Telkom could be fined R3,5 billion for unfair pricing

Telkom faces a fine of up to R3,5 billion for abusing its dominant market position and harming competition in the telecommunication industry.

The Competition Commission wants Telkom to be fined R3,5 billion for excessive pricing and abusing its power and position in the market. This comes after reports that Telkom allegedly leased services to its competitors at a higher rate than what it charges to its customers. The matter will be decided by the Competition Tribunal, who is wrapping up hearings this week.

3 ways to price your product or services effectively
Deciding on a pricing strategy is never an easy task, says Rihana Hoosain, Head of Products at MWEB. There are a few popular approaches you could follow and each has its own benefits:

1. Cost-based pricing
The most widely used approach is probably cost-based pricing. This takes the direct cost associated with the product as the cost of running your business and adds a profit margin to reach your selling price. The downside of this approach is that it doesn’t take competitor products into account or the price consumers are willing to pay for a product like yours, based on the demand for your product.

2. Competitor-based pricing
Another method you could adopt is competitor-based pricing. This involves pricing your product at the same or at a lower price than that of your competitors. This is a good approach to get your foot in the market and start gaining market share. But it can be a risky option, as you need to make sure you remain profitable when you drop your price to meet what your competitors are doing. This means staying very aware of your product costs. Remember that the best way to reduce the price of a product is to look at reducing its associated costs.

3. Customer-based pricing
Many businesses adopt customer-based pricing, where the price of your product is closely linked to its perceived value. In the model, you are guided by demand for your product. When demand is high and you have an innovative product, you are in a good position to adopt this approach as customers often link the price of the product to their perception of its value.

“I believe you should adopt a healthy mix of all three strategies when pricing your product to make sure you keep your eye on your competitors and your cost,” Hoosain says.