1011: Pricing & Margin is a Balancing Act --Is your customer comparing apples to apples and pack sizes with the same pack sizes?
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Is your customer comparing apples to apples and pack sizes with the same pack sizes?
DSR Dave suggests if pricing is an issue with your customer, you need to sit down with them and go over the items in question and help them figure out what price they should be paying based on the menu price and the MARGIN THEY WANT TO MAKE. We call this the TARGET PRICE.
Not many of your competitors will take the time to do this, even if they were to know how to do it in the first place. YOU need to help your customers stay in business and making money; don’t assume they fully understand or have the time to go through this process.
Many times, you’ll get beat on price because neither you nor the customer are paying close enough attention to pack sizes and/or the quality of a particular product. Differences with either of these two can and will make a difference when a customer is shopping price. Most independent operators are just looking at the case price on the invoice, and if it’s higher than a similar product on your competitor’s invoice, the competitor wins!
Make sure you and your customer are comparing the exact same product and the exact same pack size. This could be one of those little things that’s a big thing when it comes to winning or losing a product in an account.
For example, 4/1 hamburger patties sold by one rep in a 9 lbs. case versus 4/1 patties sold in a 12 lbs. case will have a price difference due to the case size.
Maybe the menu price is not the right price. It takes some work, but it is worth it to get your calculator and the kitchen scales out to start checking yields and portion sizes. Work backwards costing out all of the items on the plate including garnishes, oils used to fry, etc. Make sure it is the “real” cost and therefore the real margin. Help them do this on every item on the menu. They won’t want to be in business without you because you might be the only DSR who will do this for them.
When you’re going through the process of figuring target pricing with your customers, you need to start with the most used items and the costliest items first, and then work your way down the list to the least used items. It usually comes down to the 80/20 rule with 20% of the products making up 80% of the total dollars they buy.
Two things to practice when you are pricing-out the margin-added items which are the other 80% of the products they purchase.
- Pay close attention to when pricing these items so you ensure the customer is making enough money so they want to stay in business.
- Be mindful of the competitors in that account and what they are good at. Did they start out as a produce company therefore they’re great at produce? Did they start out as a meat & seafood company, or maybe a coffee and spice house, or a dairy products provider that became a broadliner? They probably will kick your butt on knowledge and price in those categories and catch you speeding on those products.
It is always a balancing act.
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