How Do You Price Your Small/medium/large Versions?

[anytimeflowers]

I'm still struggling with this Mark, you've really gotten my attention. I've so often heard that you should never leave money on the table and this seems like a very good example of that. At first I took the fifteen dollar difference in price as leaving money on the table but that really isn't true ~ if I never offer a discounted upgrade, I'm leaving five dollars on the table, not losing fifteen.

I don't see why it couldn't work on select products that can be easily controlled on the website. In my situation now especially, it could really work. I have to buy 25 roses anyway to fill an order for a dozen. If I can't sell the other dozen I have to throw them away.

 

[lori042499]

My answer was no margins are sacred and must be maintained....reason being in all of your examples the makers of the product are unskilled low paid workers making minimum wage...in our stores, anyone who can make any arrangement costs 12-20 dollars an hour and in order to offer those medium and large versions you need to have someone on all the hours you are there...unless of course you have space and time to make extras and just have them for sale, but then that is just the price no incremental sales..We do not sell widgets thet are just on a shelf all the same in different sizes, we sell a custom made product...I do get less margin on things like tulips and roses simply because they are a more sought after product, easy to deal with and make up and will sell more at better prices, but mostly you do not need to be skilled to learn to make them, anybody can be taught how to make a rose vase or wrap up tulips...so the answer depends on the product and its difficulty to make...more difficulty more labor cost more money...

 

[pnelker]

Please don't think that I am taking sides in anyway in this debate. One size shoe does not fit all. Every shop must look at their expenses and their customer base for what will work for them. You can not compare yourself to the shop at the other end of town or for that matter around the corner. I just put my comment out there as the way I do things, and it seems to work for me. There are a few things that I have observed when working at other shops before opening my own. Most of the owners I ran into had a compulsion to buy the newest things from market and put them in their stores, even if most of their business came from selling flowers for the Big Three (Teleflora, FTD, 1-800). Pretty things, cute things, but when you are required to buy a doz of something you only sell 2 of in a year, in my opinion you've wasted your money, the other 10 are old by then. I've observed this to be a real problem for owners. Now depending on your shop and location this is not necessarily a mistake you must know your customers, where your orders come from and what you are really selling and your traffic if in a retail shopping center versus a stand alone building. Because florist are very creative people and want to play with the latest things this is a real draw for them, a hard one to keep reined in, at least for me too. When I was in outside sales the thing they teach you is that you DON'T WANT every sale. That may seem strange to someone in retail but how it relates is this....what are you selling? My self, I sell flowers and a few cards and an add-on or two but basically flowers. I don't carry the lastest, prettiest, things. I have walk in customer but they find me by google for florist not where is the closest gift shop. I try to listen to my customers, make friendly service a priority and give them the best product I can. I let them know that as a small shop I don't carry every flower in every color but if they need something special if they can give me a day or two I can get it for them. I'm trying to make customers for life, not just one sale. All I'm saying is we're all different and we need to find what works best for each of us and I wanted to share what works for me..........maybe it can work for you..........maybe not.

 

[anytimeflowers]

Please don't think that I am taking sides in anyway in this debate. One size shoe does not fit all. Every shop must look at their expenses and their customer base for what will work for them. You can not compare yourself to the shop at the other end of town or for that matter around the corner. I just put my comment out there as the way I do things, and it seems to work for me.

I don't feel like anybody is taking sides. Mark isn't trying to convince everybody his idea is the next best thing. We're just discussing whether or not this would be a viable option for florists to use to add to their customer base as well as putting a few more dollars in their pockets. And if so, what a general formula would be.

You are absolutely correct that there is not a one-size-fits-all way to run a shop, and the best thing any owner can do is to know their own customer and offer what that customer wants. Right now, that's where I'm hitting a rock. I know my customers would like a volume discount, I just don't know if it would be good or bad for me.

 

[theRKF]

Linda,

Why not run a trial? Create 2-4 special designs for your website and offer the upgrade structure that Mark has suggested. If sales increase in any noticeable way, you can look at the data to make a long term decision.

 

[bootcampguy]

I agree that no 2 shops are alike, but 75% of our business' are pretty close to the same. What separates us is marketing, not sales. Like the earlier mention, if an owner bought something and it didn't work, then they are not real bright to keep that product around. What I teach when I do some consulting work is , when that bill is do (usually net 30) and the product is still around, then it was a bad buy if most is still with you. Our inventory (90%) of it rotates out by the payments cycle of 30 days. When new products comes in, you must design, photo it and then put into sales paths for traction, like (RKF) said. If it slides off the road, then cut your loses and move on. Customers for life is the right marketing strategy Walmart would rather sell 100 cans of coffee and make a dollar a can, I would rather sell 30 cans of coffee and make $3 a can and forget about the $10. That $10 is what's killing florists, trying to do to much in a limited time frame. When people ask why I don't have all the ws, the main reason is they are unprofitable but they demand from me at a time that I can't give. To make a point with Mark is that we (florists) normally don't attempt to increase the sale buy allowing the customer (to add another dozen roses for $19.95/ or we have blown vases from Polland, for XX you can upgrade your vase). I think florist leave 20% of sales or better on the table per. year. Most shops I visit and I go to a least one in every city where I do a talk, most employees are cars salesman. They stand around and then perk up when they see a "sale" coming, then they just take the order with no selling involved at all.

Someone posted earlier that profit was the key, not margins. I jumped out of the chair and did 2 laps around the building on that one. We don't follow standard margins for a few years now. We've determined what we want to make and see that is attained on every ticket (or best we can). Our hydrangea are marked up 500%, they look great and can command that mark up. But I will always discount that product to sell more of it but only after the first sale.

 

[Mark Anderson]

It's good to hear from you Rick.

