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Which Cake Tastes Better – and Your Woodworking

cakeSo what does chocolate cake have to do with woodworking?

Just about nothing – just about.

Pricing has often been a topic I’ve tackled on BlogNotes because it’s such a big issue for us – how much do we charge for our work? Obviously, we want the most we can get for our hard work, but when do you price so high that people start telling you to go pound salt?

One clue is this: if you have something people want – really want – price becomes less and less of a consideration. That might be the “must have” latest handbag for a lady, or hot car for a guy. You don’t NEED those things – but sometimes you really want them, even if you can’t really afford them. You have a perception of that product that changes the actual value of it – in your mind. Part of that calculation is the price of that product.

Enter chocolate cake.

Last night, I was watching Brain Games,  a show about psychology, basically. They play out different psychological experiments, and make it interesting to a general audience.

In last night’s episode, they said up a booth in a busy city center in summer. The set-up was they were an upstart bakery, and they wanted to know which chocolate cake tasted better – the cake that was $15, or the one for $55, and why it tasted better. A market research kinda thing. So, people came by, and sampled each one – which looked just like the picture shown here, one round, the other square. Samplers generally described the $15 cake as being dry, and the frosting not too sweet. The $55 cake, however, was nice and moist, the frosting just sweet enough, in general tasted wonderful. They even remarked, that yes, they would even buy the more expensive cake.

Both cakes were from the same cake mix, using the same ingredients, baked at the same time in the same oven in the same molds; they were identical except for shape.

No, the take-away here isn’t shape – but price. People thought the more expensive cake was better, and worth the price. Price subconsciously tells us the value of a product. I mean, if it costs more, it must be better, right? We’ve been conditioned all our lives to believe that. A first class airline ticket is about three times more costly than an economy ticket – but both get you to the same destination at the same time. Only you have a bigger seat, and some better service. A more expensive watch is better than a cheap one, an expensive car better than a cheap one, and so on.

So, just price your work higher than mine, and you’ll sell more, right?

Oh, if only it was that easy.

That pricing strategy falls apart when people can clearly see what the product is made of. A cutting board, for example – if you make the exact cutting board that I’ve made – people aren’t going to buy yours more than my less expensive board. Why? They did it with the cake!

Because there is no ambiguity. People didn’t know exactly what was in the cake – sure, they may have known about sugar, eggs, flour, chocolate – but beyond that, no. There was an ambiguity about the product that they couldn’t discern, which left them open to allowing for a higher price. If I build a side table with the same plans you used, and used the same wood, yet I priced higher, I believe I would do better in sales than you. Why? Because people think that I have better skills at assembly, finishing and fitting than you did. Having said that, if a potential buyer examined both our pieces side by side, and could find no visible differences, they would more likely be inclined to buy yours. Still though, the mystique of a higher price might make the sale for me.

So what’s the take-away here? If you price low – trying to beat a competitor on price – you’re slitting your own throat, if it’s a product that has ambiguity to it. Higher prices tell people – or at least gets them to ask themselves – that the product is worth more, better.

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Posted by on February 3, 2015 in BlogNotes

 

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Price / Shipping Ratio

shippingI hate to ship my pieces. Hate it! I’d rather sand by hand – heck, by cabinet scraper.

I hate trying to find a box the right size, correct packing material, wrapping the item – ugh!

Rant = over.

Shipping is part of this game of being a professional woodworker, if you are making pieces to be sent all over the United States. We’re lucky that we have such a large audience; 20 years ago, before e-commerce became mainstream, you’d either be doing local only work, or taking out ads in national print media. Today, we can literally have a customer anywhere there is an internet connection, a shipping address, and a buyer. We’re blessed in that regard.

Shipping is a devil we have to deal with. However, not only is there the physical issue of shipping – the boxing up, the shipper, and so on – but the cost associated with shipping and the potential buyer. Maybe you never though about it that much, but shipping cost can make or break a sale.

Let’s role play here a little bit. Let’s say you are interested in buying the exact same table from either guy A or guy B. Guy A’s price for the table is $900, and his shipping charge is $100. Guy B’s price is $750 for the table and $250 for  shipping. Assume that both tables would be coming from just about the same distance, and using the same shipper and shipping time. Just based on a quick gut reaction, which guy do you think you’d go with?

I’m guessing guy A – the table is $900, and his shipping charge is $100. Was I right? If I was (and I bet I was) why was I right?

Because you didn’t want to pay more for shipping – which you really feel little perceived value from. People don’t want to pay anything for shipping – or very little. How many times have you been tempted to buy a product because there was free, or cheap, shipping? That’s why you chose guy A, because you wanted to pay the least amount for shipping – even the total price you’d pay either guy would have been the same – $1000.

The take-away here is don’t charge for actual shipping price (in most cases). Especially if you are making bigger pieces like a coffee table, or larger. Once you box or crate that puppy up, you’ll be charged by dimensional weight, used in shipping and freight, which is a billing technique which takes into account the length, width, and height of a package. Weight has little to do with it. Don’t believe me? Look up rates for a 40 pound package going from NY to LA, ground rate. Never mind I did it for you! A one foot square box would cost about $65; a box 43x33x23 would cost $281!

So what to do then? Build the cost of the shipping in – at least in part. Guy A above has it about right, in my estimation, 10% of the price of the piece. It’s fuzzy math, to be sure, and other things must be taken into account – the cost of the piece, the size of it, actual shipping cost – but what you don’t want to do is scare off a customer to a sale because of a high shipping cost. People understand that for furniture, it’s going to cost some coin to ship it; but they will get turned off to the idea of buying from you if shipping – a low perceived value service – is too high.

Final word – build in a large part of the shipping cost into the price of your work, and charge a lower shipping price. 

 
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Posted by on May 29, 2014 in BlogNotes

 

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