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HOME > Market Linkages > Designing Product Pricing Systems | ||||
Most companies set the price they pay to smallholders for their products at the open market price (where a local market for the product exists) - i.e. they pay the minimum needed to ensure that they secure the amount of crop that they require. This pricing system has several disadvantages, both for the smallholders and for the company:
It is preferable that the smallholders' price is determined in a way that gives them a stake in the success of the purchasing company, and hence an incentive to sell good-quality products to that company rather than to another buyer. There are various elements of a product pricing system which are essential, desirable and optional.
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Natural
Resources Institute 2003
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