Question 1

What is a tiered pricing strategy?

Accepted Answer

A tiered pricing strategy involves offering different versions of a product at different price points. For a bar, this typically means having "house" (basic), "premium," and "luxury" (or "super-premium") options for wine and beer. This strategy allows you to cater to a wider range of customers, from those looking for a deal to those willing to pay more for higher quality.

Question 2

How do I determine the cost for each tier?

Accepted Answer

The "cost" in this calculator refers to your "cost of goods sold" (COGS) for an average item in that tier. For example, for your basic beer tier, you might average the cost of your top 3 best-selling domestic drafts. For your luxury wine tier, you would average the cost of a 6oz pour from your high-end bottles.

Question 3

What is a "target margin" and how do I set it?

Accepted Answer

Your target margin is the percentage of profit you want to make on top of your costs. For example, a 300% margin means you want your selling price to be 4 times your cost (100% cost + 300% profit). Typical margins for beverages are:Beer: 200-400%Wine: 200-300%Cocktails: 300-500%Setting a target margin helps you price your items consistently and ensures profitability.

Question 4

What is a "blended margin"?

Accepted Answer

A blended margin is the average profit margin across all tiers, weighted by how much you sell of each (your sales volume). It gives you a more accurate picture of your overall profitability than looking at a single tier's margin. Your most popular tier will have the biggest impact on your blended margin.

Question 5

My sales volume is heavily skewed towards the basic tier. What should I do?

Accepted Answer

This is a common scenario. While it's great to have a popular option, it can hurt your overall profitability if the margin is low. Consider these strategies:Staff Training: Train your staff to upsell. Teach them about the premium options so they can confidently recommend them to customers.Menu Design: Make the premium and luxury options look more appealing on the menu with better descriptions or placement.Small Price Increase: A small price increase on your basic tier can significantly improve your blended margin without scaring away too many customers.

Beer/Wine Price Tier Calculator

Tier Costs & Target Margin

Sales Volume (Optional)

Results

Understanding Price Tiers

Frequently Asked Questions

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