Pricing Specials: The Strategic Balance Between Volume and Revenue
There are two ways to increase your top-line revenue: sell more items or sell items for more money. Today, we're going to talk through which works best for you, how you can model different outcomes, and potentially predict the future for your bar business. But your ability to do this is greatly dependent on the quality of your data. So, we will be using SpotOn, our podcast sponsor, as an example POS system, and showing how their reports and data are key to intelligent special and promotion management.
Understanding the Price-Volume Relationship
When we talk about pricing strategy and top-line revenue, what we're really discussing is the relationship between volume and price. That relationship is what determines your top-line revenue.
The fundamental equation is simple: Revenue = Price × Volume. But the application is far more nuanced. Lowering prices doesn't always translate to higher profits. Even if you sell more units, your discounts might be cutting too deeply into your margins.
One of the dangers I see bar owners fall into is constant discounts. When you're constantly discounting your prices, you train your customers to only come in during specials, which creates a feast-or-famine cycle that's hard to break.
It's critical to analyze your competition's pricing strategy, but don't blindly match it. Remember, if your price is way higher than competitors selling the same products, you'll struggle to maintain volume. Conversely, if you're pricing significantly lower, you might be leaving money on the table.
This is where having the right technology becomes crucial. SpotOn POS provides the analytics and reporting tools that make this price-volume analysis possible. Instead of guessing about your pricing impact, SpotOn's comprehensive dashboard shows you exactly how changes in pricing affect your volume and overall revenue in real-time.
The Everyday Special Approach
Rather than playing the "price up and down volume game," consider what I call an "everyday special" – a good deal all the time, not a great deal that's only available sometimes. This creates consistency for your guests and potentially a strategic advantage in your market.
Let me share a real example: In one bar I owned, we charged $12 for beer buckets every day of the week. Early in the week, competitors charged $10, making our price $2 higher. But Thursday through Saturday, they charged $15, making our price $3 lower. We never changed our price – it was $12 every day.
This strategy created an interesting dynamic. Early week, our volume was lower but our margin higher. Weekend volume increased as our price became more attractive. The result? Consistent revenue without the operational challenges of changing prices and confusing staff or guests.
With SpotOn's unified system, implementing and tracking this kind of consistent pricing strategy becomes seamless. Their platform allows you to set standardized pricing across all your service periods while still giving you the flexibility to run targeted promotions when strategically beneficial. The beauty is that all the data flows into one centralized dashboard, so you can see the full impact of your pricing decisions.
Finding your "sweet spot" price point requires understanding both your costs and your market. You need to determine a price that allows you to maintain your target margins while remaining competitive within your competition.
When Pricing Specials Make Sense
Despite the advantages of everyday value pricing, there are strategic times when limited-time specials can drive significant business:
Slow day/daypart activation strategies: Consider using specials to drive traffic during traditionally slow periods. I used to sell steaks at cost one night a week on Tuesdays because I knew for every steak I sold, I'd sell a couple drinks and other food items at normal margins – and I made money.
New product introduction specials: Limited-time pricing can help introduce new items to your menu and get customers excited to try them.
Event-driven promotional pricing: Special events, sports games, or holidays can warrant special pricing to capitalize on increased traffic or create a festive atmosphere.
Seasonal offers: Align your specials with seasonal expectations. People expect pumpkin spice in fall and tropical drinks in summer – pricing accordingly can drive interest and volume.
SpotOn's marketing automation tools make executing these strategic specials incredibly efficient. You can set up targeted campaigns that automatically promote your Tuesday steak special to customers who haven't visited in a while, or send seasonal drink promotions to guests who've shown interest in craft cocktails. The platform tracks which promotions actually drive incremental revenue versus just discounting business you would have gotten anyway.
Measuring the Impact of Your Pricing Strategy
Setting SMART goals (Specific, Measurable, Achievable, Relevant, Time-Bound) around your pricing strategy is essential for determining success. Don't just implement pricing changes without a way to measure their effectiveness.
You need to track key metrics when adjusting prices. This is where SpotOn's analytics really shine – their reporting dashboard provides the granular data you need to analyze how volume changes with different price points. If you reduce a cocktail price by $2 and only sell one more per night, SpotOn's reports will show you exactly how this impacts your bottom line.
