Pricing is one of the most challenging parts of running a food business.

The right price on the shelf (and in turn, to stores, distributors, and brokers) determines your success. You could sell very little of a premium product and a ton of a low-priced product.

The challenge? You need to know where you fall. And the strategy that’s going to get you there.

It took me six months to decide I wanted to test my prices. One of my mentors kept nudging me. “Test your prices! What’s the worst that could happen?” he’d ask me every month.

I wouldn’t do it.

$5.99-$6.99 (and in some places as high as $9.99) was where I wanted to stay. I call my product “super-premium” because that’s what it is. It’s not regular mustard. And I’m not making ridiculous amounts of it.

But, to make my business sustainable, I need volume. And volume comes (for the most part) when you lower your price. As this same mentor has said many times before:

“You are not selling a sandwich. You are a small part of the sandwich. People pay $10-12 for a sandwich because that is the meal. They are purchasing lunch. You, are just a condiment on that sandwich. So, why would people pay $7 for mustard when they can get an entire sandwich for just a few bucks more?”

He’s right.

It’s time to experiment.

Before I ran my experiments, I went to a handful of grocery stores in the area to see what the most premium priced mustard was. In all but one case, it was $3.99. (After research, Shaws started carrying Stonewall Kitchen mustard on an end cap for $5.69.) I wonder how that will do.

So, to make it into mass grocery, it’s at the most $3.99 — but I like $4.99 because we’re not your standard mustard. The research was right. Let’s get to those experiments. After all there’s nothing like cold hard numbers.

Experiment #1: Retail Pricing

Hypothesis: Lowering my shelf price to $4.99 and running my mustard on promotion for $3.99 increases the number of units I sell weekly.

What I did:

  • Lower shelf price to $4.99.
  • Add a week-long promo at $3.99.
  • Do demo in-store during promo week.

Where I started: When I started selling at this retailer, our mustard was $5.39. I increased my prices last year, which brought the price up to $5.69. Now, I’m slashing my prices to $4.99 on the shelf.

In 2013, we ran a promotion. My price on the shelf went from $5.39 went to $4.99. I sold 41 jars of mustard (with 8 jars sold at the demo). I didn’t run a demo in 2014.

Here were my results during our most recent promotion in April 2015:

At $3.99 on the shelf, I sold 67 jars (with 14 jars sold at the demo). This was more jars than we had sold at this retailer during all of 2015 combined.

That’s incredible.

Can I do better? Yep. My demo time wasn’t ideal — Tuesday from 1pm – 4pm. A demo on a weekend during the promotion would likely yield more jars.  I also think we did well because we were the only mustard on promotion that week.

Note: This promo happened because I sell direct to the retailer. I setup a meeting with the buyer (stressing less than 15 minutes) and gave them a better price. Then, the promo was ran as a scan-down. That means you pay per unit for every unit that crosses the register during a certain time period. In my case, it was 50 cents. That means I paid $33.50 for this experiment to happen. Well worth the price.

What I learned from experiment #1:

1. Price makes a difference – I wasn’t initially convinced I was going to move more product at a lower price. I not only moved 5x the product I normally sell each week, but I gained a handful of life-long customers.

2. Shelf talkers call attention to your product – shelf talkers are the bright signs saying something is “new” or “on sale”. In this retailer, the sign is bright yellow with black lettering. You can’t miss them. And when you’re the only one there, it’s even better.  This means off-peak promotions may be a better bet in the future.

3. Demos move more product when you product is on sale

Demos have been a pain in my side ever since I started this business. I used to sell 4-8 jars at full-price demos. They’re more exciting when your product is on sale. You actually move units. I found strategies like stressing the sale and encouraging people to purchase more than one jar were helpful.

Experiment #2: Farmer’s Market Pricing

While our farmer’s market isn’t year-round, it’s packed in the summer with 5,000-8,000 people a weekend — a good mix of tourists and locals. Prime time for experiments.

Historically, we’ve had loyal customers (as I’m sure you do, too). People who buy from us every week, regardless of price. But, as with the above experiment, I wanted to see if we could increase our volume by giving customers something for free.

Hypotheses: I’ll increase my volume by giving consumers a jar for free when they buy three jars.

Where I started: Here’s our initial pricing at a farmer’s market or festival:

  • One jar – $7
  • Two jars – $12 ($6/jar)
  • Four jars – $22 ($5.50/jar)
  • Six jars – $32 ($5.33/jar)

What do you think most people buy? They get 2 jars for $12. This way, I’ve increased my average customer value from $7 to $12 by using a steep discount. As you get higher in quantity, less people buy.

The test pricing:

  • One jar – $7
  • Buy 3, Get one Free ($5.25/jar)

The incentive here is to buy three jars because that’s the best per jar rate. I thought because we had 9 flavors to choose from the buy 3 get one free incentive would make it easier for customers to choose flavors.

The results:

  • 3 people at the farmer’s market take advantage of the deal. (2 were long-time customers)
  • Six people purchased 2 jars
  • The rest purchased single jars.

Revenue wise, it was a great day at the farmer’s market. Too many variables come into play to know if this pricing strategy actually worked: it was the first farmer’s market, the weather was great, and the mix of people was different, too.

We switched back to our regular pricing the following week. TONS of people purchased two jars and a handful purchased four. This revenue cocktail produced our best farmer’s market ever. (Yay!)

What I learned from experiment #2:

1. Give customers an accessible incentive. At $7/jar, mustard is certainly a hard sell — especially at a farmer’s market. But then, I had created too large of a gap to get to the next reward. Customer either paid $7 or got a deal at $21. The gap was too large for the clientele at the market.

2. Price for your audience. When when we travel during the upcoming festival season, I may try “Buy 3, Get 1 Free” again. Customers tend to buy gifts at these shows so they may be inclined to buy more mustard.

I learned a lot during these two experiments — and I continue to try stuff out to see what works. You’ll find some of that in future blog posts.

How to apply this to your business:

Don’t be afraid to try something new. It doesn’t have to be pricing. It could be jar label, size, store strategy, etc. You never know what tweak takes your business from zero to millions. If you try any experiments, I’d love to hear about them in the comments below.