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Last Update: Thursday July 29, 2021

Key Idea: Price To Turn

The Country Supply catalog offers unique products priced to please.  More...

Key Question:

A: 

Scott thinks that pricing is an art and that it is hard to teach art. Science we can quantify and understand and predict. Art is mysterious and hard to put our arms around.

Q:
  If we can't understand pricing like Scott because it is an art, do we know his overall pricing strategy?

A: 
Sure. He is the price leader. According to Marketing, the textbook by Charles Lamb, Joseph Hair and Carl McDaniel, "The three basic strategies for setting a price on a good or service are price skimming, penetration pricing and status quo pricing.

They go on to explain that price skimming is what innovators often do when they bring a new product to the marketplace. Today's headlines are full of discussion about new drug prices which are high because the pharmaceutical companies have to recoup the costs associated with research and development. Any high-priced item must justify the price with some amazing benefit. For example, "this exercise equipment does the work for you. You lose weight with no effort." If the maker of this equipment could actually document this claim, he could probably launch with a price skimming strategy.

Lamb, Hair and McDaniel explain that penetration pricing is, "opposite of skimming." Penetration pricing is Scott's strategy and it works according to these authors because Scott is operating in a price-sensitive market. The company that made this strategy famous is Southwest Airlines. The wonderful aspect of penetration pricing is that it will increase the market. People who at one time could not afford to fly would take a bus or drive their cars. The last ticket we bought Southwest was from San Diego to Phoenix. One way we got a price of $29. It is a five-hour drive across a hot, dry desert, so we always fly!

Penetration pricing by Vietnamese manicure and pedicure salons has increased that market by leaps and bounds in the USA. Twenty years ago, only wealthy women routinely had manicures and pedicures. While the old shops still charge as much as $25 for a manicure and $45 for a pedicure, at a shop owned by a new American from Vietnam, the price is as low as $28 for both! Today millions of "pink-collar" workers and school teachers make the weekly or biweekly trek to have a manicure and a pedicure.

We don't know for sure if Scott's low prices have actually created new horse lovers because Country Supply makes owning a horse more affordable, but we know that he receives fan mail from customers like this:

"I am a 13 year-old with the sweetest Arab mare that we got from the Heart 4 Horses Rescue. I am luckier than most 13 year olds. I get a fair-sized allowance and my own checking account. Everything I buy is for my horse. I am here to say, thank you so much for making ownership more affordable!"

Q:  Why would Scott or any small business set out to be the price leader when historically only big companies can make this work?

A:
  Remember that Scott's goal is to serve customers who live as he does. His passion has always been to find the best prices for himself and every horse lover who has to be on a budget. Scott was never lured into serving the high-end users although we heard Roxanne Wojan ask Scott to carry more English riding gear. Our guess is that if Scott can find the gear at low prices, Roxanne will see it in the catalog.

Think about it

Does your pricing strategy grow the marketplace? Do you want it to? Would it be interesting to investigate offering a price leading product or service as a loss leader?

Clip from: Country Supply

Ottumwa, Iowa: Meet Scott Mooney, the founder of Country Supply.  Scott has over 450,000 customers throughout the USA and in several countries generating over $17 million in annual sales.  Since the taping of this episode of the show, Scott sold his company to a global business.  He got that unexpected knock on the door and an offer he simply could not refuse. 

Country Supply

Scott Mooney, founder

PO Box 369
Louisiana, Missouri 63353

Visit our web site: http://www.countrysupply.com

Toll Free: 800-637-6721

Business Classification:
Distribution

Year Founded: 1984

Price To Turn

HATTIE: Most small-business owners around the country are not the cheapest, so how did you decide I'm going to be the price leader and how do you make that work?

SCOTT: You have to work just 10 times as hard to sell on price.

HATTIE: What do you mean?

SCOTT: You're going to be operating on lower margins. In fact, there are products that we've put into our line that we've sold at a loss because we didn't have the volume to be able to buy like the big boys buy.

CHRIS: Scott moves stuff around every day on the Web site. We're overstocked on a particular item or we need to lower the price or do something different. And so he's moving items around all the time, bringing them to the front page to --

SCOTT: Put them on sale.

CHRIS: -- put them on sale.

SCOTT: Pricing is an art. There's no science to pricing.

HATTIE: Let's talk about that.

SCOTT: If you're going to make it an art, you better watch those numbers every day because --

HATTIE: Good point.

SCOTT: Yeah, I mean, you don't know that, OK, I sold $100 worth of stuff, I made $45 profit today. Without going out and looking at each individual product, which, of course, we have those reports, too, That's kind of the big number that you looking at. And with pricing being an art, you can get a feel for what's selling, what's not selling just by looking at those margins 'cause you really know where your margins are on a lot of stuff. You just sense it so you kind of know what's selling and what's going on, what time of year it is.

HATTIE: I think what I hear you saying to me is it's the long haul.

SCOTT: Right. You've got to look at the big picture, keep your eyes on the horizon, but be aware where your feet are.

SCOTT: Now most of the trainers that you have here, are they keeping all of their horses here?

HATTIE: Scott's customer, Sandy Moore, is a horse lover who gets to earn a living around horses.

SANDY MOORE: So the horses that are in the arena up here are new babies, they're two-year-olds.

HATTIE: She's assistant manager of the San Luis Rey Downs Thoroughbred Training Center in Bonsall, California.

SANDY: The other thing that I like that you guys carry for people that are real trail riders.

SCOTT: See, we manufacture these and these and these. We sew these together in the back room.

SANDY: Oh, yeah, OK. Yeah, I'm looking at them.

SCOTT: You have one of these little patch pockets?

SANDY: No, but I've been thinking about getting one.

SCOTT: Well, you ought to.

SANDY: I know.

SCOTT: I designed those. I have a patent on them.

SANDY: Really?

SCOTT: I'm the patent holder.

SCOTT: Yeah, I know how my customers think because I think like my customer.

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