Pricing can be a challenging aspect of running a business, particularly for printing and embroidery shops that offer custom-decorated products. In many cases, businesses tend to overcomplicate their pricing strategies, causing confusion for both their team and customers. However, by simplifying the pricing formula, companies can streamline their pricing structure, making it easier to understand and more transparent for customers.
In this article, we will explore how to simplify your pricing strategy by adopting a straightforward pricing formula, adjusting blank product markups, and using decoration pricing matrices to influence quantity breaks. By doing so, you can boost your business’s bottom line and improve the customer experience.
The Pricing Formula: A (Blank Price) + B (Decoration Price) = C (Final Price)
It is common for printing and embroidery shops to make the mistake of overcomplicating their pricing, causing confusion for both their team and customers. However, the truth is that determining the price for custom decorated products should be as simple as adding the blank price (A) and decoration price (B) to arrive at the final price (C).
Customers are only concerned about the final price and not the breakdown of the individual costs. If calculating the final unit price requires the use of a calculator, the pricing strategy is likely too complex and should be simplified. The simpler a shop keeps their pricing strategy the easier it is for everyone to comprehend when breaks occur and how the price varies with quantity and other variables.
The Blank Product Markup
Each decoration shop applies a markup percentage to the blank product, although the exact percentage can vary from one shop to another. Two decades ago, suppliers provided price breaks for a dozen or a case of the same SKU or product, which prompted shops to adopt the same approach when selling to customers.
Traditionally, shops marked up the blank product price by 100%, resulting in customers paying twice as much as it cost the shop. However, a 100% markup creates the need for discounts to be applied to keep the price competitive for larger quantities. Essentially, over-marking up the blank product price necessitates discounts, making the pricing structure needlessly complicated.
On the other hand, the newer approach involves marking up the blank product by around 50% and increasing the decoration price. Since suppliers do not change their blank product price based on quantity, there is no need to adjust the price according to the customer’s order size. By avoiding excessive markups and discounts, the pricing structure remains simple, particularly when sharing the blank product price with customers.
Decoration Pricing Matrices
The majority of printing and embroidery shops are in the business of decorating products, rather than buying and reselling blank shirts. The newer approach of marking up the blank product at a lower percentage provides more flexibility to shops when determining the decoration price to charge a customer. In larger quantities, decorating a product becomes more efficient than ordering the product, and this is why the decoration price should have a more significant impact on quantity breaks than the cost of the blank product.
Additionally, several decoration methods can be applied to the same product, such as bulk screen printing, no minimum digital printing, and embroidery. When the blank price is marked up at a lower percentage, the decoration price can be adjusted to keep the final price competitive for all decoration processes offered on that product. Making the decoration price the primary influencer for quantity breaks also simplifies price calculation, especially when different garments are printed with the same design, and the unit decoration price must be determined across all products. This becomes more difficult if the blank price has to be discounted because of an excessive markup.
Conclusion: Keep Your Pricing Strategy Simple And Transparent
To ensure that your pricing strategy is easy to understand for both your team and customers, it is crucial to keep it simple. One way to achieve this is by avoiding excessive markup of the blank product price and placing the majority of the margin from an order in the decoration price. To simplify pricing for customers, consider listing blank products with a price that includes your markup and images of your decoration price tables. This increases transparency, making it easier for customers to determine where price breaks occur. As a result, customers are more likely to purchase more products and not need to contact you with questions that they can answer themselves.