Sitting Margin: Measuring a Pricing Strategy | Margin Master
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Measure, Don't Guess

Sitting Margin

The one number that says whether your pricing strategy is working

Plenty of software will change your prices. Far less of it will tell you whether the change was worth making.

Sitting margin is your blended gross margin, weighted by what you actually sold over the last twelve months — so a nail you sell ten thousand of counts ten thousand times more than a tool you sold once. Margin Master reports it two ways: your current sitting margin at the prices on the shelf today, and your future sitting margin at the prices a strategy would set. Same cost, same volume; only the price moves.

The future figure, and the annual gross profit change reported with it, are projections from your last twelve months of sales, holding volume and cost where they are so that only the price moves. That is what makes two pricing options comparable on your own items - it is not a forecast of realized profit. The realized figure is the current sitting margin you read the next time, once the prices have been on the shelf and your own volumes have had their say.

Current sitting margin rising to future sitting margin An illustration: the current sitting margin at today's shelf prices rises to a higher future sitting margin at the prices a pricing strategy would set, a gain of 1.7 percentage points. The cost of the items does not change; only the prices do. Current 32.4% Future 34.1% +1.7 points Same items. Same cost. Only the prices move.
Illustrative. Your own figures come from your own items and your last twelve months of sales.

Why a weighted margin, and not an average

A plain average margin across your catalog tells you almost nothing. It gives a slow-moving special-order item the same vote as the item at the front counter, so it can look healthy while the items paying your rent quietly lose ground.

Sitting margin weights every item by its own twelve-month unit volume. It moves when the prices that matter move — which is exactly what you want from a measure you are going to make decisions with.

Volume-weighted margin compared with a simple average An illustration. Seven departments are drawn as bars: each bar's width is the units it sold and its height is its margin. The departments that sell the most units carry the lowest margins, so the volume-weighted sitting margin of 31.7 percent falls well below the simple average of 41.1 percent across the same seven numbers. 20% 40% 60%Fasteners — 2,400 units at 22% marginPaint sundries — 1,200 units at 30% marginHand tools — 700 units at 38% marginElectrical — 500 units at 42% marginPlumbing — 400 units at 46% marginLawn & garden — 300 units at 52% marginSpecialty — 150 units at 58% margin Simple average 41.1% Sitting margin 31.7% most units, least margin fewest units Bar width = units sold  ·  bar height = margin
Illustrative. A simple average gives a once-a-year special order the same vote as the item at the front counter; sitting margin does not.

What is left out, and why

Items with no cost, and items whose margin falls outside the valid range, are counted in your item totals but kept out of the margin itself. One miskeyed cost can otherwise swing a blended margin by points.

The same rules the Profit Analyzer uses, so the number you see in an assessment, in a strategy run and in your profit analysis are the same number.

Where it fits

Margin Master does not just suggest new prices — it closes the loop

Analyze

The Store Assessment reads where your pricing stands and what the options are worth

Build

Margin targets, rounding schemes, SKU exceptions, custom groups, minimums and maximums

Implement

Run the strategy, review what it priced, and send the new retails to your point of sale

Measure

Current to future sitting margin, and the profit impact at your last twelve months of volume

Adjust

Change the steps that did not earn their keep, and run it again

Where you see it

Before you commit

Every option and every potential plan in the Store Assessment carries its current and future sitting margin alongside the number of price tags it would change. You compare approaches on the measure, not on a feeling.

On every strategy run

The execution summary reports the sitting margin the run moved, from current to future, and the profit impact at your last twelve months of volume — plus which items it left without a new price, and why.

Any time, for the whole store

The Profit Analyzer shows current and future sitting margin for the store and breaks it down by department, class, price range, vendor and non-vendor items, so you can see where the margin actually sits.

Start with the measure, not the prices

A Store Assessment gives you your current sitting margin and shows what each pricing option would do to it — before you change a single price tag.