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Pricing Pointers & Strategies
Retail Floral Shop Operations - Redbook Florist Services
The use of a consistent and well planned pricing program is essential to operating a profitable business. This involves more than simply pricing products to include profit and expenses. It also involves the use of pricing strategies that help attract customers to the store and encourage them to buy (and buy more than they originally intended). A variety of these strategies is used regularly in retail business management and may be easily adopted by the florist. The following sections offer several pricing pointers and strategies, which may be used to help increase the total dollar volume of sales in the flower shop.
Base Cost Pricing
When designing arrangements, it is a tedious process to keep track of and price every minor supply item used in construction and packaging (foam, tape, preservative, waxed tissue, etc.). Base cost pricing can be used to ease the pricing process on everyday designs. This is done by determining the average cost of all supply items, except flowers and sometimes foliage, needed to complete a design in a specific container. These containers are stocked in the workroom with a base cost price listed on them. Designers can then subtract this amount from the total dollar value of an order before selecting the flowers and foliage. This helps ensure that all costs in a design are covered, and it makes the pricing process much more accurate and efficient. For example, a standard rose vase costs $1.10 ($.92 plus $.18 freight cost). To design and package an arrangement in this vase, the following supplies are normally used.
| One half block of floral foam at .61/block | $ .305 |
| One foot of bowl tape at .02/foot | $ .02 |
| One half scoop preservative at .04/scoop | $ .02 |
| One care tag at .03 | $ .03 |
| One enclosure card at .02 | $ .02 |
| One white envelope at .02 | $ .02 |
| One cardette at .03 | $ .03 |
| Two pieces of waxed tissue at .05 | $ .10 |
| Five feet of cellophane at .04/foot | $ .20 |
| One yard of ribbon at .05/yard | $ .05 |
| $ .795 or $.80 |
cost figures are derived from the single unit cost of goods method
$.80 + $1.10 vase cost = $1.90 total base cost
If the price of a design is $25.00, using the divisional percentage pricing system with a 30 percent cost of goods figure, the total cost of goods that can be used in the arrangement is $7.50 ($25.00 multiplied by 30 percent). The total base cost calculated above is then subtracted from this figure to determine the total cost of flowers that can be used in the design.
$7.50 total cost of goods - $1.90 total base cost = $5.60 available for flowers
The arrangement might then be constructed with:
| six stems of leatherleaf at .09 | $ .54 |
| twelve carnations at .42 | $5.04 |
| $5.58 |
$5.58 total flower/foliage + $1.90 total base cost = $7.48 total cost of goods
To check the accuracy of this calculation, the total cost of goods can be used to recalculate the price.
$7.48 total cost of goods -;- .30 cost of goods percentage = $24.93 or $25.00
Rounding Prices
When using any pricing system, many of the prices calculated will come out to odd figures, such as $8.37 or $14.51. These kinds of random figures are considered undesirable because they lack standardization and are difficult to remember. When pricing products, these figures are typically rounded to numbers which are easier to use. This usually means rounding to the next fifty cent or dollar figure. For example, an $8.37 item would be priced at $8.50, and the $14.51 item would be priced at $15.00.
In all cases, the figures are rounded up rather than down to ensure than not a single cent is lost on the sale. The $14.51 item is a good example of this. One might be tempted to price this item at $14.50 since the price calculated is so close; however, this would mean a loss of one cent. Instead, the price is rounded up so the full value of the merchandise will be received and it will make the figure easier to work with.
In the case of high-priced items, prices might be rounded even higher to provide figures that are convenient to use. For example, a casket spray might be calculated to a price of $107.00. However, since $107.00 is a somewhat odd figure itself, the price might be rounded to a more standard price of $110.00. When rounding prices, a florist should develop a system which is consistent and which can be used easily by everyone in the shop.
Odd End Pricing
Odd end pricing is actually another method of rounding prices.
It is based on the belief that a price such as $4.95 or $4.99 is more appealing (i.e., sounds less expensive) than a price of $5.00 Retailers have used this pricing strategy for years, and although customers are very familiar with it, it is still effective. A florist needs to decide if this type of pricing will be used in his shop, then he must choose which figure prices will be rounded to ($.95, $.99, or another number). This pricing strategy should then be used consistently for all products.
