I learned a lesson on how to set prices to the optimal level when I least expected it. When I first met my wife she had a job at a local butcher shop. The owner’s name was Fred. He always positioned himself at the main cutting table with the butchers to his left and the meat display counter to his right. This way he could keep his eyes and ears on everything.
Like most good philosophies his concept on pricing was simple. “Everything has a magic price” he used to say. That’s where you sell just the right amount of everything to maximize revenues. When you think about it his pricing challenge was actually quite difficult. If the chicken breasts marked too low then he would wind up having to drop his prices on legs and wings so they would move or worse yet he might have to throw them out because they didn’t sell fast enough. Fred had more than chickens to worry about. He also had sides of beef and pork products to consider. It was, and still is, a busy butcher shop. Pricing was a continuous activity for him.
His pricing also considered the twelve employees who worked for his company. Fred wanted to pay them well enough so they could comfortably support their families and enjoy life. His company had also just bought a brand new retail store and the pricing had to be able to make enough money to pay for that as well. A lot depended on Fred’s “magic pricing” strategy.