Pricing for profit: hurdles for three Colorado industries.

• Author: Horkan, Louis

Slap a "Made in Colorado" sticker on it and the masses will surely buy that product or service. Or will they? Ultimately, that decision hinges on variables such as the quality delivered, the utility provided, and the perception that the value merits the price charged.

As addressed in the "Art and Science of Pricing" (Colorado Biz, April), pricing is a strategic tool critical to the successful operation of any business. Here we examine pricing considerations for three important Colorado industries:

FARMING

Colorado farmers make their living in the most commoditized product market that exists. They find themselves in the unique position of having their prices set for them.

Ryan Niebur, president of Tri-County Ag, and a fourth-generation farmer from eastern Colorado, says crop prices are set on the Chicago Board of Trade, as well as some of the regional exchanges.

"Pricing is a process when it comes to farming. Sometimes it's gradual and you're selling your crop at different times over the course of an entire year, while other times you might sell it all at once. The other option is the futures market, where farmers try to lock in a favorable price for a coming year, but there is risk in doing that."

In addition to his farming operations, Niebur is in the unique position of selling product and services to his fellow farmers, providing seed, fertilizer, and spraying services. He admits that working on both sides of the fence influences how he prices. "Many of my customers are friends, and I know what they are going through," he says. "While I am a businessman and want to make a good profit, I also want to do what I can to help these people out during difficult times. Does that make you less of a good businessman? I don't think so."

Neither does Tim Matanovich, founder and general partner of Market Leaders Group LLC, a Colorado-based business-consulting firm that helps companies benefit from using value-driven sales, marketing and pricing strategies. "Good pricing is about understanding your clients' situation and trying to partner with them in a win-win scenario" he says.

In Niebur's case, not only can he make a profit selling product and service, but he has the added benefit of getting his fertilizer and seed at cost, which reduces his own farming costs and directly influences his bottom line.

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