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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! 

๏œ๏ธ Isabelle | she/her
Seller Community & Super Seller Program Manager | Square, Inc.
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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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I'm eager to see other people's replies to this, especially people in the food/beverage industry! It feels like a combination of art & science and is a constant learning process for us.

 

Our first step is to look at our ingredient/food cost for every item as well as estimated labor, knowing that we want those costs to stay under a certain percentage. Knowing food cost should be 30%, for example, helps us know where we need to set our pricing to make sure that's the case. Then, we do periodic "audits" of other cafes/coffee shops/restaurants in our area and price compare -- are our prices way lower, much higher, or somewhere in between? We personally don't want to be the most expensive option, or the cheapest option -- so we try to fall somewhere in the upper middle of that pack, while making sure we hit our desired percentage goals. 

 

With how volatile ingredient prices have been lately, we've been keeping a very close look on our pricing and adjusting as we need to (for example, when avocados doubled in price from one week to the next). We try to just be very transparent and proactive with communicating changes with our customers, who generally are okay paying for high quality food and service.

 

Look forward to seeing other replies to this!

Michelle Savage
Co-Founder & President
Savage Goods | @savagegoods | savagegoods.com
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The last coaching session for my business (copywriting/marketing/advertising) included a comprehensive pricing guide for newly minted copywriters. 

 

So with this guide, I can be fair and consistent with one less thing to worry about.  It takes one major thing out of the process, and myself and the customer can concentrate on the service I provide and they need, and whether there is mutual interest.

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I have a mobile pet grooming company and we base our prices on a few factors.  

 

At first I checked what the pricing was like from others that were doing mobile grooming in our area.  That was a mistake.  Groomers, like many creatives, are notorious for undercharging and not doing sufficient price increases to keep up with inflation.  

 

A little over a year later, half the mobiles in our area went under because they couldn't afford a vehicle repair and hadn't planned ahead for those sort of expenses.  Luckily, we knew they were undercharging so we started higher than them, but not high enough and still had to do a 30% price jump to keep up with where the surviving mobiles switched over to.  I think it's a more accurate price for our services now but it might be able to go up a little bit more.  

 

Since we have so many regulars it's very taxing to raise their prices. After this big jump we'll probably wait until early next year to reassess how much more to increase it.

 

This price change was the best decision we've made.  One of the things that allowed us to pull the trigger on the price change was the realization that losing some clients is not a bad thing. We played around with the equation: $P*G= $S meaning P is our average service price, times G # of grooms, then our total sales would be S.

 

We soon realized that even if we were to increase the price by so much that we lost enough customers to where our total sales dropped a bit, we would still be better off for it because that would be a lot less wear and tear on our groomers and our vehicles, less gas, less product, less burnout, and we'd be able to start fitting in more of the people who we didn't have the availability to take anyway.

 

We ended up losing a lot less people over the change than expected and are still running a waitlist. We were able to hire more experienced groomers recently so we'll be catching up closer to our demand shortly.  We're also in a major metro area that is chronically short staffed on groomers so that plays into our demand level which gives us more pricing flexibility than other areas would have.

 

From one service to another we consider the scope of work based on how long each of the different services would take the same groomer to do (because everyone's skill level and timing is unique) then we use that as a multiplier to determine average service prices by breed.  We add another modifier to this for the risk, bodily strain, or experience level needed to perform a certain service.  Most salons in our area don't do this enough so they end up with large, high maintenance breeds being underpriced for their workload -- one of the major causes of groomer burnout.

 

We also had to consider pricing within our niche of mobile grooming much more than the prices of traditional salons because our labor is higher and our equipment and maintenance costs are different in order to provide grooming services at people's homes.  We have drive time, and we groom one dog from start to finish rather than batching them like an assembly line in a salon.  We also need more experienced groomers because they have to be able to do these grooms on their own without being able to ask the groomer at the table next to them for feedback as they would in a traditional salon environment. 

 

This is an example from a premium brand perspective. It's important to consider all your additional costs that need to be covered with this sort of brand placement because you need account for all of that and still have healthy margins in order to be able to show up the best that you can.  If you're not priced high enough your customers can feel it and your employees can feel it because there's no wiggle room for vacation time, equipment upgrades, etc. if you don't plan for them.

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I absolutely love reading answers from wildly different industries to food & beverage, and thoroughly enjoyed yours! We're similar in that I've tried to position the company as a premium brand--quite easy since there isn't that much 'competition' in our area--and train my team to think of ourselves as such.

 

I've been forced due to labor shortages to hire inexperienced young folks but often get them to reframe to think less about the what of our day to day (making coffee, constantly cleaning up after people) and more about the why (providing genuine hospitality, offering a quick haven from work and responsibilities, etc.), and how that allows us to charge the prices we do. 

 

And how, hopefully, knowing our value becomes a solid bulwark against future complaints regarding any increases.

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Being a specialty retailer it's hard because there are no set margins. There is perceived value, what our competitors sell a product for, and margins which can be all over the place.

