How Often Can You Change Prices?
Every three months, Rocky Mountain Chocolate looks at each stock keeping unit and sets a target margin so that even if costs go up, the company will hit its target.
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PRICING
This company has started changing prices every three months: “Rocky Mountain Chocolate’s answer includes quarterly pricing adjustments for truffles, chocolate-covered pretzels, and more to account for the turbulent cocoa market. Executives call it dynamic pricing, though there are no plans to change prices based on demand around popular chocolate holidays such as Valentine’s Day, said Chief Financial Officer Carrie Cass. Instead, the chocolate seller will raise—and lower—prices on a set schedule based on its own costs. ‘We’re really trying to stick to a certain margin,’ Cass said.”
“The past several quarters have been bruising for the company, prompting cost cuts, leadership shifts, and operational changes including the new pricing strategy. Revenue has largely remained flat the past few years, aside from spikes around occasions like Valentine’s Day and Christmas.”
“With two price adjustments so far, total product and retail gross profit increased 200 percent, to $300,000, for the quarter ended May 31 compared with a year earlier. Total gross margin increased to 6.9 percent for the period, compared with negative 5.8 percent a year earlier. Rocky Mountain Chocolate anticipates adding several million dollars in gross profit this fiscal year because of the new approach to price adjustments, executives said in June.”
“The plan was put into motion this year after the company revamped its data collection on sales, input costs, and other items. Such figures used to come with a delay, and often weren’t granular enough to make decisions about specific products. Now, the company monitors sell-through, inventory trends, and product performance in real time and at a store level, and executives can see the margins tied to each product, Cass said.”
“‘So instead of just saying we’re going to increase prices across the board 5 percent or 10 percent or whatever, we strategically look at each [stock keeping unit] and set a target margin so that even if our costs go up, our adjusted pricing will still provide us with that target margin,’ the CFO said.” READ MORE
