embroidery pricing models explained · 1/20/2019 embroidery pricing models explained before we...
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Erich Campbell
Embroidery Pricing Models Explained:
Tackling Pricing and Value through Theory
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Embroidery Pricing Models Explained1/20/2019
Who is this guy?
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Embroidery Pricing Models Explained1/20/2019 3
About Value
Knowing Your Shop
Doing The Math
The Minimum To Maintain
Pushing For Profit
Dealing With Digitizing
Additional Fees
Price Versus Value
IN THIS SESSION
Embroidery Pricing Models Explained1/20/2019
BEFORE WE BEGIN
Your work is valuable.
You need profit to grow and thrive.
Find your unique value, dare to care for the
customer’s experience, and be audacious
enough to charge what you deserve.
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Embroidery Pricing Models Explained1/20/2019
BEFORE WE BEGIN
Price is not cost.
Price: What a customer is willing to pay
Cost: The resources used to create a product
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Embroidery Pricing Models Explained1/20/2019
ABOUT VALUE
What’s the difference?6
$6 $60
Embroidery Pricing Models Explained1/20/2019
ABOUT VALUE
Measurable Value / Perceived Value
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$6 $60
● Blank● Standard Tag● Direct Sale
TheTee
● Same Blank● Custom Tag Print● Sold In Boutique● Packaging
Embroidery Pricing Models Explained1/20/2019
ABOUT VALUE
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Measurable Value● Based on labor/costs● Easy to quantify● Proved by calculation● Takes more input (quality,
labor) to raise
Perceived Value● Based on perception● Harder to quantify● Proved by response● May raise through
context, marketing, positioning, or popularity.
● Out of sync with labor / cost.
Math alone can’t describe value.
Embroidery Pricing Models Explained1/20/2019 9
KNOWING YOUR SHOP
Your shop is unique.
Taking a poll of the shops in your area and averaging the quotes isn’t a viable method
to determine pricing.
Embroidery Pricing Models Explained1/20/2019 10
KNOWING YOUR SHOP
Your shop is unique.
No simple spreadsheet or price-per-thousand can be universally correct for all
shops and situations.
Embroidery Pricing Models Explained1/20/2019 11
KNOWING YOUR SHOP
Your Shop’s Position
Total Costs
Equipment
Region
Local/Niche Market
Unique Value
Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Why start with calculations?
Staying in business requires knowing what things cost.
Growing a business means making more than we need to break even.
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Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
The Minimum to Maintain
Pay all costs + a reasonable wage for all you do.
Calculated based on optimal production and growth,
our goal is long-term sustainability.
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Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Calculating your costs
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Fixed Expenses● Leases● Subscriptions● Communications● Insurance
Variable Expenses● Supplies● Utilities● Temp Labor● Repairs*● Misc. Costs
Record/Review costs + extrapolate 1 year
Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Production Possibilities
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Know the labor your shop can
reasonablyachieve.
Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Production Possibilities
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= 45,180 ‘thousands’ of stitches per head/year
Average stitching speed: 500 spm
6 full production hours per 8 hour shift
251 working days in a normal year
Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Initial Pricing by Stitch Count
Yearly Minimum to Maintain / ‘thousands’ per year
= Minimum Price per Thousand Stitches
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Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Base Pricing
Low-count jobs can lose money when priced entirely based on stitch count.
Establish a base price per piece to cover
production labor that remains constant
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Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Minimum Pricing by the Hour
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Yearly Minimum to Maintain / estimated hours per year
= Minimum Price per Work Hour
6 full production hours per 8 hour shift
251 working days in a normal year
1506 work hours in a normal year
Embroidery Pricing Models Explained1/20/2019
DOING THE MATH
Time Studies
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● Hooping● Trimming● Finishing● Packaging● Stitching*
More accurate than estimates
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFIT
Building Profit Beyond Minimums
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Garment Price + Markup and Decoration
Garment Price + Profit-adjusted Decoration
Flat Rate Pricing
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITGarment Price + Markup And Decoration
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Garment Cost $5
+100% Markup $5
Sub Total = $10
+ Decoration $12.18
Final Price = $22.18
Markup/profit is applied to garment cost
+100%
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFIT
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+ Pros● Simple Calculation● Industry Standard
- Cons● Less profit on inexpensive
garments● Markup too high on
expensive garments● No profit on customer-
supplied garments
Garment Price + Markup And Decoration
Markup/profit is applied to garment cost
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITGarment Price + Profit-Adjusted Decoration
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Garment Cost $5
+ 20 Mins. Labor or
10,000 Stitches
+ Calculated Profit
$20.67
Final Price = $25.67
Markup/profit is applied to Decoration
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFIT
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+ Pros● Consistent● Easier to estimate profit● Entirely tied to labor
- Cons● Time studies required● Must predermine desired
yearly profit
Garment Price + Profit-Adjusted Decoration
