This is Your Captain Speaking
“Daddy, I miss you! You want to come to Austin and hang out with me for a few days?” was the text that I was hoping for!
And when that text didn’t come, I called Austin’s newest resident and said I was flying down. “Don’t worry, I’ll be out by the weekend.”
Because I know better then to be hanging around come Saturday night.
Heavy clouds over much of the country obscured the view from seat 16F on Jet Blue flight 795 from JFK to Austin, but THE window seat is still the place to be.
From our cruising altitude of 36,000 feet, almost 7-miles high, my view stretches hundreds of miles.
Just the way I like it!
For those who work with me “on the regular,” you’ve heard my frequent reference to keeping your altitude high.
The high altitude gives a perspective which allows for strategic thinking. From 36,000 feet, even the mighty sequoia is just a speck!
I’ve been working closely with one of the Minutemen on my Revolution, Zach Maddux at PaintColumbia.com. You can go check out his site now if you like. It’s about to get a big upgrade!
I’ve shared with you previously that Zach is an Allpro dealer transitioning into the owners role; his father Zeke made parole for “time served” behind the counter.
During a Zoom earlier this week, a conversation about pricing brushes turned into a conversation about altitude.
Pricing As a Strategy
To get the bawdy 46% margin my stores had my final year at Tremont Paint required more than pricing my brushes high. It required a whole-store pricing strategy which was in place before I sat down to price the brushes.
Many dealers I know default to pricing in a way which is easy to manage. Item by item or perhaps by category, they set a margin in their POS system which defines their intended margin based on cost. New brush line? The dealer or a staff member enters the product description and cost into the POS and based on that pre-set margin, a retail price is set.
And then you often discount off of that!
The problem with that thinking in my view, is that it only takes one factor into calculating your selling price: your cost!
But a pricing strategy allows for multiple factors: cost, availability of the product at other stores in the area, relationship to other products in your own stores (that’s huge, I’ll come back to that) as well as the final and perhaps biggest component: what the market will allow.
I asked Zach how much he sold his chip brushes for?
As expected, he got a healthy margin. Keystone! A sales price double his costs.
Keystone is thought of as generous by paint store standards. Which is why I never used paint store standards!
My strategy for pricing items, particularly sundries such as brushes which consumers tended to have less knowledge of pricing for, was to price them in relation to other items in my stores. Rather than pricing them based on my costs. So if a nice DIY brush was $4.99, a chip brush was a good deal for the bargain shopper, at $1.99.
Mark, two dollars for a chip brush which cost you $.19?
Did you know they sell them as basting brushes in the supermarket for $3.99?
It was my view that no customer would ever notice the price of anything that was under a buck or two and over the course of my career, the only time I was ever questioned on this price was by one contractor who bought them by the gross.
For those reading and wondering why so much attention to chip brushes, let’s do some math! We sold 4000 chip brushes a year, each with an additional profit of (approximately) $1.50 over what Zach’s pricing gets him. That’s $6k a year directly to my bottom line in the form of NET profit.
And I did that for 30+ years which means that the extra profit generated from just chip brushes paid for four years as a Buckeye for Buck!
I admit, this chip brushes be the most drastic representation of this strategy, but it was far from the only one. Tape, caulk, paint, sand bars and more were all priced using this methodology.
If you are pricing without consideration of how an item compares to the alternative in your stores, then you don’t have a pricing strategy. You’re just pricing!
The same goes for paint, where I admit a bit more effort is needed due to more readily known pricing. But it’s worth the effort.
My stores sold mostly premium paints: Regal always lead the way with Red Seal from Pratt & Lambert also in the mix.
But we didn’t buy them anywhere near the same price. In New York, where P & L often needed to be more aggressive to gain share in the Ben Moore stronghold, I often bought Red Seal for as much as $10 per gallon less than Regal.
But that doesn’t mean I wanted it to be $10 less to the consumer! Customers looking to save a few dollars we’re thrilled to find the Red Seal was $5 less per gallon than Regal.
And $5 for the house! Even when I spiffed my counter guys $1 to sell the Red Seal (sorry Dan), I was well ahead of the game with both a higher GPM as well as net dollar profit.
Over the years, I honed this strategy and filled my shelves with alternatives; items placed items on the shelves specifically because they supported my overall pricing strategy.
From 30,000 feet, you can see the value of an overall pricing strategy which could never be clear when you’re just looking at your item costs. Yes, what an SKU costs you matters. But not as much as the other considerations such as what the market will allow and the price of similar items in your stores.
More important than margins and e-commerce: in Austin with Buck is her BFF for all time, Caroline. CaCa to us! The girls mothers were pregnant at the same time so I like to think the friendship started in utero.
Whether through amniotic telepathy or other more terrestrial means, these two have stayed together. Here’s a TBT to the first day of kindergarten in 2003.