 

Typically if an item is less than $20 I'll look for a 3-4 X cost, if it's over $20 I am looking for a 2-3 X cost. 

 

I usually have google search and Amazon both open whenever I receive a product to ensure my prices are in line or even cheaper with what the current rate is. 

 

I would say 90% of the time we're the cheapest option because a lot of the online stores have to factor in shipping which on stuff like Pinatas is super expensive. 

 

I try to balance the costs of doing business and having a LARGE inventory versus pricing to ensure product is moving; unfortunately there are some realities in the retail industry which affects margins.

 

I also use Square Loyalty which I have set to offering a 10% towards future purchases for my customers. None of our competitors offer a loyalty program.

www.PartyManiaBethesda.com
Please Require Customers to pick time/date at checkout for Square online. Thanks!
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I am a retail jeweler and from 2009 to December of 2021 I had my own store. I have been a professional jeweler for 38 years, and I am now 73 and no longer have my store.
  The traditional way is that pricing is composed of 3 parts. Overhead, cost of goods/labor and profit. Usually close to even thirds.
  I work a little different. I make both gold jewelry and sterling silver jewelry, and there is actually more labor in silver than gold, because it is harder to work with. Basically, I chose a 'starting' point. In rings, they start at $75/each, for cast rings in silver with no stones. Starting at size 6 1/2, the price goes up $10 and does so each 1 1/2 sizes, so again at 8, 9 1/2 and so on.
  Rings that are wider than 6mm are an extra $10, and rings that have a pierced design are more work so those I add on as the time dictates.
  A cast silver ring starts with hand carving the ring in wax, casting it into metal and then making a vulcanized rubber mold. This allows me to spread the cost of carving the wax (a few hundred dollars) over many rings rather than making them one at a time (I do that as well, but that's a different story).
  With the vulcanized mold in hand, I pressure inject melted wax to get an exact copy of the original (minus a small amount of shrinkage). Then I clean any mold lines off of the wax and add/subtract wax to the bottom of the shank to get the size I want.
  I usually cast 5-10 rings at a time, so I do that procedure until I have the rings I want to cast. I attach them all to a central wax piece and make a 'tree'.  I put that tree into a metal 'flask', a tube, and there is a common point of access reaching the base of the wax 'tree' of rings, that is the center wax that each is attached to. A high temperature plaster of paris, an investment, is mixed and poured into the flask with the tree inside and completely covered (a little extra headroom is always a good idea). When the investment hardens, the rubber base is removed (did I forget to mention that???). The flask is placed in a kiln, with the opening tube facing down, and heated to about 1100C to melt the wax (this is the Lost Wax Casting). When the correct temperature of the flask is reached, the metal is melted in a crucible with the other hands. When it is good and melted (but not TOO hot) the flask is taken out of the kiln and placed on a porous pad that has a vacuum sucking on it. The metal is poured into that opening filling the negative wax space. Then, after it cools, it is broken out of the investment. Each ring has to be sawn off of the tree, individually cleaned up (filing where the tree attached, sanded to enable a bright polish etc).  Then they each get tumbled to clean up the recesses and polished on a buffing machine, inside and out. I then use a very sharp pointed piece and put a texture to the background.
  Each ring, from injecting the wax to the final texturing takes 1-2 hours, hence the price. I make mostly Celtic jewelry and am vending now at Highland Games, Renaissance Faires and some Arts and Craft shows.
  My website is www.thecelticjeweler.com

 

I hope I helped some and didn't bore you to bad.

Will B 

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So, Iโ€™m with @mksavage on this one.  Itโ€™s a balancing act, and requires constant attention in the food & beverage world.  We, too, want to find ourselves in that pricing sweet spot.  I love it when we are making good money and still hear โ€œis that all?โ€ from customers.

 

I have a spreadsheet (cue the laughter and nods from Square folk who are well aware that I have spreadsheets for EVERYTHING!)โ€ฆ. Anyway, I have a spreadsheet that I developed years ago.  It is actually an app in spreadsheet form.  In it I keep my โ€œpantryโ€ list and update costs every few months.  It tells me what needs attention and what is fine where it is.

 

While I at least give attention to the x% rules, I donโ€™t live and die by them.  For example, beer and wine here at my ice cream shop is something I offer so that parents have other options while their kids are getting ice cream.  Iโ€™m not trying to make a killing on those, so my margins are less than most bars.  Also, in the current inflationary world in which we find ourselves, my CoGS are higher than normal because I made the decision to โ€œsplitโ€ the temporary (please be temporary!!!) increases Iโ€™m experiencing.  So far that balancing act is working well โ€” customers didnโ€™t even notice that I did a price increase last week.  Thankfully, on $8-10 average checks, those increases arenโ€™t so noticeable.

 

Iโ€™ll put my plug in here.  Square really, really, really, really, really, really (x100 million) needs to offer a restaurant and bar costing and pricing app.  Yes, I know, food and beverage pricing is hard.  But I did it with a spreadsheet without all of the fancy tools that software engineers have these days.  Iโ€™ve got a very good start on what could become a Square Restaurant/Bar pricing app! (JKโ€ฆ or am I?)

