Once upon a time a small boy and girl were building a sand castle on the beach. They spent hours building towers, walls, and a moat. As they were building the castle, the tide slowly kept creeping in closer and closer. Finally after working on this castle for most of the morning a big wave came in and wiped it all away. An adult who was watching all of this was at first feeling sorry for the children because of all the work they had put into building the castle. The adult then saw the children hold hands and run together laughing down the beach. It was then that the adult realized that although it is fun building empires, the lasting fun is having friends with whom you can continue to laugh and be with after all that you have spent your life building has washed away.

There is a trick to being successful and making sure that your retail margins are high enough to cover your “nut” (the cost of opening your doors) while leaving enough on the bottom line to reward you for your investment and for your efforts to build your business.

That trick is called MATRIX PRICING. Matrix pricing divides up products into categories based on their level of demand, the gross margin that is possible to get based on the first factor (together with competition) and the percentage of the total business that particular product has compared with all the others in the retail store.

Who uses Matrix Pricing? Just about every grocery store chain, most retail & franchise chains, the big-box stores (WalMart, Target, Lowes, Home Depot, hardware store chains (franchise, coops and independent chains), etc. The list goes on and on. Many people who work in these stores are not aware of how pricing is done.