Boost Profits in Paint and Decorating with Smart Margin Management

The difference is in the details for small business owners.

If you own an independent paint and decorating business, you may think that the only way to grow your margins is to match the prices of big box stores. But this may not be a viable long-term strategy, as your store has lower volumes and higher costs. However, you can offer some benefits that the big chains cannot: more personalized service, a convenient location, and an overall better customer experience. These value-added factors can attract and retain those customers who seek quality over price. But how can you balance quality and price to appeal to a broader swath of today’s consumers? The answer is to manage your margins effectively optimal prices that boost your revenues and protect your profits while increasing customer loyalty.

How to Change Your Customers’ Price Perception

Some customers may assume that independent paint and decorating businesses charge higher prices than big box stores. To change this perception, you need to know how and when to price competitively while emphasizing excellent customer service.

Two pricing scenarios influence how customers perceive your prices:

• Everyday low pricing, where customers expect you to offer competitive and consistent prices
• Full price plus heavy promotions, where customers see you as a quality brand that offers discounts to create a sense of urgency to buy

How to Mix Pricing Strategies for Your Paint and Decorating Business

You can use both pricing scenarios to your advantage by setting everyday low prices on some items and using promotions and discounts on others. The trick is to pick the right items for each strategy.

You can set everyday low prices on fast-moving items, those that customers buy frequently and repeatedly. Display these items prominently on end caps and at the point of sale (POS), where they will catch your customers’ attention. On the other hand, you can set higher prices and margins on slow-moving items, as well as hard-to-find products, that you happen to stock. You should identify the items that are unique to your business and mark them up accordingly. 

Taking the time to select and promote the right items at the right price can help you maximize your profits and differentiate your business from the competition.

How to Optimize Pricing Strategy

You don’t have to rely on guesswork to set your prices. Instead, make the most of your POS retail management system to discover insights into how your pricing strategy is working with customers.

Your POS system can help you:

• Categorize items by department, class, and fine line
• Label items as commonly available or hard to find
• Rank items by popularity

You should check your POS system reports regularly to monitor sales trends and look for:

• Fast-moving, high-margin items—these can hurt your pricing image
• Slow-moving, low-margin items—these can reduce your profits
• Dead items—these can waste your capital and force you to sell at a loss
• Everything else—the faster an item sells, the more you need to price it competitively and display it prominently

You should also consider your local market and adjust your prices accordingly to match what customers are willing to pay. 

How to Fine-Tune Your Prices for Your Paint and Decorating Business

Once you’ve set your prices, you should review them periodically and adjust as needed:

• Only discount where necessary to maintain your price leadership.
• Use your retail management system (RMS) and create a pricing matrix model that includes detailed pricing categories.
• Increase margins on impulse purchases while showcasing and promoting complementary products.
• Test item elasticity using technology that measures how price changes affect demand.

Use your RMS to help you set up price rounding schemes so you don’t have to do it manually.

How to Use Discounts and Promotions for Your Paint and Decorating Business

You can use price promotions to keep your business and brand in front of customers while driving store traffic and sales. These discount-oriented events must be executed carefully to keep things streamlined and effective.

• Focus on the entire “market basket” customers buy when you run promotions and merchandise complementary items alongside discounted goods.
• Use buy-one-get-one promotions to support your blended price-perception strategy while simultaneously fostering impulse buys.
• Use coupons to attract new customers tempted by offers, effectively growing your customer base and increasing loyalty.
• Use simple discounts to drive customer behavior and mix things up by offering discounts for certain days of week, age group, or other discount strategies.
• Always track promotions and measure results to learn how discounted and complementary market basket items performed so you can fine-tune future offerings.
• Use your retail management system to define, prepare for, and track promotions with reporting and analytics to understand the results of promotions.

It’s okay to run a promotion without dropping prices. You’ll build brand awareness, and consumers will assume your advertised price is a good one.

Maintain Success with Margin Management

With your pricing strategy and practices in place, you’ll need to protect margins by adjusting prices when costs change. Here are some tips:

• Walk the aisles periodically and check label prices randomly to help ensure they match your system prices.
• When costs increase, mark up all inventory immediately; when costs decrease, cut prices only after you’ve sold most of the inventory acquired at the higher cost.
• Use your retail management system to update costs, calculate new prices, and print new labels when a cost adjustment is needed.
• To protect your margins, have your retail management system alert you when salesclerks make price exceptions at the POS.
• Actively manage prices across store locations and vary the price by location for items that could garner more margin.

With the right attention to key details and the right retail management solution in place, you can use margin maintenance to enhance customer loyalty and drive success throughout the year.

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