Is Your Pricing Model Holding You Back?

In a world that is becoming more digital by the minute, price competition has come to the forefront of a lot of retailers’ minds. When a customer can be browsing the aisles of your store, pull out their cell phone and compare your prices to Amazon, it should get you thinking about how to stay price competitive. 

While we all know that brick-and-mortar locations hold a major advantage in the education realm of natural products retail, if your prices are not competitive with online shopping, you run the risk of educating your customer to the point where they will take the knowledge you bestowed upon them and still go buy the products you recommended for a better bargain. You’ve now spent valuable time educating and then ultimately losing the sale.

So what can you do? How do you create a pricing model that is competitive and gives your customers the peace of mind that you are looking after their health and their wallets? 

There are a few pricing models you can consider. The purpose of this is not to say that a certain pricing model is superior to others but to get you thinking about what other models are out there compared to what you currently have and get you thinking about how to become more competitive.  

MAP Pricing

One pricing model that some of our retailers have implemented is a MAP Pricing policy. If manufacturers have a MAP Policy and enforce it well online then you should, in theory, always be competitive with e-commerce stores. 

This is a huge pro! Between the discounts you can receive from your manufacturers, taking advantage of line drives, and so on, you should still be able to get between 35%-50% margin even by selling at MAP. 

A con to this model is for brands that don’t have a MAP Policy that is well enforced. If their prices are 40%-50% off MSRP online, then it’s going to be hard to compete with that and still make money. If your store carries several brands without a strict MAP Policy, then you could set yourself up for some losses of sales if someone price checks those brands while shopping with you. 

This model will require you to really analyze the brands that you carry to see if you can stay competitive with those particular brands. 

This model also does not give you a ton of flexibility since you are offering an everyday low price store-wide. 

Flat Discounts

Some stores offer flat discounts of 5%-30% off MSRP on everything in the store depending on the department. Food typically has lower discounts while supplements have more room for discounts due to higher margins. This certainly makes life easy when it comes to setting prices. 

The con here is that some brands are going to be more discounted online due to their MAP Policies (or lack thereof) and you could still lose customers to the deeper discounts online. Just be mindful of that fact that if you choose to do a 15% off EDLP on supplements, many major brands offer 20-35% off everyday. While your customers will appreciate the discounts, you need to keep in mind the brands that have lower prices. 

MSRP with Ongoing Promotions

Another model to consider is MSRP with ongoing promotions. A pro here is that you can easily set your prices and get a lot of flexibility with your promotions. You can easily run BOGO deals, major line drives, mix and match deals and so forth. 

While this model comes with flexibility for promotions, be very mindful that it will require a lot of attention to make sure that you are constantly staying competitive. By having to run promotions constantly to offer a competitive price, it will take a lot of man-power to ensure that you’re staying competitive at all times. 

Variable

The last model we want to cover is a variable model. This is where your base price is not based on MAP or MSRP but on the price that you pay everyday and then adding a percentage up from that. 

A pro here is that you can ensure your margins are exactly how you want them to be with every item. You can be flexible with promotions. You can be super competitive and really do whatever you please. 

A con with this model is to really be successful with it, it will require a lot of time and effort. You could set it and forget it but the ideal way to utilize this model is to be constantly evaluating your pricing and structure promotions based on your pricing for that given time. 

Pricing Models Are Not One Size Fits All

There is a reason that there are several pricing models out there. What works for one store may not work for you. However, we hope that this article gave you some food for thought. 

At the end of the day, your customer wants the products that you sell but the vast majority of them will not be okay paying significantly more at your store just because you taught them about the product they are taking. Eventually if they realize they can get it cheaper somewhere else, they will take their business elsewhere. 

We want our members to thrive and having pricing models that keep them competitive is just one way to make that happen.