I was recently at the Midway (MDW) airport in Chicago and came across a Potbelly Sandwich Works (menu). I was fascinated that the sandwiches at the airport were only 10 cents more than its other locations around Chicago. I don’t think I’ve ever seen such a low airport markup. Potbelly sandwiches are normally a cheap $3.89 so they actually have quite a bit of room for markup – probably even up to 5-6 bucks. It’s these kinds of actions (along with their great service) that makes customers loyal to the company.
Another great example is Costco. From an Barron’s article:
As a matter of corporate policy, Costco refuses to mark up any product by more than 15% above its cost. When the company signed a new contract in 2005 with a supplier for Brooks Bros.-style men’s cotton and button-down shirts, and got a significant price reduction for a massive two-year order, it immediately cut the price of the shirts to $12.99 from $17.99, notes Richard Galanti, Costco’s chief financial officer. Other retailers might have phased in the reduction and captured added profit, but that’s not the Costco way.
When you don’t milk your customers every chance you get, you’re rewarded with loyalty and repeat business that’s worth more in the long run.
Do you know of any other good examples?
- Justin