A photographer can sell a well framed picture for Eighty Thousand Naira (N80,000). The true cost of taking the picture and framing it may be N2,000. However if the photographer is famous enough and his picture is intriguing enough, he would likely find a willing buyer.
The same goes for an artist selling a portrait. Paint several portraits of famous people and hold an auction, you’ll quickly realize the legends who are most famous and whom regular people do not mind owning a portrait of this famous individual and have it hanging on their wall. You’ll also know who not to paint again.
An auction market is one whereby buyers enter competitive bids and sellers enter competitive offers at the same time. In the Nigerian Stock Exchange Market (NSE) or the New York Stock Exchange (NYSE), the price a stock is traded represents the highest price that a buyer is willing to pay and the lowest price that a seller is willing to sell at. Matching bids and offers are then paired together and the orders are executed. So if 3 different buyers place a purchase order for Dangote shares at N150 and the others place an order for N151 and N152 respectively. If there is are willing sellers willing to sell at N152, N153 and N153.50k then automatically the price of the shares would be sold to the buyer with a matching order at N152. The official closing market price for the day would be N152 and all other orders would not be executed except they match the current price.
In an auction market, the price of the shares is determined by the market’s perception of the perceived value of the company’s net worth is. The key word here is PERCEPTION.
It brings us to the lesson of the day. For those of us selling services and products, for example, e-books, books, portraits, master classes, coaching sessions, speaking services, training programs etc. Would it be helpful to allow the market to determine what your price is? By offering your services at a price that the market is willing to pay for and retaining the sole right to accept or reject offers, you can gain the advantage of the following:
1. Determining the market’s perception of what your service or product is valued at and if necessary increase the value you provide the market.
2. Understand whether you are under priced or over-priced and then maintain the integrity of your pricing. Wouldn’t it be ideal to discover that your market is willing to pay far higher a price than you were even willing to ask?
3. Decide if your services or product is well positioned in the market, if there is a broad awareness and if the demand of the market you are currently in can sustain your business. Then decide if to remain in a particular business or change your business model.
At the end of the day, the winner in an auction market is company whose true value by far exceeds it’s perceived value as the stock price is bound to rise after buyers begin getting massive Return on Investment or dividends from their purchase. So sellers, ensure that you bring in more value than you’re asking the market to pay for.
For buyers in an auction market, remember that like Mark Cuban, the billionaire investor and entrepreneur says, if you are looking for the next big thing in the same place everyone is, then you’re looking at the wrong place. Marc Andreesen warns that sometimes its the next big thing lies in the midst of everybody but only a mind set on the principle of bundling and unbundling usually sees it.
N/B: Salute to Austine Okonkwo for the insights and the entire NAPIMS staff.