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Pricing Strategies

Discussion in 'Picture Framing Business Issues' started by Bob Carter, Sep 18, 2000.

  1. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    I've had several people contact me directly on our pricing strategies. I don't mind responding, but I'm wondering if some type of general posting might be easier and more beneficial. One week could be about how each function of pricing is developed. I don't mind sharing our concepts as long as people are interested. If so, please respond
     
    American Picture Frame Academy 1-888-840-9605

    The American Picture Framing Academy Learn Picture Framing Now
  2. JRB

    JRB PFG, Picture Framing God

    Bob, I think showing people howe to arive at profitable pricing is an excellent idea.
    I don't think sugesting a specific mark up is a good idea. I am not big on price fixing. I think each business should determin what they need to earn a living and make a reasonable profit and determin their mark up based on that, they can also adjust prices to control volume. I think each geographic areas prices would probably end up being fairly simillar since the cost of living is pretty much the same in most towns and citys. Rent on a store on Geary Street in San Francisco is going to be a lot different than rent in Clarksville, Tennessee, Markups would be different as would labor costs.
    John
     
  3. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    John-As usual, you are right. Nobody should set their prices based on what you, I or anyone else does. My offer of help was in response to several private inquiries. I thought some value could be shared, but it appears a lot more people are more interested in hours of operation than this important topic. I guess the TSAR (that sounds about right) method works for most people. There are so many variables in developing an effective pricing schedule; maybe it's just too much work. Contact me directly if you would like our system
     
  4. JRB

    JRB PFG, Picture Framing God

    Bob, Post your system, it may help a lot of people. Most frame shop owners do not like to admit they need help with somthing so fundamental in running a business. I'm not supprised you've had so few takers. Real men do NOT ask directions. Real men do NOT need shrinks. Real men solve their own problems,Period. Try to make it as clear and simple as you can, not many people will want to ask questions.
    John
     
  5. Greg Gomon

    Greg Gomon CGF II, Certified Grumble Framer Level 2

    Bob, I am wondering if your organization uses computers at the design counter. We are just about to integrate our back office with the design counter for pricing, inventory, workorder flow control. If so, i am sure the prepackaged pricing formulas used by the computer software company needed to be tweeked a bunch. If you use a computer at front counter, would you share your reasons for which software and why? Thanks.
     
  6. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Greg-Yes we have been computerized for many years (10+) and I don't use anybodys pricing schedules. As my background as a retailer, we use a little more sophisticated approach. It includes several components to developing a comprehensive schedule. The two most important variables we consider are cost and market. There are sveral more, but if you start with these two, it will probably help you understand the entire backage better.
    You should know your costs of material. If you don't, you need to. It's the easiest of all the components. A little more difficult is market. The easiest approach is to shop your competition. I know, some people think this an invasion of others rights or unethical. You're not alone. You're wrong, but you're not alone. Get over it. You want to be in business, well, act like it. This is business. Shop as many competitors as possible, but at least 5. You need to shop the same project so you develop a baseline. Once you collect this data, do some comparative analysis. Look for mark-up opportunities as well as other things I'll get into later.If everybody in town is higher than you on glass, go up. If everybody is lower than you, monitor your resistance.Adjust accordingly. The key is to be competitve, but never lower than anybody similar to you. If you do raise any price, do it at logical and moderate increases. If, for example, you charge $13 for 24x30 glass, and everyone else is at $16. Go up immediately to $14, then after afew months another dollar and so on. It's easier mentally for you, and for those very few customer that really do know your prices, it won't be much of a shock to them. But you've instantly givenyourself a $2 raise per item. Review every single item in your price schedule and do it religiously and consistently.
    The only time cost really dictates any pricing is on the exception items that you just have to carry, but can't buy well do to factors beyond immediate control, like freight, minimums,etc. I'll save that for a follow up post, so this doesn't get too ponderous.
     
  7. po' framer

    po' framer MGF, Master Grumble Framer

    Bob, I just noticed this particular thread and don't mind saying that I'd appreciate some of the voices of experience on this critical issue.

    If you will just keep posting away at whatever comes to mind with some sense of logical order, I'll try to follow along quietly and will interject when I don't get it.

    Thanks
     
  8. Susan May

    Susan May Gone.

