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How do you determine or calculate your pricing? ๐Ÿท

Hey Seller Community! Hope you're all having a wonderful week โœจ

 

This week's question is...

 

 

How do you determine or calculate your pricing? ๐Ÿท

Do they come with preset prices? How often do you adjust them? Can't wait to read your replies! 

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@QuokkaCoffee Margins on ice cream and other frozen treats are already pretty good as it is.  And I spent a lot of time over our closed months buying up all of the product that I could before we opened, since I could see that the prices werenโ€™t going to get better for probably a year.  But when we blew through that product, inflation hit me square in the face.  The worst part of it for us was the freight costs, especially on our basic soft serve product.  Those have gone up over 100%, which is a huge impact given that Iโ€™m limited in where I can source that.

 

Honestly, if I were going to pass my entire costs on to my customers, I would have had to raise prices by at least 30% and in many cases 50%.  Iโ€™m not sure I could have done that.  So we decided to share the pain with our guests โ€” they eat about 60% of the increased costs and we eat the rest.  Also, for now, we are not applying our markup rule for the added costs โ€” we are assuming they will be temporary (ie - this season only) and only adding the extra costs to our selling price โ€” no profit.  For now, it is working, and the customers are by and large none the wiser.  But, I have the advantage of not having indoor seating and the massive overhead associated with that seating.  So we can do this, for now.

 

This is the area where I said being in a diverse socio-economic neighborhood is tricky.  Many of my customers count not afford the drastic increases Iโ€™d have to make if I passed everything through to them, with overhead.  So I try to carefully balance it, praying to whatever gods exist (if any) that this will break sooner rather than later.

 

Gauges of success?  Thatโ€™s easy for me.  It is my basic line of frozen treats โ€” dishes and cones.  As long as my CoGS remains relatively consistent (since that line is 75% of my sales), we will survive and even thrive.  So far, weโ€™ve managed it.

Chip

If my answer resolves your issue, please take a minute to mark it as Best Answer. That helps people who find this thread in the future.

Piperโ€™s Ice Cream Bar, Covington KY USA
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Click here to see a list of third-party apps I use to add functionality to my Square account!

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Same here. We are a children's bookstore and most books still have prices on them. We have to make sure we have a lot of gift items to pair with books in order to make a profit. We mark up based on costs, overhead, and shipping.  We also look to see who else is selling the item. Since we curate our collection, it is a bit easier to get people to buy since we can tell them the benefits to them if they do. 

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We are getting smarter with pricing. We run a salon.  In our first years we didnt want to raise prices or did it at odd times that didnt make sense. 

 

Lessons learned - Raise prices for an item at the peak demand time for that item. This should have been a no brainer, but we used to raise prices during our slowest season....that was dumb.  Now we do price increases during each items busiest month which ends up being around spring. 

 

Mistake 2 - We were matching competitors and saying that was good, however our work is better so we are working towards a premium. 

 

Finally - and this is the big one - We used to think excessive profits were greedy. Yes, we felt bad for charging more than competitors and raising price.  - We no longer feel bad.  We are actually in the process of setting up DYNAMIC PRICING in a SALON. This is unheard of!  We were already able to pull it off on one service line as a trial program and it has worked good, so we are expanding it to other service lines.  Multiple price points for the same service has increased our reach on the low end and increased our profits at the top end while aiming towards the max revenue we can generate from each customer.

I will warn - It is challenging to bill the same service to different clients at different prices but with some clever marketing you can do it and they dont notice that the "chevy" and the "cadillac" are  basically the same while targeting multiple price points. 

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Wow- what a great question- I am so interested to see how other businesses price.

For us- we have a few different categories of products so our pricing strategy changes depending. 

 

Across every category- the average markup is 3x cost..

However we do have a few traditional keystone products as well as books which are marked with the MSRP. 

 

With items that have MSRP we do our best to buy at markets and get specials... that is usually keystone less 2-5% and free shipping- every little bit adds up.

