Advertising and Marketing Ideas to Create Phenomenal Profits In YOUR Small Business

“Why My Small Business Charges So Little For The Small Stuff” PDF Print E-mail
“Why My Small Business Charges So Little For The Small Stuff”

In our retail store we have items that people purchase regularly, and they are low ticket items. Vacuum cleaner bags, belts, ad small parts.

We charge very little for these items, and in the case of vacuum cleaner belts...we give them away for free.

I’ve mentioned the altruistic reasons in other newsletters. But here are the business reasons. My business is small...and I want it to grow.

I read on Forums that people charge more for the small items. Their reasons are; “We sell lots of belts, we need to make more on each one to make a profit”  and “Customers don’t notice if we charge a few dollars more than Wal-Mart””.   Maybe.

Have you ever called a lumber yard for a quote on lumber? Most people that call, ask how much a 2 X 4 costs. Then the customer may make a couple other calls to compare prices…..on that one item….and then decide on a lumber yard...to provide all the lumber for a major project.

Here’s a secret; Almost everyone that calls, asks for the price of the 2 X 4. ...and lumber yards know that.  So the 2 X 4 prices are very low...maybe even below that lumber yard’s cost.  But the lumber yard also knows that almost nothing can be built with just 2 X 4s.

So the caller goes into the lumber yard with their low price quote on that one item...and fills up their truck, without another comparison of all the other pieces they are buying.

Grocery stores sell sugar, flour, baking powder, etc. for about their cost. Why? Because they know that people compare the prices of these items. And if you go into a grocery store that has low prices on these items (or other common advertised items), they know you’ll buy more items at the higher markups.

What does this have to do with us? Plenty.

Take the product we sell in our store. Vacuum cleaners.

Several times a year, a customer will come in for small items; a pack of vacuum bags, a filter, a vacuum belt. And once every several years, they make a large purchase (a high end vacuum cleaner).

But most of the times they come in...they get the feeling that I have really...really low prices.

Why? Because my commodity items (ones they can buy a other stores) are low priced. So they don’t even think of buying somewhere else when they buy a higher ticket item.

Does this always work? Of course not. But business is Math. At the end of the month, we have a very high number of high end vacuum cleaner sales. And 99% of our profit comes from these high end sales (also we sell other high end products). Less than 1% comes from the items that we sell for very little.

Think. If I doubled the prices of my smaller items….what difference would it make to my bottom line? Maybe a bump of 1%.

But then I would have higher prices on virtually every thing in our store. And every time someone bought something...anything...they would be paying a higher than average price. And some people will notice.

Do you ever go fishing?

Think of your low priced commodity items as bait. If you have a small bucket of live minnows, do you just eat them...because you are afraid of wasting the bait?  No. Minnows are bait to catch bigger fish. My small ticket items (let’s say $1-$30) are the enticement I use to sell bigger items (let’s say $300-$1,200).

Now here’s where you have to pay close attention;
We still advertise the higher end products. We don’t spend money advertising the items that are only a few dollars. Why? Because the customer needs those items anyway. After they come in, and walk out with a belt (or other small item)...the customer has the feeling of “Wow, they were so helpful, and their prices are so low. I’ll recommend them to my friends”.  

It’s as if they came into my lumber store and bought one 2 X 4 stud for a dollar….and they thought “Wow, their lumber prices are so low!””
Where are they going to go when they build a garage? You guessed it.

Don’’t trip over dollars to pick up pennies.