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Profitable Pricing
24 November 2020
Mark Wilson from Framiac ran a pricing and upselling webinar with Jon Price last month. You can view the webinar on our website and below are Mark’s views on the principles of best practice.
In my experience, the price we think a customer will pay does not correlate to what the customer will pay. When I first started my business I had little money and therefore priced to what I thought I could afford. Later, after realising I was struggling to pay my bills and afford to live, I started lifting my prices. This was scary, how many people would reject my quotes, would the business I invested so much into survive? What I found was that there was no change in rejection. Some people rejected my prices, but that happened when my prices were lower anyway.
Increasing my prices did two things; it allowed me time in the business, I wasn’t flat out making frames all day just to pay the bills, and soon I was able to afford a part-time employee. This is when I started focussing more on building a consistent profitable pricing model. I wouldn’t say this was an easy process, it took some research, work and contemplation. It required finding a workable system to which I could apply my model. Computers in the early ‘90s were becoming more mainstream and luckily for me I found the perfect solution.
After this my business took off. If I had to say what the main factors were, I would say confidence and consistency. I now understood my pricing and why I needed to charge the price I did. This gave me confidence to look the customer in the eye and deliver the price. This also reassured the customer about the price. Some were surprised by the price, but the way it was delivered convinced them the price was correct.
Consistency also had a lot to do with the success of the business. We received a lot of word of mouth referrals and totally reliable delivery standards had a lot to do with this. Part of this was keeping to the same consultation processes and delivery times, but transparent pricing had a lot to do with it too.
Place yourself in the shoes of the customer and get an understanding of what it is like to ask for a quote for something which does not have a commonly advertised price. Consider being the customer of a business where the price is given after looking up at the ceiling for a minute. It doesn’t create a lot of confidence for the customer, and it also reflects somewhat negatively on the entire business and framing industry as a whole.
By being consistent, our customers were able to confidently pass on a price to their family and friends, and when these people came to us there was no nasty surprise. They felt more comfortable entering the shop and asking for a quote as the price had been somewhat normalised. Offering considered and consistent prices really worked for me.
My business was not in a high-income area, in fact it was the lowest income area per capita in the whole state of New South Wales. I’ve heard people say: “My customers will never pay that”. I think this comes back to what I said earlier, it’s easy to set your prices to what you think people will pay rather than what your customers are willing to pay for your specialisation. I’m proof that even in a low-income area there are customers who will pay the price, all you need to do is create the right kind of environment for them, an environment that meets their desires and expectations.
It’s important to reflect on why customers reject quotes. Quotes are not always rejected because of the price, but because the level of service did not match the customer’s expectation. When I go to a specialist business, I expect a higher level of service. If the level of service is below my expectation it makes me feel uneasy, I’m not sure they are going to give me the quality I expect, and then if the price is lower than anticipated I wonder how they can deliver the quality I desire. Will there be shortcuts made?
It should go without saying that proper pricing is fundamental to the survival of the business. It’s easy to think the only way to make more money is to make more frames. But perhaps stop and consider for a moment that you can be more profitable by simply raising your prices, even just a little. I think you will be pleasantly surprised at the level of price rejection when you do.
Buying a computer singularly for running a pricing and POS software package was quite an investment in the 90s. However, I have always maintained that this was the best thing I ever did. It enabled me to build a business on solid information, it allowed for everyone in the business to price accurately and consistently and therefore enabled me to step back from the business, which was very beneficial to my social and mental wellbeing. Computers and software are much cheaper these days, I genuinely believe every framer should consider these as essential as a guillotine or mount cutter.
www.framiac.com
In my experience, the price we think a customer will pay does not correlate to what the customer will pay. When I first started my business I had little money and therefore priced to what I thought I could afford. Later, after realising I was struggling to pay my bills and afford to live, I started lifting my prices. This was scary, how many people would reject my quotes, would the business I invested so much into survive? What I found was that there was no change in rejection. Some people rejected my prices, but that happened when my prices were lower anyway.
Increasing my prices did two things; it allowed me time in the business, I wasn’t flat out making frames all day just to pay the bills, and soon I was able to afford a part-time employee. This is when I started focussing more on building a consistent profitable pricing model. I wouldn’t say this was an easy process, it took some research, work and contemplation. It required finding a workable system to which I could apply my model. Computers in the early ‘90s were becoming more mainstream and luckily for me I found the perfect solution.
Advocating consistency
After this my business took off. If I had to say what the main factors were, I would say confidence and consistency. I now understood my pricing and why I needed to charge the price I did. This gave me confidence to look the customer in the eye and deliver the price. This also reassured the customer about the price. Some were surprised by the price, but the way it was delivered convinced them the price was correct.
Consistency also had a lot to do with the success of the business. We received a lot of word of mouth referrals and totally reliable delivery standards had a lot to do with this. Part of this was keeping to the same consultation processes and delivery times, but transparent pricing had a lot to do with it too.
Place yourself in the shoes of the customer and get an understanding of what it is like to ask for a quote for something which does not have a commonly advertised price. Consider being the customer of a business where the price is given after looking up at the ceiling for a minute. It doesn’t create a lot of confidence for the customer, and it also reflects somewhat negatively on the entire business and framing industry as a whole.
Confidence is key
By being consistent, our customers were able to confidently pass on a price to their family and friends, and when these people came to us there was no nasty surprise. They felt more comfortable entering the shop and asking for a quote as the price had been somewhat normalised. Offering considered and consistent prices really worked for me.
My business was not in a high-income area, in fact it was the lowest income area per capita in the whole state of New South Wales. I’ve heard people say: “My customers will never pay that”. I think this comes back to what I said earlier, it’s easy to set your prices to what you think people will pay rather than what your customers are willing to pay for your specialisation. I’m proof that even in a low-income area there are customers who will pay the price, all you need to do is create the right kind of environment for them, an environment that meets their desires and expectations.
Learning from rejection
It’s important to reflect on why customers reject quotes. Quotes are not always rejected because of the price, but because the level of service did not match the customer’s expectation. When I go to a specialist business, I expect a higher level of service. If the level of service is below my expectation it makes me feel uneasy, I’m not sure they are going to give me the quality I expect, and then if the price is lower than anticipated I wonder how they can deliver the quality I desire. Will there be shortcuts made?
It should go without saying that proper pricing is fundamental to the survival of the business. It’s easy to think the only way to make more money is to make more frames. But perhaps stop and consider for a moment that you can be more profitable by simply raising your prices, even just a little. I think you will be pleasantly surprised at the level of price rejection when you do.
TOP TIPS
- Invest time in understanding your pricing.
- Be considered and consistent with your pricing.
- Don’t prejudge your customers or their item to be framed.
- Regularly review your prices, don’t fall behind as your expenses increase.
- Test the market, don’t be afraid to adjust your prices.
- Record and monitor your conversion rate from quotes to confirmed orders.
- Think about why the quote was rejected. Was it the price or was it not meeting customer expectations?
Mark’s investment
Buying a computer singularly for running a pricing and POS software package was quite an investment in the 90s. However, I have always maintained that this was the best thing I ever did. It enabled me to build a business on solid information, it allowed for everyone in the business to price accurately and consistently and therefore enabled me to step back from the business, which was very beneficial to my social and mental wellbeing. Computers and software are much cheaper these days, I genuinely believe every framer should consider these as essential as a guillotine or mount cutter.
www.framiac.com
