45!").
- **B2B**: Round numbers (ETB 45) for transparency in contracts.
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### **4. Contingency Plans for Competition**
- **Price War Response**:
- Leverage Russian cost buffer to sustain ETB 45/liter even if competitors drop prices to ETB 48.
- Introduce limited-time promotions (e.g., "Buy 10,000 liters, get 500 liters free").
- **Differentiation**: Highlight ESG initiatives (e.g., biofuel pilots) to justify premium if needed.
---
### **5. Alignment with Financial Goals**
- **ROI Target**: 150% in 24 months requires **ETB 55M revenue by Year 2**.
- **Volume Needed**: 1.22M liters/month at ETB 45/liter.
- **Market Share**: 10% of Addis Ababa’s diesel market (2.4M liters/month) by Month 12.
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### **6. Dynamic Pricing for Jet Fuel & Gasoline**
- **Jet Fuel**: Premium pricing (ETB 65/liter) for guaranteed 24/7 airport availability.
- **Gasoline**: **ETB 50/liter** (vs. competitors’ ETB 55) with prepaid cards to lock in rates.
---
**Conclusion**
Boaz’s pricing strategy balances affordability, profitability, and resilience. By anchoring prices 10% below competitors, offering tiered discounts for bulk buyers, and hedging against volatility, the company can capture market share while safeguarding margins. Early payment incentives and psychological pricing further enhance cash flow and customer appeal, ensuring alignment with ambitious ROI targets.