When it comes to creating a profitable floral business, pricing is clearly a major component. There are many things to take into consideration when determining your prices; we’ve compiled a few key points here to help you make the best pricing decisions for your business.
- Different Pricing Models Attract Different Customers
Florists understand that there’s no “one size fits all” when it comes to floral arrangements. The same thing is true when it comes to pricing: Different pricing models appeal to different customers.
Here’s an example: Customer A prefers 20% off an arrangement, while Customer B prefers free shipping, and Customer C goes for a gift with purchase. Which pricing model should you choose? Experiment with all of them!
Use your social media and email marketing to offer different pricing models at different times. See which ones attract which types of customers. You may find that switching up your pricing models at different intervals will create new customers who would never have considered your shop in the past.
- Use Charm Pricing to Increase Sales
Charm pricing, or psychological pricing, is the practice of ending a price with an odd number, most often the number “9”. Charm pricing has been an industry standard for decades. Why? Because it WORKS. Study after study has shown that charm prices create more sales.
In one study, people bought more of an item when it was priced at $49 than when it was priced at $45. You’d think that as the price goes up on something, demand would go down. That’s true in most cases, but not with charm pricing.
Charm pricing works best on customers who are looking for a good value. If a customer is looking for high quality, round pricing tends to work better. So if your brand is based on being the highest quality florist in your area, use round pricing. If you have a lot of competition and price is a concern, then charm pricing is your best bet.
- Less is More when Communicating Prices
When you’re expressing prices to your customers, either in writing or verbally, less is more. It’s much more palatable to a customer to read $49 than $49.99. Also, the “.99” at the end of a price tends to communicate a lower value when a customer sees it in writing.
There’s another concept here as well: When quoting prices over the phone to a customer, which sounds better? “One-hundred-and-forty-nine-dollars-and-ninety-nine-cents” or “One-forty-nine-ninety-nine”? The fewer syllables, the easier it is for customers to process.
Ideally, you wouldn’t be using “.99” on your pricing and instead ending the price in a “9”. But what happens to your revenue if you price something at $49 instead of $49.99? There’s an easy solution: Just change your pricing UPWARDS. For example, pricing something at $49 instead of $45 will sell more, as you read earlier. So skip the cents and take the prices higher!
- Let Your Customers to Spend More
Sure, there are lots of customers who are focused on price, but there are also plenty of customers who want to spend more on something that they consider high quality. So let them!
Many people prefer to pay more for something because to them, it means it has a higher value. In fact, many of them will look for the higher-priced option and go to that shop, thinking that it’s a higher-quality product.
Don’t lose those customers! Always offer more expensive options in your shop, and show them to every customer. Maybe they won’t purchase the most expensive option, but you’ll have shown them that your items are high quality—making the item they eventually purchase an even greater value to them.
- Know Your Value to Customers
Understanding how customers value different attributes of your product can increase your profits. Is there something you offer in your flower shop that makes you unique? Is it something you can charge for?
For example, you may have a well-known designer in your shop, or one who’s been featured in local publications. Your customers may pay more for arrangements created by that designer. Or perhaps you have a unique line of containers, or unusual handmade enclosure cards.
Plus, when you want to reward or motivate your customers, it’s easy to do when you know what they value: If someone loves your great customer service, provide even more service like a free consultation in their home or business. If they love your product, send them a free arrangement as a thank you for being such a loyal customer.
- Battle Price-Sensitivity
“Price-sensitivity” is the degree to which pricing affects purchasing behavior. There’s the highly price-sensitive customer who’s motivated almost entirely by price, such as the bargain-hunter. Then there’s the less price-sensitive customer who may be purchasing products for emotional reasons, or who just wants a higher quality product.
It’s important to know the difference between these customers and to tailor your offerings to both types. It’s also important to do things in your business that make people less sensitive to price and more willing spend money on your product; this is mainly achieved when you know how to brand yourself and market your product well.
One way to stand out is to offer something unique. Customers perceive this as higher value. For a floral business, taking your own product photos and creating unusual product descriptions can set you apart from all the other florists using generic photos and descriptions on their websites.
There’s also something called the “sunk cost effect”, where the price of a component of your offer is low relative to the total cost. Adding a cost to your enclosure card or adding a delivery charge at the end of the order process are examples of this: Customers don’t mind paying that little bit extra because they’ve already sunk enough time and money into placing the order.
- Use Anchoring to Increase Value
“Anchoring” refers to the psychological bias that occurs when a person relies too heavily on an initial piece of information (the “anchor”) when making decisions. Because it’s hard to really understand the value of most things, we tend to assign a lot of importance to the first piece of information we get and base all subsequent decisions on that. Think of the price tag on a sale item that shows both the regular price and the sale price: The regular price acts as the anchor, which makes the sale price more attractive.
High prices can also act as an anchor, by making lower prices look more appealing. Offering a high-priced arrangement filled with the most expensive flowers in an expensive vase can make your products seem more prestigious. Then customers will see the lower-priced offerings and consider them a great value for the price.
One important point here is to avoid asking a customer how much they want to spend or what their budget is. As soon as the customer says the price, the anchor has been set and will be hard to change.
- Compete to be the Most Expensive
There’s a lot of price competition out there, with companies vying to outdo each other on who has the lowest price. Here’s another option: Compete to have the highest price in your area. Prices send a strong message about the perceived quality of your product. In fact, price is the single most powerful indicator of quality.
Some really interesting studies on pricing versus quality have shown this to be the case. In a series of studies with wine, testers have been shown to give lower quality wines higher ratings if told they’re expensive, and higher quality wines lower ratings when told they’re inexpensive.
Add a few higher-priced offerings in your shop and promote them. This provides an anchoring effect, as you read earlier, plus it gives customers the opportunity to spend more if they wish to. They also provide clear evidence that you’re the best at what you do!
- Inexpensive Doesn’t Have to Mean Low-Margin
One of your goals should be to have a product for almost every customer, from the price-sensitive to the quality-obsessed. Of course, you need to have inexpensive products, but don’t assume that means lower margins.
It’s important to realize that price-sensitive customers are focused on the bottom-line price, not on value. They’re looking for something cheap, but this doesn’t mean you have to offer them something that eats away at your profit margin.
Here’s an example of how to build good margins into your least expensive products: Single roses on Valentine’s Day. Say you offer a dozen roses at $39.99 and a customer thinks that’s too expensive. How about offering a single rose at $19.99? The customer will be happy with the lower price, and you’ll have increased your margin considerably.
Review your pricing structure and see which of these tips would work best. Then watch your revenues and profits increase!
