Gather a group of drapery makers and the conversation soon will turn to pricing. It’s the age-old question in this custom window coverings industry. The common thinking is that if our prices are too high the customers will flee, and if our prices are too low we’re failing somehow. So, we ask each other the most-often asked question, “How much do you get a width?”
The question is asked so often I almost want to turn it into an acronym like those so popular in text messages and e-mails. HMDYGAW, perhaps? Or maybe just refer to “width dollars.” Somebody could just ask about width dollars and we’d all get it over with, cough up the amount and move on. But width dollars doesn’t really tell us the whole picture. Pricing is much more complex than that.
WHO’S YOUR MARKET?
In the last few years, I have had the privilege of visiting other workrooms. I’ve watched one workroom that charges twice what my own workroom charges per width work on panels. After observing for a while, I determined the workroom was probably losing money on panels. I’ve also watched a smooth panel operation in another workroom that averaged 500 widths per day with 14 employees. Not surprisingly, they were making a tidy profit charging half what my own workroom charges per width.
We can do time studies, quality studies, fixed cost studies, think about how much money we want to keep in our pockets and all the other traditional methods of pricing, but that doesn’t cover everything we need to think about when determining prices. There’s more, so very much more.
First and foremost, who is your market? What are the pricing expectations of the market you have chosen? If your targeted market is a high-end market, your pricing should reflect that. Your high-end customer by definition is high dollar. That customer’s expectation is to pay for the privilege of being exclusive.
Your quality of workmanship might be exquisite, even bordering on perfection, but if your prices do not match the expectations of the high-end client and filter out other customers who do not belong in that group, then you are not properly pricing for your market. It may seem unfair to spend the same amount of time as a workroom aiming for a lower market to perform essentially the same labor. However, that is the nature of the beast.
By the same token, if you have chosen to serve the commercial market, then the watchwords are fast and economical. The hospitality industry is not looking for perfection, it is looking for adequate and on time at the right price. There is money to be made in both markets, but pricing structures, construction methods and quality standards vary widely.
FEEL FOR THE CEILING
Most of us fall somewhere in between. We live in areas that are not necessarily on the outer reaches of high-end, and we do not participate in the fast and furious commercial and hospitality market. We serve the upper middle class and upward. But the same question applies: What are the expectations of your market in regards to pricing?
The best way to find out is to feel for the ceiling. We all know where the floor is, no guesswork there. But where is the ceiling? How do we determine what the market will bear? We do that by pricing high and gauging customer response. When you hear the words, “Oh, is that all? I was expecting more.” Don’t congratulate yourself on making the sale; kick yourself for leaving money on the table!
Pricing to find the ceiling will help you determine the true worth of your products. Any product is worth exactly what customers are willing to pay for it. If you have priced your product out of the range that customers are willing to pay, then it’s simply a matter of backing down. But quite frankly, it is amazing the value that customers will assign to custom-made products. If we think about it, the customer is setting the value of the product by agreeing to buy. If the customer is willing to pay a high price, then that is what the product is worth to that customer.
If one customer is willing to pay that price, others are as well. Do not let customers who are unwilling to pay higher prices be the ones to set your pricing. As long as you have adequate workflow at higher prices, then people with unreasonable expectations of low pricing are not your customers. It’s tempting to think every potential customer needs to turn into a real customer, but that’s a temptation best overcome.
The next consideration is your workflow. Are you swamped? Do you have more work than you can possibly do and still have a life? If so, your prices are too low. Not might be too low, not quite possibly or even may be too low. They are without a doubt, absolutely, unequivocally too low, and most likely too low by a significant amount.
There is no rule on the face of the Earth that says extensive amounts of backbreaking labor are required to make a decent living. Being swamped is a sign of excessive business growth. Excessive growth has to be controlled or it will ruin an otherwise good business. Slow down the runaway freight train by applying the brakes with pricing.
The last consideration is the pricing of your competitors, which brings us back to the width dollars question. If you gathered all of your competitors, what would their answers be? I have placed this consideration last because I think it is the least important. If custom draperies were a product sitting on a shelf ready to pluck and pay, then price competition would have more impact. But because our products are custom in nature there are many more variables at play. Factors such as delivery time, quality and service often carry more weight than price.
When you look at your competition, can they deliver faster with better quality, better service and a lower price? That scenario would be rare, but if so, that is stiff competition. And if that were the case, you would be wise to look for ways to produce faster, cheaper, better and smile prettier while you do it.
Take time to look at the traditional methods of setting price, but also realize that there is much more to consider. It pays to understand that even with all the usual ways of looking at pricing your products are probably worth even more than you think.
Mary Ann Plumlee is the owner of a retail and wholesale workroom. Starting with only $50 and a home sewing machine in 1985, her business has expanded to include a showroom, 12 employees and two locations. She firmly believes that in this business only the tough survive. Finding the humor in the everyday life of a “curtainlady” is how she not only has survived, but thrived in this industry. Plumlee is often seen traveling around the country teaching classes and seminars. She is the author of The Adventures of Curtain Lady and has launched a workroom related blog: www.workroomintelligence.com.