 

Iโ€™ll add one more rule I live by.  Piperโ€™s is smack in the middle of a mixed-use residential/commercial urban core area.  Within 10 blocks of us are people who have more money than anyone should ever have, and those who are barely getting by day to day.  We want to appeal to both crowds.  That sometimes requires creative pricing which doesnโ€™t always follow the rules.

 

Great topic!  Iโ€™m hoping this means Square is laying the ground work for that amazing all-purpose pricing and costing app weโ€™ve all been waiting for! 

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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Super appreciated reading your thoughts on this, @TheRealChipA -- as always! We are in a similar socio-economic area, split between so much money and barely enough money. It certainly does call for creativity. It was helpful to read that you use the percentages as guidelines, but not live & die rules.

 

Also, yes yes yes to a costing/pricing app from Square!! I'm 100% behind your spreadsheet-turned-app idea!! We have spreadsheets that we've developed too, and it'd be SO great if this could all be integrated!

Michelle Savage
Co-Founder & President
Savage Goods | @savagegoods | savagegoods.com
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Just curious, what do you mean by 'splitting' the costs of inflation? Also, are there items that you sell and use specifically as a metric to gauge 'success'? For us, it's a 12oz coffee, typically a flat white.

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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
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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"blew through that product, inflation hit me square in the face"

 

Oh, I sadly know this too well, and more than most. I design and make beaded jewelry, gemstones and precious metals only. Thirty years ago I bought a very large quantity of sterling silver beads and I'm still using that stock. When something runs out though, and needs to be replaced... OMG. The price of silver now to thirty years ago!!!!

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I make handmade jewelry so I price based on what other places like Claire's how many others like me charge so the price I chose was $2 if it is something I can make again now as is something I will never be able to make again because it was from scrap jewelry that someone gave me then I charge $4 because that is a one-of-a-kind piece.

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Very nice! ๐Ÿ˜Š

Is there a link to your work? 

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Itโ€™s fairly straight forward. When I opened up the shop I sat down and figured out what my fixed overhead costs were every month and what margin I needed in order to be profitable. Once I had those numbers then it enabled me to arrive at a margin of 60% which covers my overhead, processing fees, taxes, and leaves me a profit of 21%. So every product I order I take the wholesale cost and enter that into the margin Calc set at 60% and that gives me my retail price. Canโ€™t get 60% on everything but for the most part I can because I personally know all my vendors so can work out better wholesale prices on most items. 55% is my minimum so if I wonโ€™t be able to sell an item and make at least 55% then that item doesnโ€™t come into the shop. Every order I am having to reset prices right now because   item costs are very fluid due to increased shipping costs. I will also look at manufacturers suggested retail price and try to stay close to that if possible and still within my margin range of 55 to 65%

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This is a great question, and I can't wait to read the responses especially anyone in the fashion industry.  I myself do a markup of nothing less than 64% + shipping.  I look at the price and decide if that's something I would pay and then I compare that to other brands prices.  It varies on the items as well but that mostly how I do it.  

Jacqueline
Owner of Jackie's Uniquely U Boutique
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@mksavage ,

 

Your initial post is quite literally what we currently do for the food and drinks we don't produce. Our focus has always been on our wine and spirits, however as we're in a weekend tourism driven area, we rely on the restaurant to bring traffic to the door.

Our clever chef is always coming up with new things that are cost effective (read - cheap to make ๐Ÿ˜‰) and this really helps.. In those situations we price based on market expectation and have a little extra for the pocket. Our lowest profit items would be cheese platters as good cheese is not cheap but for the 'winery' aspect it's something we need to have.

 

The alcohol we produce is obviously higher profit, and is generally based on the middle to higher end of the craft market. We do not apply as large a markup on our produced wine and spirits in the restaurant as a normal restaurant would, but this serves to enhance our offering.

 

 

Bruce Wilson
Owner | Vigneron | Distiller
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Hi Olive, my name is Halina (aka Hali). I am a children's book author who self-publishes (Third-CareerPress.com) and does some of my own marketing. I do it all. The things I must consider are the time that goes into writing each book, the costs of any artwork, editing, printing, sales tax and what the market will bear. I prefer doing book-signings at local/in-state venues (time and mileage), but did set up an e-commerce site in 2020. There, I must charge for shipping and sales tax. I currently have 3 books for sale and am working on a 4th.

All my work has a message and values. I write for birth thru preschool, early readers and for tweens. I do pay for some marketing, the task I least like. I work from home and have only travel costs to factor in.

 

So setting a price for a new book is usually in the 30-40% profit range. It is a labor of love. I am retired and can manage with expenses reasonably well.

Good Luck!

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Almost everything in my store and spa has a preset price that I am under contract to use.  Not great for times like now that have such drastically fluctuating costs!  

Doran

Esthetician
Haute Beauty Guide
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