This article was originally published in Graphics Pro Magazine, December 2020 Edition, pg 82-85. Graphics Pro owns the rights to the content and images, with permission to republish on Stitchitintl.com. The original article can be accessed here: Time to Rethink Your Embroidery Pricing Model.
By Jennifer Cox, NNEP President
One of the most frequent themes in my conversations with apparel decoration professionals is pricing. One of the questions that I hear almost every day is, “How do I respond when a customer tells me they can get it for less from someone else?”
Why do our customers feel that their question about why our price is higher is even relevant in the first place? Do they go into a gas station and tell the cashier that they can get gas for several cents cheaper from the gas station up the road? I am certain that they do not. There is a significant difference between the prices in our businesses and the gas stations’ prices, and that is this: gas station prices are highly visible, even when they change on a daily or even hourly basis.
It appears that there is a unique perception about pricing in our industry. Our customers make assumptions based on this perception, and even worse, we ourselves seem to maintain this perception. This self-defeating perception is that our pricing is random. That we just make it up, pull it out of thin air.
I think it is about time we do something to change and correct this perception. It is high time to set the record straight about what our time, expertise, equipment, skills, and services are worth as apparel decoration professionals.
We can apply the gas stations’ displayed pricing strategy to our products, even though our pricing is equally as fluid as gas prices. Our prices are usually based on the particulars of any specific order.
It is likely that you often sell a certain brand and style of golf shirt, T-shirt, and sweatshirt throughout the year. After the holidays, review your orders over the past two or three months and see where you priced similar orders. Then dig deeper to determine if those orders were profitable at those prices. Beginning the first of next year, establish set prices for your core products.
Set pricing for those core products to include a slightly oversized left chest design, because this allows for higher pricing for larger stitch count designs. In addition, create an add-on price for oversized designs, additional logo placements, and for names.
Think about your pricing as if it were a menu at a fast-food restaurant. Make “adding fries with that” as easy to understand in your business as it is when you are at the counter ordering a meal, except that the fries are the additional placements, names, or oversized designs, for example.
Go back through the last quarter of jobs and see what the average stitch counts for the left chest designs were. If the majority of your designs contain less than 7,500 stitches, you know you can build your pricing based on that as your top range of stitches for your basic left chest design. If you have customers that have designs that run closer to 13,000-15,000 stitches, look up pricing of those orders and use that as the base of your oversized design pricing.
You have access to the information to develop these core price points on your most commonly purchased products, including golf shirts, sweatshirts, caps, bags, and jackets. It is all in your customer files, or it should be.
Look at the stitch counts of typical designs. Evaluate the profitability of these completed orders. Analyze the average order sizes. Did you make the profits that you needed to on these jobs? If you did not, here is your opportunity to establish pricing that enables you to earn the profits you need and develop customer-friendly pricing all at the same time.
The key information to track:
- Average stitch counts for your most common placements or designs – left chest, oversized left chest, full front/back, appliqué, caps, backs of caps, name drops, numbers, or any other jobs that you regularly do.
- Average number of products in orders, based on the kinds of products – golf shirts, sweatshirts, jackets, caps, bags, etc.
- Profitability of your orders – which orders were priced to meet your profit goals, and which came in way above or way below that. Can you determine why the order was high or low, so that you can tweak your pricing accordingly for similar jobs in the future?
The burger joints have figured out a profitable pricing solution for their products. Granted, they know down to the penny their fixed costs and have a much smaller range of variables than we have to deal with in our industry. I think that their strategy can be applied to our industry successfully, however. When you spend a bit of time and do the research into the real numbers of your existing orders, patterns and trends become apparent.
Take this information and develop the pricing guidelines to display in your business for 2021. Display it in your business and even online. It will make it easier for your customers to do business with you. When you make it easier for customers to do business with you, they are more likely to choose you over a competitor that is less forthcoming with pricing information.
Once you establish the price points that make sense for your business, the next step is to make these prices and core products highly visible in your business. In your retail location, put up a display that features these specific products, then include signs with your new pricing information.
You do not have to price every product in your business, just make sure your core products are highly visible and the pricing information jumps out. On other products, clip on a small sign or add a hangtag that says something like, “Need something custom? Ask for a quote!”
Add an asterisk to every pricing display so that you have the opportunity to modify the pricing if the order does not fit into the criteria that you have established. A simple statement such as, “*Prices subject to change based on the products and designs request,” gives you a bit of wiggle room for the orders that do not fit the criteria for your established pricing.
By establishing and displaying visible prices, you begin to train your customers that your pricing is not random. It is not based on the seat of the pants numbers that you just made up.
If you do not have a retail storefront, create some print information that outlines the same pricing information, including that asterisk and statement. It can be a price sheet, brochure, your website… anything that you can place in front of the customer that has established pricing information displayed on it. This counters the perception that whatever price you quote is random since you have it in print.
Establishing effective and profitable pricing is challenging. It is a tough line to walk to make your pricing attractive to customers and simple to understand all while applying it to custom work and hitting your profitability goals. Using valid information–the data from previous orders–is one of the best ways to develop these price points successfully.
So, what do you say to the customer when they ask why your price is different than the other business? Speak to what you can and will do for your customer. State your price, guarantee your work, and honor your deadlines. Set the bar high for your competition. Do not get pulled into a pricing war, because both apparel decorators lose in the end.
If you feel particularly bold, ask the customer why they want pricing from you instead of placing that order elsewhere. The customer is not going down the street for a reason. It is likely they were getting exactly what they paid for and it was not meeting their needs. The work may have been poor. A deadline may have been missed. They may not have liked how they were treated. This is your opportunity to show them what you can do.
Jennifer Cox is one of the founders and serves as president of the National Network of Embroidery Professionals (NNEP), an organization that supports embroidery and apparel decoration professionals with programs and services designed to increase profitability and production. You can contact her at email@example.com.