How to set & hit your price point

Still struggling to determine the optimal retail price for your natural product? And if you aim low, how can you drive down cost to keep your margin intact? These tips can help you hit a pricing sweet spot that accurately reflects the value of your brand in relation to your competition. If your ideal retail price is a shade lower than your margin would allow, consider these examples of other natural food brands that have successfully downsized their packaging to hit their margins.

Bob Burke

June 26, 2013

3 Min Read
How to set & hit your price point

One guiding principal is that your pricing should reflect thepositioning of your brand. Are you the category leader, or the number two or three brand? Are you striving for parity pricing with your key competitors, or premium pricing? Do you have superior features and benefits that command a premium price? And, as we have emphasized previously, is there enough margin in your pricing structure to sustain and grow your business?

When it comes to fine tuning your pricing, consider that many retailers follow traditional pricing schemes. They often follow popular beliefs about psychological price points: “Rule of $.99” ($.99, $1.99, $2.99, etc.) and “Rule of $.49” ($1.49, $2.49, $3.49, etc.). These are proven psychological barriers that should be explored when establishing both your regular and promotional pricing. For example, if you find that the retail price achieved based upon your current cost structure is $3.39, you probably would not adversely affect your sales by raising your wholesale price an additional 3% to achieve a $3.49 price point. This additional margin could go to help support your brand marketing efforts. Conversely, if your resulting retail comes to $2.09, it certainly makes sense to consider reducing your margins 4% to achieve the $1.99 price point.

Downsizing to hit your price point

One strategy used very effectively in the natural industry (and conventional of late) is to downsize package contents, which reduces costs and allows the company to achieve more aggressive price points. It is difficult in commodity items such as a half-gallon of milk or a pound of butter, but when you are putting chips in a bag, cereal in a box, or toothpaste in a tube, it is easier to vary from the standard conventional alternatives in terms of package size and weight.

In most examples of comparisons outlined above, the natural food product packages where downsized versus their conventional equivalent. Who is going to miss an ounce or two out of a box of cereal? Or four less cookies in a 16-ounce bag? Or one ounce less in the natural tube of tooth paste? It is far more critical that you hit a reasonable price point than that you match conventional product packaging standards.

When a leading yogurt brand decided to introduce an organic version of their top-selling natural yogurt, they were faced with a dilemma. The additional costs associated with organic ingredients resulted in the need to price the product over the $1.00 barrier price point for yogurt. A strategy that worked very well for the product was to keep it line-priced with their natural product (which was packaged in 8-ounce containers), but to reduce the size to 6 ounces. The product has been wildly successful and offers convincing proof of the value of downsizing. In this case, maintaining the price point was far more valuable than maintaining the standard yogurt-sized container. You’ll also find organic eggs packed in half-dozens, rather than the standard dozens. Similarly, organic milk comes in half-gallon sizes to limit the sticker shock of having to pay the equivalent of nearly $7.00 for a gallon of milk (versus $3.49 to $4.49 for conventional gallons of milk).


This content is excerpted from the Natural Products Field Manual, Sixth Edition, The Sales Manager’s Handbook, written by Bob Burke and Rich McKelvey. To learn more about or purchase the Natural Products Field Manual, visit the Natural Products Consulting Institute website.

About the Author(s)

Bob Burke

As a consultant since 1998, Bob Burke provides assistance in bringing natural, organic and specialty products to market across most classes of trade. This includes work in strategic planning, growth strategies, writing sales, marketing and business plans, budgeting, pricing, building distribution, broker selection and management, organizational development, strategic options, financing, branding, trade spending management and assistance around M&A, due diligence and venture strategy groups. He is also the co-author and co-publisher of the Natural Products Field Manual, Sixth Edition, The Sales Manager’s Handbook and Staking Out Space on the Supermarket Shelf. Prior to consulting, Bob was with Stonyfield Farm Yogurt for 11 years as Vice President, Sales & Corporate Development and Vice President, Marketing & Sales. He has held marketing positions with Colombo, Inc. and Sperry Top-Sider. He received an MBA from Babson College.

Bob has worked with numerous companies, including Annie’s Homegrown, Oregon Chai, Snyder’s of Hanover, UNFI, No Pudge!, Kraft Foods, Bayer Consumer Care Division, ConAgra, Kellogg’s, General Mills, Stacy’s Pita Chips, Kettle Cuisine, Small Planet Foods, New Hope Natural Media, Bushes Beans, Equal Exchange, Nantucket Offshore/Stirrings, Immaculate Baking, Dr. Bronner’s Magic Soaps, Dancing Deer Bakery, The Natural Dentist, Rice Select, EcoFish, PMO Wildwood, S.C. Johnson, Blake’s All Natural Foods, Megafood/BioSan, Mighty Leaf Tea, Lesser Evil Snack Co., Theo Chocolate, The Jane Goodall Institute, Kashi, Project 7, Vermont Butter and Cheese, Yoghund, Bord Bia, American Halal, Orgain, Turtle Island, the W.K. Kellogg Foundation, Bausch + Lomb, Boehringer Ingleheim, Harbar LLC, Rhino Foods, Popcorn Indiana, Stonehouse 27, The ProBar, Hail Merry, Mamma Chia, 479 Popcorn, Heel USA, Nature’s Path, Pfizer, Cape Cod Provisions, E&A Industries, Sopexa USA, Mavea LLC, Via Sana, Skyland Foods, Ignite Sales, Dave’s Gourmet and others.

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