Sevenpence a Gallon

Dear friend,

The riddle first, as the tradition demands. Back in the old town a shop might carry four hundred articles, and no householder in the parish could have told you the price of more than a dozen. What a man cannot remember he guesses, and he guesses from the little he knows.

Two ironmongers in the old town, forty yards apart, the same traveller calling at both doors.
The same nails, the same soap, the same paraffin oil out of the same sort of drum.
One put a third on everything he bought and never thought about it again.
One chalked four prices on his door post and took rather more on all the rest.
Same trade, same stock, same street, and the second man's till the fuller of the two.
By the autumn, which of them had the name of the cheap shop in the parish?

Hold your answer. Story time.

The Story

Both shops smelled of paraffin and hemp and cold iron: the drum on its cradle at the back with the brass tap, the scoop in the nail bin, the bell on a curl of spring above the door. The same traveller called on both with the same list and the same wholesale figures.

The first ironmonger had a rule, and a fair one. He put a third on what he paid, on all of it, oil to scythe stones. It was even, it was honest, it took him no thought at all, and he had not revisited it in nine years.

The second had spent part of the spring standing at his own door doing nothing that looked like work. He was listening to what people asked the price of. Not what they bought, what they asked. It came down to four things: paraffin by the gallon, yellow soap, candles, and nails by the pound. Those were asked for by name, and when he gave the figure the customer gave him a look back, because the customer already knew. He had bought oil last Friday, and across the road in August, and he carried the number the way he carried the day of the week. Everything else was asked differently. The woman wanting brass hinges for a cupboard door asked only whether he had any, having no notion what a hinge ought to cost.

So he split his shop in two, in his head and then in his ledger. On the four he priced as keenly as he could bear: the oil at sevenpence the gallon, which left him a halfpenny, the soap and candles and nails cut to the bone beside it. Those figures he chalked on a board at the door post where the street could read them from the far pavement, and he chalked nothing else. On the rest he took a half, and on the oddities more. Nobody asked. Nobody was in any position to ask. The woman went home pleased, and the shop she had bought her hinges in was the cheap shop, everybody said so.

The first ironmonger, meanwhile, sold his oil at eightpence halfpenny, because a third on oil comes to eightpence halfpenny, and his hinges threepence under his rival's. He was dearer on precisely the four articles the parish could price from memory and cheaper on the four hundred nobody could price at all. Every Friday a hundred and forty households carried a penny halfpenny of evidence home against him, and not one carried home the threepence on the hinges, because not one knew it was there. He was not greedy and not idle. He was even-handed, and even-handedness felt so like fairness that he never looked to see what it was doing.

The Lesson, Since You've Earned It

A customer prices four of your lines and guesses the rest, and his guess becomes your reputation. You are not judged on your price list. You are judged on the few things a person can actually check.

Be exact about which things those are, because the list is shorter than you fear. A price is only carried about in a customer's head if it meets three conditions. The thing must be bought often, so the figure stays fresh. It must be sold in more than one place, so there is something to compare. And it must be the same wherever it is bought, so the comparison is clean. Paraffin oil met all three. A pair of brass hinges met none, and hinges fitted by your own hands to a warped door met none of them twice over.

What the customer does with his handful is the part that costs you money. He does not conclude that your oil is dear. He concludes that you are dear, a statement about four hundred articles made on a sample of four, and he repeats it to his neighbours in that form. This is the ordinary working of what a price gets compared with, except that here the customer has chosen the comparison, and he has chosen the lines on which you have least to gain.

See, then, what a flat mark-up is. A decision made once and then quietly stopped being made, which guarantees that you are dear wherever you are examined and generous wherever you are not. The remedy is a morning with your own list. Mark every line that passes the three tests; there will be a handful, rarely more than six. Price those so that no rival can undercut you by enough to mention. Then take your proper margin on what can be compared with nothing: the irregular, the infrequent, the thing you specify yourself, the work that exists only bundled up with your own labour. If your mark-up there matches your mark-up on the oil, you are leaving the year's profit on the floor.

This is not a trick played on the ignorant and must not become one. The test for an invisible price is whether you would say it out loud, unprompted, before the customer has committed to anything. If you would rather he did not hear it until the bill, you have not found a margin, you have found an apology you will be making later.

In this century the three tests are applied faster, and the famous list is longer for it. Anything with a name and a number on it is checked in a moment, sometimes while the customer stands in front of you. But your own time, your own specification, the work of deciding what a job needs: none of that has a published figure anywhere. Only the border has moved, which is also why you publish the famous prices and quote the rest as one figure for the finished job, since a price broken into parts invites a pencil.

Two cautions. If the comparable lines are the bulk of your turnover you have a positioning problem rather than a pricing one, and no cleverness with margin will mend it. And the lists drift: a line kept keen for a decade may have quietly stopped being famous, in which case you are buying a reputation nobody awards you.

Three questions, for the week in front of you:

1. Which of my prices does a customer arrive already knowing? Write the list. If you cannot name them, notice for a week which are asked for by name, by people who already have the answer.
2. Which of my prices can be compared with nothing? Set your mark-up there beside your mark-up on the famous lines. If the two are the same, one of them is wrong.
3. What do people call my firm when I am not in the room? Ask three customers plainly whether they think you dear. The answer was built out of two or three figures, and will tell you which ones they are.

The Answer to the Riddle

By the autumn, which of them had the name of the cheap shop in the parish?

The second, and he held it while making more money than the man who was genuinely cheaper. A reputation for dearness is not built out of a price list. It is built out of three or four figures a customer refreshes every week, and the man who evened his mark-up across the whole shop had chosen, without knowing it, to be undercut where he was seen and generous where he was not.

The verse:

The oil and the soap and the candles and nails,
are the whole of a shopkeeper's name,
and the hinges and locks that are bought once a year,
will never be asked for the same.

Until next time. Go and write down the five prices your customers already know before they walk in, and find out today whether yours are right.

P.S. If you quote rather than keep a counter, you have the same two lists. Your famous figure is the day rate, or the price a square foot, whatever unit your trade announces itself in. Your invisible ones are the making good, the materials, the going back. Most trades have it the wrong way round: a proud headline rate that loses the comparison, and extras priced at cost out of embarrassment. Turn it over.

Also in the archive: The Prices Nobody Argued With, Three Names on the Wall and The Crowded End.