Let’s talk about add-on selling for example. Let’s say you pay $6 for a bottle of jewelry cleaner and you’ve priced it at $19.97 (You CAN do this, by the way. Not that you’ll sell many at that price, but you can then discount the price when people agree to add it on to another purchase.) So, when people buy something else you offer the jewelry cleaner at just $14.97, or about 25% off. Nice deal for them, right? And if 3 of 10 customers say yes to this deal – a common outcome – you’ve generated $44.91 in additional revenue and $26.91 in additional profit. But what would happen if you gave the customers almost 40% off on their “add-on purchase” of the jewelry cleaner (or $12) and as a result got just 2 additional customers to say yes to the offer. Now you’ll have generated $60 in revenue and $30 in profits. You see, it’s actually more profitable, in this scenario, to sell at the lower price. Now you might think, “Aw, it’s not worth the thought that has to go into it to get the extra $2.09 profit out of every 10 customers,” but the truth is, you could see an even bigger increase in closing rates, getting up to 60, 70, or even 80 percent to say yes to the offer, which would substantially increase the profitability of the effort. But jewelry cleaner is not where the real magic lies. Rather, it’s in the PRINCIPLE involved. The math may very well work for much more expensive items. The difference in closing rates between a 20, 25, 33, or 40 percent discount may be profound indeed, not just in those closing rates, but in actual profit dollars generated. And while this is particularly intriguing and applicable to up-selling and add-on selling, you may find similar truths in the events and promotions and sales you do. Indeed, the principle may apply to value-added offers as well as to discounts, with even more profound impact on the bottom line. For example, if you’re willing to offer a 20% discount on a $100 item, you’re willing to take $20 out of your pocket. Well, go ahead and take the $20 and “buy” your customer a value- added gift with purchase (or something similar) that costs you $20, but has a retail value to the customer of $40 to $50. You still sell the product for $100, and you still took $20 out of your own pocket to motivate the sale. But if closing rates increase at all, you’re profit dollars ahead. By Jim Ackerman LOWER PRICE, HIGHER PROFITS… Have you TESTED the effect of price on profits? Conventional wisdom suggests that higher prices result in higher profits. True on individual items, but not always over-all. 38 | The Jewelry Business Magazine