 

Our best margins are with our pocket crystals- we buy them by the kilogram and sell them by the piece.. because of this we often have margins of 500% or more on those items.. and the footprint are great as well.

Dina
Co-Owner Amityville Apothecary
www.shopamityvilleapothecary.com
Instagram | TikTok @AmityvilleApothecary

Podcast: Apothecary After Dark (YouTube & Spotify)
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I'm with @TheRealChipA and @mksavage on this one!

 

I've uploaded a screenshot of our Notion pricing and inventory databases in another thread but the principles are the same: I went into this specific business at this specific location (also a mix of wildly disparate socioeconomic levels) knowing I needed to charge a certain amount on our biggest sellers (coffee and toasties) for the math to make any kind of sense, with the awareness that we could make up for a smaller margin by the sheer volume.

 

A few years back I read Colin Harmon's 'What I Know About Running Coffee Shops' and thought it pretty life-changing. Understanding that I'd never make bank on running this type of cafe (slightly lower staff overheads due to lack of a full-service kitchen and training every single member of the team across all of our stations) made that bitter pill easier to swallow.

 

Since I still do most of the purchasing and bookkeeping myself, and liaise as often as I can with our suppliers, I get to audit our pricing regularly.

 

Sure there's rules like 30% COGs, 30% labor, 30% overheads, 10% take-home, etc. but recent events have seen us throwing that out the window as we just focus on continuing to provide the warmth and service we're now known for.

 

We're starting to flag with select regulars that there'll be price increases as we work towards our first anniversary but I'm confident it shouldn't result in a drop in trade (although my stomach did when I typed that!) because we've set up the groundwork: we take care of people because they take care of us. ๐Ÿ™‚

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"awareness that we could make up for a smaller margin by the sheer volume."

 

I'm hoping to get back to the volume the party industry was known for pre-covid. The party industry was hit so hard that volume is still no-where near where it should be which has a significant impact on everything.

 

Congrats on getting to your first anniversary, the first year is definitely the most challenging no matter how solid your business plan is.

 

One thing that stuck with me recently when talking to another business owner about price increases was that she said to just raise your prices, your costs are skyrocketing and it's either raise prices or eventually go out of business.

 

I just hope our customer base realizes it's not the early 2000's anymore, when we first opened minimum wage was $7 an hour. LOL

www.PartyManiaBethesda.com
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@PartyManiaMD Itโ€™s still $7.25/hour in my backwards-looking state (the tipped employee minimum is still $2.13 here), and probably would be lower if the powers that be thought they could get away with it!  Ha.

 

That brings up an interesting phenomenon Iโ€™ve noticed.  Our customers know (because we tell them so) that we pay our employees (all high school or college age kids) a non-insulting, NOT $2.13 hourly wage, that they pool all tips received and that we guarantee they will receive $x in tips/hour every week or we make the difference up.  Since we started making that fact common knowledge, weโ€™ve actually seen an increase in our average weekly tips.  Customers love our employees and reward them.  It makes working in this seasonal ice cream shop pretty lucrative for someone 16 or 17 or 18 years old.

 

The point of that aside is that customers notice more than we think they do.  They listen.  As long as we are open and honest with them without complaining and blaming others (the government, the shippers, etc, etc, etc), they usually respect that and show that respect with their loyalty.

Chip

If my answer resolves your issue, please take a minute to mark it as Best Answer. That helps people who find this thread in the future.

Piperโ€™s Ice Cream Bar, Covington KY USA
Website
Facebook
Click here to see a list of third-party apps I use to add functionality to my Square account!

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I actually got my start in an ice cream shop. I never thought I'd say I miss the days of being a

16 -18 year old but the stuff we worried about then was so much less stressful!

 

I would say that most of our customers are understanding, we've always had an uphill battle because of having to "compete" with companies like oriental trading/dollar stores.