Markup/profit is applied to Decoration
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITFlat Rate - Package Model
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Final Price = $25.00
(Includes specific
garment + left chest
logo only)
Package Model with Restrictions
1 LogoThis polo
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITFlat Rate - Location Model
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Garment Cost $5
Left Chest Logo $20
Sleeve Logo $10
Final Price = $35.00
Price per Location
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFIT
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+ Pros● Easy to explain● No need to quote● No calculations
- Cons● Less Equitable● Complicated jobs may not
be profitable● Restrictions can
confuse/frustrate customers
Flat RateDecoration + Garment Inclusive / One Price per Area
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITDiscounts by Volume
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Primarily used to encourage
larger orders or reward
larger decorations
Calculated by Garment Volume and/or Stitch Count
Embroidery Pricing Models Explained1/20/2019
PUSHING FOR PROFITDiscounts by Volume
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How is it profitable?● Reduced switching costs
● Reduced cost from vendors
● Reduced chance of errors
Embroidery Pricing Models Explained1/20/2019
DEALING WITH DIGITIZING
File Ownership and Revealing Fees
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Passing it On
Loss Leader
Dividing by Garment
Embroidery Pricing Models Explained1/20/2019
DEALING WITH DIGITIZING
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+ Pros● Can add markup● No fight over files● Less fear over ‘lock-in’
- Cons● Time lost in prep● No barriers to bargain
shopping
Passing on the Cost
Cost directly assessed - Files to customer
Embroidery Pricing Models Explained1/20/2019
DEALING WITH DIGITIZING
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+ Pros● Retain Ownership● No ‘Setup Fee’ fight● Enticement to return
- Cons● No direct profit● Opportunity cost● Initial small orders
may be at a loss
Loss Leader
Costs waived - Files stay in-house
Embroidery Pricing Models Explained1/20/2019
DEALING WITH DIGITIZING
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+ Pros● No visible setup fee● Easy accounting for
clubs/events
- Cons● Skews quote
comparisons● Hides value
Divide by Garment
Costs amortized by upping per-garment price
Embroidery Pricing Models Explained1/20/2019
ADDITIONAL FEES
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● 3D Foam
● Applique
● Patch Making
● Individual
Packaging
● Tagging /
Labeling
Tasks that add materials and labor should increase the final price
Embroidery Pricing Models Explained1/20/2019
RUSH FEES
Justify overtime on a full schedule and/or increasing staff or production capacity
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It’s not (just) a PITA fee.
Embroidery Pricing Models Explained1/20/2019
RUSH FEESWhat if I’m not busy?
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Nobody knows (or should know) your volume.
Customers will not understand the higher price for the
same service at a later, busier time.
Embroidery Pricing Models Explained1/20/2019
RUSH FEESWhat if I don’t need or want to charge
rush fees?
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Recognize the effects of disrupting your schedule:
added switching time, stress, and labor, accruing real
costs and opportunity costs.
If you choose to waive them, always show fees on the
invoice to acclimate the customer in case you need or
decide to charge them in the future.
Embroidery Pricing Models Explained1/20/2019
PRICE VS. VALUEWhat is your unique value proposition?
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What does your shop offer that you can’t
get anywhere else?
What makes you more than a
commodity?
Embroidery Pricing Models Explained1/20/2019
PRICE VS. VALUE
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Customers pay (value you) more if you:
● make their lives easier
(review ordering, pickup, communication)
● offer products or decorations others can’t or won’t
● maintain a high standard for quality
● offer valuable information and consultation
● provide an enjoyable experience
Embroidery Pricing Models Explained1/20/2019
PRICE VS. VALUEPrice-only shoppers are fickle.
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For bargain hunters, you are only as
good as your last ‘deal’.
Customers have a measurable value,
too.
Embroidery Pricing Models Explained1/20/2019
PRICE VS. VALUE
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Competing on price always drives
prices down; competing on value can
raise them and justify them to the
customer.
Embroidery Pricing Models Explained1/20/2019
ASSESSMENT
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Calculation-Based Pricing● Know your costs
● Add a reasonable amount for all labor
● Examine your shop’s unique position
● Use estimates and/or time studies to determine
capacity
● Examine pricing schemes and fees for custom work
● Set your initial pricing
Embroidery Pricing Models Explained1/20/2019
ASSESSMENT
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Value-Based Pricing● Know your unique value proposition
● Look for niche markets, services, and contexts
that raise your value.
● Share the ‘story’ of your shop’s defining
characteristics and abilities
● Adjust pricing in these avenues accordingly
Embroidery Pricing Models Explained1/20/2019
IN CONCLUSION
Your work is valuable.
You need profit to grow and thrive.
Know your costs, understand the math,
but in the end, one of the most important
things you can do is to be you.
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Embroidery Pricing Models Explained1/20/2019
IN CONCLUSION
Price fairly, but don’t underestimate your value. If you don’t believe your
value can make a profit, work to increase value first.
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Embroidery Pricing Models Explained1/20/2019
IN CONCLUSION
Find your unique value, dare to care for the
customer’s experience, and be audacious
enough to charge what you deserve.
47
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