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What's It Worth?

Get your prices right, or it'll cost you.

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This story appears in the December 2004 issue of Entrepreneur. Subscribe »

If your store is filled with percent-off signs this holiday season, you might not be effectively, says Tom Shay, specialist and principal of Profits Plus in St. Petersburg, . "Independent retailers need to know their margins to master higher 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 you something. "If you're selling a gallon of 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."

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