    I guess since I am not a man I can ask for directions. [​IMG]

    My main problem is finding out the actual "cost" of a frame job. I try to keep in mind all the waste and small pieces of hardware. How do you find the cost of an 8x10? You can't assume that you will be useing the entire sheet of matboard for more 8x10's.


    ------------------
    Sue May :)
    "Everyone is born right-handed, only the greatest can over come it!"
     
  9. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    I'm getting a lot of private emails so I will answer as many questions here s I can.They might be applicable to others as well.
    Once you get a sense of your place in the market price-wise, don't make any decisions yet unless they are so obvious as to need immediate action. That was the really easy part. Now, lets examine how cost enters the equation. Once you develop a logical price structure based on market, refine it by costs. For example, if a 24x30 glass should be around $16 in your market, look at what you pay for it. We buy glass in pallets for about 1/3 less than box glass. We have great margins on glass, and that allows us to shave some margin on items that maybe we don't buy as well. In our case, we seem always to get about twice as much filet as we need. If we figured our prices on what we paid for that fillet, we would probably price ourselves out of the market. So with greater margins on glass and other items, we still attain the desired cost of goods of the entire project. Pricing is dynamic and includes a lot of factors. But you've got these two important factors that have to be considered. Know your market prices and know your costs. Start developing these two first and we'll move on to how to incorporate them
     
  10. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Sue- If you have to pay for the mat board, you have to include it in your cost of goods. In practice, you may have a small piece from a prior workorder(some people call it scraps, we call it inventory) in that case you pay nothing. The prior workorder, in essence, paid for it. But you can't assume a second sale, because you may never sell the scrap(inventory). We cost every order out but what we pay for the material. It sounds like a lot of work but it isn't. Remember only material goes into cost of goods, no labor or any other overhead.
     
  11. JPete

    JPete <span style="color: red"><b><i>Charter Member</i><

    Keep going, one can always learn something.

    [This message has been edited by JPete (edited September 20, 2000).]
     
  12. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Lesson Three: How to incorporate your market and your costs. This to me is the fun part. When we get a new product or new samples, we review them as a team. The first decision is do we like the product. If no, the games over. If yes, we all take a stab at what we think we can sell it for(know your market) then we look at our best negotiated price to see what type of margin it provides(know your costs). If it fits our gross margin parameters it goes on the wall and we monitor it's progress. We usually get some type of introductory cost consideration and display it in the middle of our wall with an introductory price. It forces our sales staff to show it and come up with some of customer acceptance. I 'll promise you, if the staff doesn't like it, it rarely comes off the wall and then why bother. If they love it and show it often and we have no resistance, it's a candidate for mark up. But the final vote is always the customer. They drive almost every decision in our stores. Oh, and once in a while we let the framers in on the decision-making process. But we would rather keep them locked up in the back. No, actually they offer great insight into fitting problems. We've often decline some products because they are a nightmare to deal with that only the framers would point out. Next, we'll talk about dropping unproductive lines ( we call them firewood)
     
  13. Greg Gomon

    Greg Gomon CGF II, Certified Grumble Framer Level 2

    Bob, you are in your element! I am learning a lot...thanks.
     
  14. JRB

    JRB PFG, Picture Framing God

    Bob, What's going on here? I haven't found anything to disagree with. Actually this is great stuff, keep going.
    John
     
  15. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    John-I promise I'll try harder. Actually, we really agree on so much more than we disagree upon.But, I think that's true for most of the comments posted here. Thanks
     
  16. Lance E

    Lance E Member

    Keep it up Bob, we will all learn something from your lessons. I especially like the part about locking the framers in their workshop! (good advise)

    ------------------
     
  17. Susan May

    Susan May Gone.

    Learn something new everyday! Thanks!

    ------------------
    Sue May :)
    "Everyone is born right-handed, only the greatest can over come it!"
     
