Pricing your Embroidery Services
Figuring out how you will price your products and services is an important factor in your business plan; not just because you need to make money, but also because it will determine the direction your business will go completely. Are you the business that wants to earn loyal customers via fair pricing over a longer period of time or are you wanting the big bucks now and not necessarily the long term customer relationships? The following excerpt from Marketing, by Colleen Exline in Creative Machine Embroidery is extremely helpful with determining pricing for your business.
When pricing a product of service, keep in mind vari0us factors, including research and development, manufacturing, distribution, overhead costs (rent, insurance, telephone, etc.) and labor. Also, research competitor’s pricing for similar items.
Price products based on the following formula: cost x 1.(percentage markup). If the product costs $5 to make and the markup is 50% (5 x 1.50), then the product price is $7.50.
Use one of the following pricing strategies:
1. Skimming: Set the product price high in order to make large profits. This strategy works best for owners who have a strong patent or are looking to make a lot of money in a short period of time and move on to the next product.
2. Market Penetration: Price products lower than competitors in order to enter the market. Profits are typically low when using this strategy, so factor in all business costs to make sure it is affordable. Prices are often raised after establishing a solid customer base.
3. Follower Pricing: Price products the same as competitors. Use this strategy when the dominant competitor won’t respond to new competition. Keep costs low if competitors do respond to new competition in order to price products accordingly.
Exline, Colleen. “Marketing.” Creative Machine Embroidery May-June 2011: 61. Abstract. Print.