Pricing Guideline

Pricing Guideline

by Louie Alvarez

Listen to the Podcast accompanying this article:
Season 2, Episode 11: Pricing Guideline

Years ago I was asked, to fill in for a speaker who came down with a sudden illness, quite literally, 30 minutes prior to a scheduled seminar . This was during my time as a Seminar Speaker and Workshop Instructor with the NBM organization that puts on the A&E Trade Shows throughout the year, throughout the country. Needless to say I was not prepared and the topic was far off the standard content I typically covered, which was CorelDRAW and Laser Systems.

But I did indeed agree to be this seminar speaker as I’ve been an employee of a trophy shop and had my own laser engraving business so I am familiar with pricing structure for the central California area. Without hesitation I entered the classroom, which contained about 60 or so attendees, all ears wide open for my thoughts on pricing for the laser industry. The first sentence out of my mouth was “If your here for specific pricing of your lasered products, your in the wrong place, because I don’t know!”

You could hear a pin drop, but this silence was quickly replaced by an increasing volume of mumbling and complaining. Obviously the attendees expected more than what a topic such as this could honestly deliver. The title “Pricing your Products” in my humble opinion was simply misleading. After a couple dozen seconds or so I calmed everyone down and got into my 30 minute spiel about pricing in general with no specifics. Allow me to elaborate on the details of this seminar.

All areas of the country will have different pricing structures. This is inherently due to the fact that all markets determine the price point of a product. Let’s use a 9×12 plaque with a coated metal plate, laser engraved for an award ceremony as an example. Back when I had my laser business in central California there wasn’t a laser system in over a 100 mile radius so I could easily charge $200 for this and get it without question, but there was no competition, it was new and unique and I spin a good sales pitch. Today that same plaque may only command a $50 retail price. Because there are so many variables in how to price a product that providing specific pricing is nearly impossible as the following must be factored in (this is by no means all inclusive list),

1. How much competition is there?
2. Is your business known for high end or low end products?
3. Are there newcomers to your area that play to cheap price angle?
4. Are there companies in survival mode, that will cheapen the price to get any business?
5. Is there a good ol’ boy system in place where loyalty overrides price?
6. Do you market aggressively or simply wait for customers to walk through the door?
7. How good is your product, design, equipment, abilities, salesmanship, etc.?
8. Are you fast producer, sell a cheap product or focus on high quality? Can only have two (fast, cheap, quality), take your pick.

With that said there are a few guidelines that can be used to begin to determine what your particular market will bear. This is what I pass onto my CheckMate Lasers customer base as this base is spread across the entire country and providing specific details is impossible, even today 12+ years after conducting that seminar. But it is a starting point to begin determining what your particular market will bear to settle on an appropriate pricing structure.

1. Engraving/cutting time @ $2 per minute = $120 per hour of laser operation time.
2. Graphic design @ $50 – $150 per hour, with a minimum charge of $25. This is a huge variable as you have to determine how much your worth and yet this figure must be in line with customers expectations of your skills and value.
3. Product markup @ 400%, example: $10 wholesale price = $40 retail price

The above guideline is only a starting point of course, what must also be factored in is:
-Overhead, such as rent, employees, lease payments, utilities, etc.
-Do you want to use the guideline listed to price products?
-Do you want to charge a flat rate per product?
-Do you want to charge a time to complete a product?

Now you can see how it is impossible to provide a price per product as there are so many variable to consider and factor in and all markets are unique in their pricing structure. But at least this will give you a starting point to begin to determine what your market will bear. With the outline given I always recommend to initially go high in price as you can always reduce your price to accommodate customers pricing expectations. But if you start to low you may find that increasing your price to be more in line with what your market will bear is very difficult at the least and may cause the loss of many customers at the worst. So start high and work your way down to an appropriate pricing structure.

In closing, sell, sell, sell!

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