> 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.