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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 holidayseason, you might not be effectively, says Tom Shay, retailspecialist and principal of Profits Plus in St. Petersburg, ."Independent retailers need to know their margins to masterhigher volumes," he says. Tactics Shay teaches toclients 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 andnot a corporate entity, so they'll argue for 50 percent off oneitem and hope you give in," he says. Instead, use longer-termloyalty programs, such as punch cards that entitle customers to abenefit after 10 purchases. These inspire greater sales volumeswhile short-circuiting requests for individual discounts.
  • Benefit from lossleaders. Promote popular items that are well-priced, even ifit you something. "If you're selling a gallon ofmilk for a dollar more than everyone else, then people are going toassume you're more expensive on everything," says Shay."Sometimes, you need to take a loss on one item to get peoplein the door."

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