Good/Better/Best Merchandising Issues
In commoditized products, it may be difficult to provide tiers of selection if you choose to merchandise in a good/better/best strategy. It is usually done through a quantity/value trade off. Think of 5, 10 and 15 pound bags of flour that go up in absolute price but reduce the price per ounce for the flour with each increase in bag size. Other ways to increase the value of commoditized items is to offer a bundled purchase where a single item is one price but two items packaged together is a lower price that purchasing two separately. This is especially useful when there are many items that are necessary to work together and they carry varying profit margins. A low margin Item A can be bundled with a high margin Item B that brings the margin of the overall purchase into a more profitable range. For example, if you only make $1.50 on Item A, but make $6.00 on Item B, pricing the two together for a combined profit of $5.00 makes it a deal for the customer as well as a more profitable transaction than if the customer had purchased Item A alone.
One of the most important selections you will make is determining where to set your opening price point (or lowest priced) item. If you cater to a low-income, student crowd you may want to make it a very affordable product with no bells or whistles. Conversely, if your target customer is a small business owner, your opening item may be a more functional product with a higher price point that is durable enough to last in a work environment. Review your competition and decide if you want to have items that are under, match or slightly above your nearest competitor in terms of price and quality. If your position in the market is to be the rock bottom priced alternative, you are likely to stock low-priced, low- featured products throughout the store. But if you want to stand for quality and value, you can likely bring in better items to be your opening price point selections.