Pricing

When lowering a price makes you more money

By José, Mise en Profit · Margin times volume beats a fat margin nobody buys.

Almost every pricing instinct points one way: up. Costs rise, so prices rise. And usually that is right. But there is a move most operators never consider, because it feels backwards, that can grow your bottom line: lowering a price. Not on everything, and not blindly. On the right dish, with your numbers in hand, a lower price can make you more money than the higher one did.

Margin is dollars, not percent

Here is the mental shift. A 70 percent margin on a dish that sells 5 times a week makes you less money than a 55 percent margin on a dish that sells 30 times. The percentage looks better on the first one. Your bank account prefers the second. Total profit is not the margin on a plate, it is the margin times the number of plates, and we forget the second half because the percentage is the number we stare at.

Why it works

A high-margin dish that barely sells is leaving money on the table. It is priced past what the market wants to pay, so volume is choking. Bring the price into the range guests will actually buy at, and the jump in volume can more than make up for the smaller margin per plate. You traded a fat margin nobody was buying for a healthy margin lots of people are.

The one rule that keeps it safe

This move is only safe if you know your floor. Lowering a price toward your cost, or worse below it, is a fast way to sell more and lose more. You can only do this when you know exactly what the plate costs, so you know how much room you actually have. (That floor is the foundation of pricing a menu item properly.)

Test it on one dish. A high-margin item that underperforms is the candidate. Drop it into the range the market wants, watch the volume, and let margin times volume do the work.