Pricing products in your shop requires more than just picking a number and slapping on a price tag. Developing a proper pricing strategy will allow you to move product faster, attract new and returning customers and increase your bottom line. There is no single right way to establish a plan as it depends on the community you serve and your own personal goals as a business owner. In order to come up with a successful pricing plan for your shop, you need to need to take a look at your books, your costs and your clientele. Here are some questions to help you figure out when the price is right.
1. What is your market? Whatever income bracket you cater to definitely determines your pricing strategy. There is value perception based on the income levels and the cultural backgrounds in your area.
2. Who is your competitor? Is it a grocery chain? Or a similar shop? Are you one of many in your area fighting for the disposable income? If your competitor is someone in the same field, you need to differentiate yourself from them and pricing may be a big draw in these economic times.
3. What are your fixed expenses? What percentage of your total costs last year were fixed expenses? The easiest way is to include every cost that is not cost of goods. If you want to “live in the black” and not “in the red” you need to know how much you need to mark up product in order to cover your expenses.
4. What profit do you want? If you have fixed expenses of $50,000 and cost of goods is $20,000, how much do you want to make over and above that? I know I wouldn’t settle for anything less than total sales of $140,000 (double cost of goods and fixed expenses) as a base and would find ways to cut costs/fixed expenses without losing the integrity of the $140,000 and thereby make a larger profit. Mass marketers use this strategy a lot when planning a program. They work both ends of the calculations, negotiating costs by quantity buys or multiple buys from the same company. So if they were planning to purchase 100 items and the cost per item goes down by 10 cents if they buy 150, they would calculate that is a viable tradeoff. There is never acceptance of the price quoted.
5. What type of turnover do you have? How quickly are you selling your product? It costs money to maintain in your shop and that needs to be accounted for in your final pricing. If you are in a high-traffic area or have high sales volumes, you can afford a lower price than if you have to maintain an item for a week or two so it remains saleable. I’m talking perishable goods here as non-perishable is another story. With non-perishable you have the advantage of setting higher retails to start and gradual reductions as you sell through product.
6. What is your perceived value? Never take an item and mark it up at face value! Nothing bothers me more than seeing something priced below what it could be priced at. My best example is working for a wholesale company that had a beautiful wreath marked at $13.98. First of all, why wouldn’t I take the extra 1 cent and make it $13.99? Secondly…why not $15.99? There are certain price points that are dynamite! These include $4.99, $9.99, $12.99, $15.99, $21.99, $24.99, $29.99 – you get the point. You can FEEL an uncomfortable price point and examples include $13.99, $17.99, $22.99, $26.99 or $27.99. It’s all in perceived value.
Pricing of product in your store should be directly related to the amount of labour involved. I know of shops that use two-tier pricing: one for cash and carry and another for design work. This is a wonderful concept and kudos to those who have the time and the knowledgeable staff to execute this strategy. To me, it would be far simpler to increase all your prices and then provide discounts on cash and carry. A 10 to 20 per cent discount for cash and carry product makes the customer feel they have really received great value.
When designing for different floral segments, ensure that you charge accordingly. Gone are the days when all you needed to do was add an extra 20 per cent to design work and call it a profitable venture. Many shops lose their shirts on wedding or party work as the extra planning time is never considered. To ensure you’re making a profit, charge by the entire bunch of flowers (suggest designs that incorporate the entire bunch), take full markup and then figure out the time required to execute the event. What is the value of your time? A good start-off point would be $100 per hour. Include consultation, planning, designing and delivery. You can offer “free consultation” with two subsequent visits, then charge extra for future visits. If you are wary of this plan, do a trial run using both methods and see which works better for you.
Sympathy work and special orders all take extra talent and skill levels and need to be billed as such. Anything that requires you planning and ordering special product needs to be addressed as a value added skill and should be billed as such.
Correct pricing can make or break your company. It can also be a tricky business because you don’t want to overcharge your customers and turn them off. Step back and look at your products – ask yourself, and your staff, what would you be willing to pay for this item? The right price is any price that your customer is prepared to spend and one that will make you profit. Always remember that you provide your customers with a special talent and skill and you shouldn’t be afraid to charge accordingly.
M.G. Bernice Klassen is experienced in nearly every aspect of the floral industry, including retail, wholesale and grocery chain. Armed with a business administration degree, with a specialty in marketing and management, Bernice is now offering her services as a floral consultant to the industry. Contact Bernice directly at
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