Pricing was one of the biggest challenges they had to tackle. In retail there is the concept of Velocity Price Point, which is based on the fact that some things sell faster at one price point than at another. To arrive at their selling price, Houlihan and Harvey worked backward from the price that needed to be on the shelves for the customers. After subtracting the store's and distributor's cuts and also figuring in taxes, they ended up pricing most of their bottles at $4.99, and that gave them a very tiny margin. As a result, they had to go back to see where they could fine-tune their understanding of all the costs involved in making and selling wine. In the meantime, Harvey and Houlihan bootstrapped their salesforce by using college interns; however, even in this, they were very surprised by the impact of sales incentives and commissions. For example, if a store wanted to put the wine on sale for $3.99, Barefoot and the distributor would have to absorb the cost of the discount. Often the distributor would bill the entire discount to Barefoot. It was at this point that Houlihan finally realized that he wasn't really in the wine business. He was in the merchandising business, and the costs associated with keeping the right amount of wine on the retailers' shelves at the right prices were extraordinarily high.

What are two mistakes that Harvey and Houlihan made when pricing their wine?