AN OLD ENGLISH proverb says, “Look after the pennies, and the pounds will look after themselves.” It’s the small things that can often make the biggest difference in business, and none can be more important than getting your pricing right.
On store visits, I will often notice some interesting pricing amounts appearing — sometimes, product is priced with a 7 or a 2 on the end, such as $147, or $2,142. In these cases, the price has obviously been set as a multiple of wholesale cost without considering whether any profit is left on the table. It’s surprising what a difference an extra dollar or two can make when you consider it over the space of a year.
Let’s say a silver item that normally sells for $94.50 is repriced to $99. Only $4.50, you might think — is it worth the effort? Multiply that amount, however, by thirty sales of that one item in a year, and you’ve picked up another $135 in straight profit. Assume the same thing can apply across two thousand items sold in a year, and you start to have a serious impact on your bottom line.
An extra $5 an item might be a good start, but what about bigger ticket items? Your piece that sells for $2,142 can soon be $2,199; an item that might calculate up at $11,736 can be $11,995; and suddenly you’re starting to get meaningful results on larger ticket items. Ten sales at $11,995 and you’ve increased your profit by $2,590. Not an amount to be sneezed at!
A few items can make all the difference — just concentrating on the 20 percent of items that give you 80 percent of sales can significantly lift the bottom line if you’re looking to increase margin by just a percent or two. Even pieces that are already rounded can often go to the next pricing level.
The best part is, your cost of sales doesn’t increase. Yes, there may be some reticketing involved, or you might just reprice items as they come into store; the choice is yours. Either way, it takes the same effort to sell the item with no additional expense. It’s easy to see how you can add thousands of dollars to your bottom line over a year just by changing your approach to pricing these products.
Would a few dollars here or there make any difference to your customer’s desire to purchase the item? Evidence from many jewelers pursuing this rounding practice has shown it’s not the case. Don’t leave money lying on the table that could be in your bank account. With financial conditions beginning to toughen, you might be grateful for that little bit extra come the end of the year.