When you said "We don't follow standard margins" does that mean that you don't price your catalog products using a strict cost-plus formula? That instead you are aware of your costs, but price based more on the overall value you think the product offers?

 

[bootcampguy]

Yes and yes.....

 

[Mark Anderson]

I was hoping you were going to say that Rick!

This opens up another topic I think is really interesting – and deserving of it's own thread.

 

[sandytf]

My discount strategy has always been that I can discount product but I can't discount labor. In cases where it's the same amount of labor but more product, I would say yes. I think Lori has a really good point regarding our product. It's easy to compare sizes of popcorn. It's not so easy to compare two different floral designs. A design with twice the product doesn't necessarily look twice as big. So many variables such as style and flower choice. This would only work with designs that had a clear "difference" in the consumer's eye. Maybe with roses....a consumer can easily count the stems, but two dozen roses still doesn't LOOK twice the size of one dozen. I think it's extremely difficult to make that extra value apparent to the consumer in our industry.

 

[theRKF]

Sandy,

I think you're very right about the difficulty in explaining the extra value. I'm thinking of trying something simple, like this on a $90 arrangement: Upgrade your XXXX arrangement with 50% more flowers for $30.

It would have to have the value clearly laid out, and apply to something like a vase arrangement that can be easily expanded.

 

[anytimeflowers]

Sandy,

I think you're very right about the difficulty in explaining the extra value. I'm thinking of trying something simple, like this on a $90 arrangement: Upgrade your XXXX arrangement with 50% more flowers for $30.

It would have to have the value clearly laid out, and apply to something like a vase arrangement that can be easily expanded.

That's exactly what I was thinking Ryan. I ran some numbers and discovered that adding an additional dozen roses for and extra $30 would still net me almost $20 more; and I believe that everyone understands the difference between one and two dozen.

Sandy makes an excellent point about consumers not always readily perceiving the added value, so those differences will have to be clearly noticeable. I don't think this would ever work in a store but online this is exactly what a lot of consumers are looking for.

 

[FANCIES]

Interesting conversation I'm still trying to wrap my head around it!

 

[ChristiBrown]

love this discussion Mark! I love that it gets all of us really thinking about our pricing and why we price things certain ways. I think our industry needs to relook at pricing, that somethings are really off kilter!

 

[theRKF]

I think our industry needs to relook at pricing, that somethings are really off kilter!

If I might add to that: Some are off kilter, and some just need to evolve. Business as usual just doesn't work anymore.

 

[secretgarden]

I LOVE the dozen to 2 dozen idea and we are going to start that promotion November 1st on the website as a featured item. We will see how it goes. Now on a side note we have had a promotion all summer for $15.99 a dozen wrapped in paper to go. Some customers want to add a vase and have them delivered we have this price strategy - (These are color 50cm we get for $45 - $.58)
Dozen - $15.99
Vased with Greens - $25.99
Vased with Greens and Filler (baby's breath or caspia) - $35.99

When we do "vased" we gather them hand tied like a bridal bouquet and chop them short, drop them in the vase, and they are done. The customer can see the added value and we have very little added labor to the finished product.

We increase our profit with each upgrade. First product costs $6.50 (based on $.50 and tissue)
2nd Product - $8.50
3rd Product - $10.00

You would be surprised at how many people will upgrade to the $35.99 when given the option. Not sure if this really fits the original post but it's something we have had great success upgrading.

 

[Knife's Wife]

Following this thread, what an excellent topic. Using your examples of ice cream an popcorn... It is a no brainer as to why it works. The basic or small in these cases are over priced to begin with. Therefore the retailer looses no margin and the consumer FEELS like he has gotten a much better deal. In reality he is just getting what he already paid for.
In grocery store item pricing it is much the same large is price for x amount of profit, small is priced over profit.
If a florist raised their price on a dozen roses for a higher profit they may see more go for the 2 dozen but they may also loose some rose buying customers.

 

[master J]

Great post Mark! I think it works very well with roses, especially since there is not much labor to add 12 extra roses to a dozen already made. So, if you charge $60 for a dozen roses vased, why not offer 2nd dozen at half price or even less than that. So for example, $60 for a dozen, or only $85 for 2 dozen! If the roses cost you .80c a stem, thats only $9.60 added cost for the florist, and you are getting an additional $25 from customer. So an additional $15 profit on that sale. This also helps smaller florists be able to order larger quantity roses at better prices, and move them faster by offering 2nd dozen at a great price.

I also think it could be done with mixed flower vases too, on website with upgrade options like Ryan suggested. Instead of Deluxe or Premium, it could say "Add 50% more for only $30" or Double the amount of flowers for only $30 more"

 

[Mark Anderson]

Oh my goodness... Master J himself. Good to see you again.

 

[anytimeflowers]

Great post Mark! I think it works very well with roses, especially since there is not much labor to add 12 extra roses to a dozen already made. So, if you charge $60 for a dozen roses vased, why not offer 2nd dozen at half price or even less than that. So for example, $60 for a dozen, or only $85 for 2 dozen! If the roses cost you .80c a stem, thats only $9.60 added cost for the florist, and you are getting an additional $25 from customer. So an additional $15 profit on that sale. This also helps smaller florists be able to order larger quantity roses at better prices, and move them faster by offering 2nd dozen at a great price.

I also think it could be done with mixed flower vases too, on website with upgrade options like Ryan suggested. Instead of Deluxe or Premium, it could say "Add 50% more for only $30" or Double the amount of flowers for only $30 more"

Adam!!!!! Good to see you.

So I've been thinking about this some more and I've decided I'm going to premier the idea for Valentine's Day on my website. It's going to be for the short stem roses, 40 cm. Now I just have to make one, get a decent picture, and we'll see how it goes. Ryan, I may need some help on getting it set up for the add-on.