From the December 2004 issue of Entrepreneur

If your store is filled with percent-off signs this holiday season, you might not be pricing effectively, says Tom Shay, retail specialist and principal of Profits Plus in St. Petersburg, Florida. "Independent retailers need to know their margins to master higher sales volumes," he says. Tactics Shay teaches to clients include:

  • Don't "BOGO." "Buy one get one free" promotions can backfire, cautions Shay. "With independents, customers know that it's the owner making pricing decisions and not a corporate entity, so they'll argue for 50 percent off one item and hope you give in," he says. Instead, use longer-term loyalty programs, such as punch cards that entitle customers to a benefit after 10 purchases. These inspire greater sales volumes while short-circuiting requests for individual discounts.
  • Benefit from loss leaders. Promote popular items that are well-priced, even if it costs you something. "If you're selling a gallon of milk for a dollar more than everyone else, then people are going to assume you're more expensive on everything," says Shay. "Sometimes, you need to take a loss on one item to get people in the door."
  • Say it with insult cards. Use signage, also called insult cards, to highlight bargain products; then arrange related, higher-margin merchandise near low-priced items-like cookies near that gallon of milk-to spur impulse purchases.