 

At the end of the day I focus on providing a better quality product and the best pricing for said product. It's pretty evident because I'm now getting calls out of state asking if we ship weekly since we don't factor shipping into the price of our products. (we're pickup and localized delivery only)

www.PartyManiaBethesda.com
Please Require Customers to pick time/date at checkout for Square online. Thanks!
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I think people understand prices are going up everywhere. it sounds like you are very fair and conscious re: pricing- a little bit here and there will help you keep everything afloat.

Dina
Co-Owner Amityville Apothecary
www.shopamityvilleapothecary.com
Instagram | TikTok @AmityvilleApothecary

Podcast: Apothecary After Dark (YouTube & Spotify)
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View best awnser 

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For us as a Fish and Chip shop, on food items I like to be around 2.5x to 3.5x cost. For drinks we are around 2x. 

If items are labour intensive we bump the price up.

Chris Dimopoulos
Blue Sea Fish Shop Castlemaine
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We have common margins in the Pet industry, we work between 30-60% margin depending on the product involved. Most of our products have MSRP or minimum sell prices set by the manufacturer and failure to follow them can result in loss of ability to carry the product.

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oooooo I love this topic! 
Iโ€™m a hairstylist in Ankeny Iowa

I work with a business coach (Britt Seva) 

so pricing is exactly what we are coached to. 

I just switched to hourly for my color/cut services. (Think session pricing) 

itโ€™s working great! My clients love it and I do to because it keeps everything fair and easy to price quote. 

 

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Hey mdgolden01 sorry to bother you but I've been reading these posts to see how other industries priced there goods/services compared to how ive buildt our price list for residential construction (remodels and repairs). And just seen you were from Ankeny Iowa. My shop is located just down the way from Ankeny by Firestone in Des Moines. I hadn't seen anyone else located near here since I've been processing using square (just alittle over 2 years now) so I had to say hi neighbor. Also since you are in the hair and beauty industry do you or anyone you can refer do color? My wife has wanted to get her color done for awhile but her gal up and disappeared. Anyhow I'll let you be but if you do please let me know and I'll send her your direction. Thanks mdgolden01 have a good one.

Christopher A. Grimm
Midwest Drywall & Plaster, LLC
Http://www.midwestdrywallandplaster.com
C.Grimm@midwestdrywallandplaster.com
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@isabelle  Setting prices for me is pretty straight forward and set but the industry. If I sell some retail items prices are set pretty much from manufacturers in a sense, price could be adjusted to equal surrounding businesses with same items. 

Ryan Anton Schaffer RMT
www.reginamassagetherapist.com
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For our membership we tend to keep prices consistent with annualized rent increases. Sometimes we let a year or two go by with no increase for goodwill building. For our consumables like clay we use a 40% markup and discount to staff only.  For our pottery work that we sell as individuals we use a pricing spreadsheet that incorporates cost (clay, glaze, materials), labor ($25 an hour) and sets wholesale and retailx2 pricing according to the time it takes to make each piece. We love a spreadsheet :).

Deklan (Dex) they/them]

MudFire CEO | Square enthusiast

Visit me at MudFire online
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As a wedding planner I set my price at the industry standard and I don't charge above that as long as clients just need me for the planning process and day of coordination. For the month of July 2022 I slashed my prices in half to help with affordability. Events need planners to facilitate smooth transitions from one moment to the next. 

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I am occasionally asked "Is that your BEST price"? I answer honestly. "No. My best price is twice that, but I'm hoping it sells."

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Right! We go above and beyond for our customers! Hopefully we can get the sales our heart desires! 

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Love this response (and totally relate), @willtheengraver!

Michelle Savage
Co-Founder & President
Savage Goods | @savagegoods | savagegoods.com
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I stay up to date by checking monthly Forestry sites and then some. And then calculate in our area, risk factors, time of year, labor costs, degree of disease of tree or extent of damage and if it comes in as emergency or during regular or non regular hours. 

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When I purchase items I use the calculation of cost price divided 0.45

 

When I make an item I use the calculation of cost price divided 0.25

 

Cost price is the cost of the item plus the packaging and the label(s)

 

Renรฉ

Life is too short to eat boring cheese.
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Type a product name