Pricing Milk versus DonutsThink about how your grocery store prices. When you buy a staple like milk, the store’s margin is low. It’s much the same with the commodity items you sell. You have to meet market pricing. But your grocer has also identified items, such as doughnuts, where they can safely increase profit margin.

Increase earnings by focusing on “incidentals”

You can do the same. The pricing experts at Profit2 help you identify infrequent, low volume sales where your margins are too close to your average. We’ve analyzed the pricing of over 300 manufacturing and distribution companies and learned that:

  • All companies price “milk” about the same
  • Companies with the highest earnings consistently make 5 to 7 points more than their competitors when they price the doughnuts.

You probably have 25 to 30% of your sales that fit the “doughnut” profile. On average, your customers will buy these items 1 to 3 times a year and spend less than $500 a year on the item. All you have to do is increase your margin 5+ points on these sales to gain an additional point of margin for your company-a smart pricing strategy.

Is it safe? Yes!

Your customers have to focus on where they spend the most. You can gain an additional $5-10 in profit a year per item that a customer buys only once or twice a year. Our job at Profit2 is to help you identify the “doughnuts”, decide where they should be priced, and build a system so you consistently make more.

Increase your company’s earnings by 25+% in 6 months … just by focusing on sales that aren’t as price sensitive. We help our clients claim this gain by analyzing three Key Opportunity Indicators: Compression, Correlation, and Differentiation. Few initiatives a distributor can undertake compare with margin optimization.

Don’t underestimate your potential gain from focusing on this “low-hanging fruit”. To find out more about how the pricing specialists at Profit2 will help you pinpoint areas of profit opportunity in your business, fill out our Contact Us form or call (913) 897-0159.

Published On: June 4th, 2017 / Categories: Articles /