Price Lining
Price lining is a pricing strategy that most florists use without realizing it, especially with fresh flower arrangements which are stocked in the cooler. Price lining involves the pricing of related products at different price levels to provide customers with a choice when shopping. The price levels are often related to product size or quality. For example, a florist usually sells one-half or one dozen roses in a vase (a difference in size), as well as one dozen carnations in a vase (a difference in quality) as standard items in the shop. Similar types of pricing levels can be offered with other lines of products as well, such as offering a selection of plastic and glass bud vases at various prices. Baskets which are purchased as “nests” (one inside another, all of the same style) are a perfect example of a product whose prices can be lined according to size. The more these different price levels are used, the more customers will feel that they have a choice. This allows them to shop and make purchasing decisions they are more satisfied with.
Multiple Unit Pricing
Multiple unit pricing is another commonly used pricing strategy that works well in the flower shop. This system encourages customers to buy more by giving price breaks for purchasing multiple units. For example, roses might be priced at $3.50 per stem or $39.95 a dozen (a savings of $2.05 off the individual stem price). Some items, such as daisies, are often priced by the bunch, instead of by the stem, so that customers must buy multiple stems in order to get the product.
“Two for the price of one” and “buy one, get one free” specials are also forms of multiple unit pricing. Any and all of these strategies can be used throughout the store to increase sales by appealing to the customer’s desire to get the most for his money. However, the florist should avoid using this strategy too often so the shop will not gain a “discount store” image
Tie-In Pricing
Tie-in pricing is a pricing strategy which encourages customers to purchase related products by offering special prices when items are bought together. This is often done in the form of sets. For example, a pair of candlesticks and candles might be offered as a set for a special price. A glass vase might be offered at a special price with the purchase of a minimum dollar amount of flowers. Plants and fertilizer could be tied together in a similar way with special price offerings. The idea is to induce customers to buy additional products by showing their relationship to each other through display and providing tempting prices which make the additional purchase worthwhile.
Leader Pricing
Leader pricing is a strategy used to help lure customers into the flower shop. With this system, certain traditional floral products, such as carnations, are offered at prices significantly lower than those of the competition. This creates an impression among price-conscious customers that all of the shop’s prices are lower than those found in other shops. This way, not only will customers come to the shop for their traditional floral needs, they will also come when browsing or shopping for something special. The use of this pricing strategy must be carefully planned, but when properly applied, it can help increase the customer base of a flower shop significantly.
Price Tags
Regardless of the type of pricing that is selected, prices should be clearly marked on all products. A variety of different tagging systems is commonly used, including the popular stick-on and tie-on types of tags. In some cases, it is simpler to use a coding system rather than to mark each individual item. This is particularly true for both fresh and silk flowers, which are typically stocked in large quantities. For items such as these, signs or a coding system might be used instead, but they should be designed for easy use by the customer. Fresh flowers are often priced with either small signs in each bucket or with a flower price chart outside the cooler. Silk flowers are frequently coded with paint sprayed on the lower portion of the stems. A nearby sign is then used to translate different paint colors into prices.
Whatever type of price tags (or signs) are used, they should be located on or near the merchandise so that they are easy to find. They should also be written clearly so that they are easy to read. Pens and markers that run easily should be avoided. Pricing guns and other methods of producing pre-printed tags are another viable option. Perforated tags, which allow the price to be removed while leaving a portion of the tag on the merchandise with the shop’s name, help reinforce the shop’s advertising campaign.
Successful pricing requires a great deal of time and energy in any business. In the floral industry, this delicate process is complicated by the need to price not only hardgoods, but also perishables and products which require varying amounts of labor. Since pricing is often a key factor in the success or failure of a business, it cannot be taken lightly. The owner/manager needs to assume responsibility for the management of a shop’s pricing system. This includes studying financial records to determine operating expenses, cost of goods, and desired net profit goals. A pricing policy should be developed based on these figures and should be used consistently by all shop employees. The policy should be reviewed annually and revised as needed in order to remain competitive in the marketplace.
Ratio markup pricing is commonly used by florists, because it is easy to understand and calculate. However, this method does not ensure that all operating expenses are covered in a price; furthermore, it does not guarantee profit. Divisional percentage pricing, on the other hand, offers the advantage of incorporating known shop expenses into the price, along with a desired net profit percentage. Unfortunately, many florists find this system too complicated or confusing to use. However, once the initial figures have been calculated, it is as easy to use as the ratio markup system.
A variety of pricing strategies may be incorporated into the shop’s price management system. These may include several different pricing schemes which are used interchangeably throughout the week, month, or year to help lure customers into the shop and to persuade them to purchase products. When all of these components are taken into consideration, a sensible pricing method of any kind is bound to be successful.
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