Here at Crossover, we’ll harp on about sales reports and stock management until we fall off the back of the green. But, whilst these factors are essential to running a successful retail business, a pricing strategy is just as important, and unfortunately, is often overlooked.
Pricing will have a profound effect on the success your business, and, while customers won’t buy goods that are priced too high, your shop won’t succeed if you price items too low to cover business costs.
Correct pricing is essential for retail success and should be reviewed regularly across all items. Here are our 3 top strategies for smart pricing:
1. Size Matters
When was the last time you increased prices across your smaller products: items with a value of, say, less than £5.00?
“One Pro I met hadn’t increased the price of his bottled water for 10 years,” says Crossover’s sales manager, Matt Peace. “It’s easy to forget about the small stuff such as water, chocolates, tees and accessories, but retailers have to review these prices regularly. Leaving prices static, or not charging enough, can have a massive effect on your bottom line.”
Cost prices rise annually, so, you should be passing this on to the customer, to ensure margins don’t diminish and you’re still maximising profits wherever possible.
“If your pro shop sells 4,000 bottles of water in a year at £1.00 per bottle, and you increase that to £1.09 per bottle, you’ll make around £300 profit over the year. Do that across all your small items, and that’ll be in the £’000’s”, continues Matt.
Your smaller product items should have the largest margins in the pro shop, so be sure to do what you can to facilitate this. If you’re worried about too many sudden changes all at once, why not take your 10 highest-selling, ‘lower-value’ items and increase their prices first.
Your smaller product items should have the largest margins in the pro shop. So, be sure to do what you can to facilitate this.
The hurdle for many Pro’s is having the confidence to make that initial, small increase, but you’ll be surprised at how few customers mind, or even notice.
2. Don’t Lump It
If the cost prices are different for confectionary, or other small items, ideally you should be varying prices to the consumer, too.
Don’t lump small product items together under one amount. Individual prices won’t put customers off, even for items that are similar (such as chocolate bars).
It’s something that most stores do … so why don’t you?
3. Old Tricks are the Best
When it comes to price setting, most companies employ psychological pricing tactics to entice consumers to part with their cash. The “99 Effect” is one of the oldest tricks of the trade.
Says Crossover Chairman, Phil Barnard, “The 99 Effect has a bit of a history. Years ago, retailers started to use 99p at the end of prices to prevent potential thefts by staff. It was a clever tactic to ensure staff had to open the till when they took a sale, in order to return the penny change to the customer. Prior to that, if no change was required, tills wouldn’t log that a sale had been made: which could be a temptation for less-honest staff members.”
Now, however, the 99 Effect is still benefitting retailers, but for different reasons.
When a product is priced at £2.99, it’s perceived as significantly cheaper than an item priced at £3.00. One of the reasons is because consumers are so used to seeing the number ‘99’, that they can actually become suspicious of prices without it. An extra bonus of the 99 Effect is that, when paying for smaller items in cash, the customer receives change – giving the perception of better value and receiving something back.
Great products and services should be priced strategically. But, bear in mind, it can take time to get it right: to test, debate, and, more importantly, listen to your customers.