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 Message 2956 of 22774 in Behind the Bar
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Subject: Calculate the pour costs, upsell, and get rich quick!
From: Dan the Melon Man
Posted: Fri Dec 12. 2003, 06:56 UTC
Followup to: "Re: Upsell"  by zyedgo  (Thu Dec 11. 2003, 14:10 UTC)
> The well brands are cheap and there is much more profit in selling 
> them than there is in more expensive calls. ( your bottle cost might 
> be 50% higher or even double but you can't price them 50% more or 
> twice as high)

Gotcha!
That's a very common misconception, but in most cases the opposite is true 
once you do the maths. Look out for the bottom line by maximizing $ profit per 
sale instead of % profit per sale.

To go through an example - 
Assuming 30ml shots, and a non-US currency which may sound either cheap or 
expensive to you, I dunno, but the example holds either way.

1l well Gin @ $33.00    = 33 shots @ $1.00 each
1l call Gin @ $39.60    = 33 shots @ $1.20 each 
1l super-premium Gin @ $66.00 = 33 shots @ $2.00 each , cost price.

Rule of thumb for bar pricing, aim at 20% pour cost, that is, sell at 5x the 
base wholesale product cost to you.

Which gives us the list price of $5.00 for well spirits.

So far so good.

Following the % way of thinking means that your call price becomes 
$6.00 and this super-premium brand would be $10 a shot.

Which, as zyedgo points out, could be excessive.

But your pricing need not be calculated this way.
Follow me here...

The net extra cost to the bar of pouring a call vs a well spirit is 20c , 
yet we're taking an extra $1 ( $0.80 clear) for the privilege.

If you succeeed in upselling to the super-premium that's $1 more expensive for 
us, but that's $4 in the till that wouldn't have been there.
We're making too much money here!

So... if the pricing was tuned even back to
well:          $5.00
call:          $5.50  (10% markup on a product 20% more expensive)
super-premium: $6.50  (30% markup on a product 100% more expensive)

You are still making hefty profits by upselling. (30c & 50c extra, 
respectively)

The point is that an upsell is replacing an existing sale - the customer was 
going to buy a well drink anyway. The sale of that well drink already has the 
overhead, rent, wages, ice & mixer cost factored into it. In the normal grand 
scheme of things, the bar 'profit' may be only 10% (50c) or less on that sale.
We can now play with the one factor - the liquor quality - and triple the 
profits in real terms.

It's easy to sell this to the customer, as they have the preconception zydego 
had - that something that cost twice as much (in the bottle store) will cost 
twice as much (in the bar).
They have already committed to paying at least $5 for the drink, and if we 
offer them something 'twice as good' for only 30% more - they feel they are 
winning!

While the till, which was expecting 50c clear at the end of the day has made 
$1 from that sale - you have, in real terms, doubled the profit for the bar!

... I have this extrapolated on a spreadsheet also - mess around with the 
formulas and see what happens.

.dan.


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