When setting volume targets for special pricing periods, be realistic. If your Tuesday average is 50 guests, a special that brings in 65 might be a win – don't expect to match your Saturday numbers. SpotOn's historical reporting helps you set these realistic benchmarks by showing you exactly what your baseline performance looks like across different days and time periods.
Always calculate the true profit impact of discount pricing. What if you have an item that sells a lot and makes you a lot of money? Great. But if you have an item that sells a lot and doesn't make you much money, you need to increase the price. This is basic menu engineering, and SpotOn's item-level profitability reports make this analysis straightforward rather than a manual spreadsheet nightmare. Check out SpotOn’s free menu engineering resource.
The Guest Perception Factor
Understanding your guest avatars is crucial when developing pricing specials. Different guests have different value perceptions and motivations for visiting your bar.
Some guests are price-sensitive and will chase specials across town. Others value consistency and experience over price. Your pricing strategy should align with the guests you want to attract and retain.
The psychology of perceived value is fascinating – sometimes a slightly higher price actually increases perception of quality. This is particularly true for craft cocktails and premium spirits. For example, with an espresso martini, I might charge $12 because I know I can get a little more for an after-dinner drink that's seen as fancier. This helps balance out other items where I might want to keep prices lower to stay competitive.
SpotOn's customer insights help you understand these different guest segments by tracking purchasing patterns and preferences. You can see which customers respond to promotions and which prefer consistent pricing, allowing you to tailor your approach for maximum effectiveness.
Implementing a Strategic Pricing Calendar
Rather than random specials, develop a strategic calendar that aligns with your business goals and guest expectations. Map your specials to your annual business cycle, to help you better adjust to seasonal fluctuations in your market.
Coordinate pricing specials with your marketing efforts. A great special that nobody knows about is wasted effort. SpotOn's integrated marketing tools ensure your pricing promotions reach the right customers at the right time through email campaigns, social media integration, and targeted messaging.
Train your staff to effectively promote and execute specials – they need to understand not just what the special is, but why it exists and how to sell it. SpotOn's staff-facing interface makes it easy for your team to see current promotions and understand the goals behind each pricing strategy.
Evaluate and adjust your pricing calendar quarterly. What worked last year might not work this year due to changing market conditions, competition, or guest preferences. SpotOn's year-over-year reporting makes these evaluations data-driven rather than gut-feeling decisions.
Common Pricing Pitfalls to Avoid
Discounting your lowest margin items: This is just giving away the little profit these menu items make. Instead, discount items with lower food or beverage costs to drive volume while preserving overall margins.
Training guests to only visit during specials: If your Tuesday special is too good, you could end up cannibalizing your full-price business the rest of the week.
Failing to consider operational impacts: A half-price wing special might drive huge volume, but can your kitchen handle it without compromising quality or service?
Not accounting for increased product costs: In today's market, costs change rapidly. Revisit your specials and overall pricing quarterly at minimum to ensure your margins remain intact.
Creating specials that damage your brand perception: A dive bar offering $50 caviar service creates confusion; a high-end cocktail lounge with $1 beer night dilutes its brand.
Final Thoughts
Pricing is not just about numbers—it's about strategy. By thoughtfully considering the relationship between price and volume, understanding your guests' expectations, and aligning specials with your overall business goals, you can create pricing strategies that drive both short-term traffic and long-term profitability.
Yes, we want to be nice to our guests. Yes, we want to build communities and provide a place for people to come together and celebrate the key points in their lives. But we do that all to make money. You've got to protect yourself first. You've got to get your costing right so that you can get your prices right.
Having the right technology partner makes all the difference in executing these strategies effectively. SpotOn provides the comprehensive analytics, marketing automation, and operational efficiency that turns pricing strategy from guesswork into science.
Remember that success in the bar business requires you to be a professional in all aspects of operations. Your pricing strategy sets expectations for your guests. Be intentional, be consistent, and always measure the results of your pricing decisions.
If you're ready to upgrade your POS system to one that actually supports your pricing strategy with real data and actionable insights, check out SpotOn (affiliate link). They've been supporting this podcast because they understand that great bar operations start with great data, and their platform delivers exactly that.