Price strategy

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luckyakter22
Posts: 1
Joined: Sat Jul 30, 2022 9:53 am

Price strategy

Post by luckyakter22 »

A few days ago, after a day at the beach —perks of Canarian Christmas— I went to an Indian restaurant in the south of Tenerife. The attention and the food, exceptional. The business —at full capacity— has the energy of companies that work. The interesting thing, its pricing strategy -the mechanism used to increase the average cost of each client-. Price strategy On each table a box of tea bags, like the one they serve in the restaurant. Very well packaged with a price tag: €6.99. Also attached to the box is a coupon with a €5 discount: “bring a companion and enjoy this €5 gift on any of your orders”.


The markup on each box of tea is probably close to €4. Also, if someone uses the coupon, we are dealing with a repeat customer or a new customer - both good news. Speculating a bit and not knowing the real numbers, if that restaurant averages about 100 tables a Special Database day and only one out of every ten tables takes the box of tea bags —working 250 days a year— they achieve a net amount close to €10,000 . If the restaurant operates with a margin of around 20%, the initiative would mean an annual turnover in meals of €50,000. If we take it to 5 or 10 years, the numbers of this proposal make it very interesting.

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What if instead of one isolated initiative there are two? It doesn't matter if your business is much bigger than this or much smaller. The economic principle applies in the same way. The pricing strategy as well. In a highly competitive environment, initiatives of this type can be the difference that allows you to advertise more than the competition or have the ability to spend more to take a person to the premises and, therefore, can become essential to survive or not. . The prosperity, margin and market power of our business stem from our pricing strategy. Increasing the average spend of each customer is raising the price—without actually doing it.
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