It’s easy to get in a rut. You’ve always charged X for this product, so you keep charging X for this product. Sure, if there’s a big increase from your distributor, you’ll address the change immediately, but the smaller changes you may be tempted to ignore. [level-members]
And that makes sense, particularly if you price using the everpopular “99 cents” convention. A nickel increase in cost shouldn’t necessarily push you from, say, $10.99 to $11.99.
But when one nickel increase follows another, and another, and another, and maybe we throw a slightly larger increase into the mix, pretty soon you’re not clearing the margins you think you are.
That’s why it makes sense to be more pro-active in your pricing.Stay on top of your pricing. Know what you’re selling and how much of it you’re selling. And, above all else, know what your margins are on every item that makes up the top 20% of your sales.
Check on a monthly basis – or quarterly, at the very longest – whether that margin is holding steady. Profitability has to be your number one concern.
Check also whether a product has taken a big jump up or down in volume. This will sometimes be seasonal, but in most cases it will point to either a change in your market’s tastes or a change in the competitive landscape. Either way, you need to react quickly. If you’ve lost business, find out why and work to replace that lost revenue. (Either by pricing more competitively, finding a better value in the same category, or finding what direction your market’s tastes have gone.
If you’ve seen a large jump up for a product, you’ll want to capitalize on it. Promote it, let folks know you stock it, build a tasting around it, or provide recipes and food pairing ideas. (Don’t immediately discount to get in even more business, though. Perceived value is important enough that you shouldn’t lower prices until you know that’s the direction the market is headed.) [/level-members]