Cop Keystones as Historical Mementos

Following Hurricane Katrina’s destruction, U.S. Senator Joseph Lieberman described the Department of Homeland Security’s responders as people who, “ran around like Keystone Kops, uncertain about what they were supposed to do or uncertain how to do it.”
     The allusion was to the stock players in silent movie comedies from Mack Sennett’s Keystone Film Company. The Keystone Kops went in all directions at once, jumped up and down, and drove their vehicles recklessly, all while failing to apprehend the perpetrator of the crime.
     The implication of “Keystone Kops” has stayed solid over the decades, but the constituent words do have additional meanings. Think about “cop” in the sense of grabbing away. Think about “keystone” in the retailing sense of pricing an item at double whatever the supplier charged you.
     Like the Keystone Kops, keystone pricing should be considered as history. This method of setting margins violates the teachings of behavioral pricing research—teachings that allow you to maximize your profitability. Shoppers pay you for the value they place on the item, not for some multiple of what you paid for it.
     Why then is keystone pricing supposedly resurging? Why did the editors of Gifts and Decorative Accessories decide to have a feature article titled, “Let’s Kill Keystone”?
     I’ve concluded it has to do with the tough economy. The smart retailers realize they can’t keep cutting prices if they expect to survive, so they defer to keystone pricing to discipline themselves. The understaffed retail businesses think they don’t have the time to assess the proper margin on each item individually, so they depend on the vendor to say what to charge, and many vendors are accustomed to quoting keystone pricing.
     Unlike the Keystone Kops, keystone pricing, then, is an example of too little activity, not too much. The Kops didn’t catch the criminal, but at least their activity amused us.
     Devote your time to setting proper margins. They are your lifeblood. Yes, the price you charge the customer for an item certainly bears a relationship to what you paid the supplier. And shoppers are particularly likely to accept a price increase when you explain the increase is due to your costs from the supplier going up.
     The problem with keystone pricing is the automatic formula applied across the board, across the shelves and racks. Set your margins as close as possible to the level of the individual Stock Keeping Unit (SKU).

Click below for more:
Set Your Own Prices
Set Higher Margins on Low Velocity Items
Prepare Customers for Price Increases