  18. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Before I go any further, with apologies to Marc and the flap in PFM about formulas,let me clear up some of the mystery. The only figures as a percentage we need to use are cost of goods and margin. The cost of goods is calculated simply by entering your known cost(what you pay)in to your calculator, push divide,enter your selling price,push equal. The amount is your cost of goods. Your margin is the reciprocal(your cost of goods minus 100%). For example, if you pay $2.43 and sell it for $9.00 your cost of goods is 27% and your margin is 73%. Everything equals 100%. I know some people will say if you pay $2 and sell it for $8, you have a 400% markup. But use figures that the industry does. These are the only figures as percents that you will find on P/L's and statements of income. To determine a selling price when you know the cost and the desired cost of goods(and if you've been paying attention, you know we shouldn't determine selling on cost alone)Divide 100%by the desired cost of goods and that factor becomes your multiplier factor. For example,if you want a 27% cost of goods and you pay $3.16, enter 100%,press divide buttonand enter.27, the value should be 3.70. Multiply your cost by 3.70($3.16 x 3.7) and your sellingis $11.69. These simple calculations will help as we go further
     
  19. Marc Lzier

    Marc Lzier Guest

    Bob, no apopogies needed. No flap either. The original article addressed the fact that a 30% MU is not a 30% profit. A simple concept, and one I think you propone, or at least agree with? The detail in the explanation was an attempt to show that with percents you can really make it show anything you want. It was either that or just blow it off. It all depends upon what numbers you draw from. For instance I can show that my left pinky is more or less full of **** than your left pinky. I all depends upon who's **** and whose ****.

    It seems many framers I know feel themselves on the craftsman side, and not the businessman side of their business. A simple concept like 40% up and then 20% off is not a 20% profit will be looked at as drivel, and yet framers do it, and then don't realize why they aren't making money.
    As for the more than 100% bussiness, that, if you recall was the brainchild of other folks on this and other boards. Not me. But feel free to check if you like.

    Got for it Bob. I like what you are doing. I applaud and agree.

    Your next lesson is when? I look forward to it.

    marc

    **** = nothing, I typed *'s and not any words. Insert words according to your own imagination and heart.
     
  20. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Marc-My apology was for bringing up the controversy, and you're right, we do agree on a lot more than not.But one point of clarification for my future postings is to get out of the use of the term markup as a value. If you use cost of goods and margin(gross profit or gross profit margin) it will eliminate the confusion. The only time we should us the term profit is at the end of the month and it's that really small number on the bottom of the P/L. The next lesson will be Sunday and it will deal with tweaking and special pricings
     
  21. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Okay, here comes the tweaking part.Once you have a comfort level on the two most important components(market and cost)set up a logical grid pattern(you probably already have one) and look for a few things>start in the middle, say 18x24, and compare market pricing. Now start adjusting for where you want to be. Never lower, somewhere in the upper half of the market.Smile everytime you get to go up(congratulations, you've just given yourself a raise), re-evaluate if you have to go down. But keep the prices logical.Don't rely upon selling the remainder of any item(glass, mat etc) to maintain your margins.The easy items are mats, glass, mounting etc. 16x20 should be less than 18x24, more than 12x16. etc. Some of the items that present a little more decision-making are items like suede mats. It's hard to justify a price based on cost for a 9x12 mat when you have to buy a whole board, so set a breakeven point on a smaller size and do very well on larger sizes. Pray that you can use the dropout later, but it doesn't always work that way.You get paid the big bucks to make these decisions. But once again, if everyone else sells a 24x30 suede or fabric mat for $40, then you should, too_One point to consider, you will find prices across the board. Compare those that are most comparable to your business. I hear all the time framers, mostly home-based and industrial park locations, touting their lower overhead as a reason for lower prices. My take is that if the only way you can attract customres to your location is by being ridiculously low, that's probably not a very loyal customer. In that case, ususally the only winner is the customer. There's nothing wrong with using advantages to your benefit, but be smart about it.
    On specialty items, like handwrapping mats, decorative corner cuts you just got to bite the bullet and charge what you think it's worth. But you don't know what the market will bear until you push the envelope to it's highest limit. It's hard to compare prices on things you rarely see, it's also hard for the client to compare. Sometimes it just comes down to "Is it worth it?" Is it worth it to you to do it or does the customer think it's worth it. The first question is a lot more important than the second. Don't get trapped into trying too hard to please everyone. I don't care how little you charge, someone is going to think you're too high. If you never have any resistance, you're too **** low. That's where you as a good business person earns your keep.If you are not sure if your prices are right go up $1 an item. That might be $5-6 on an average workorder. If you lose a sale over $5 once in awhile, it happens. But if you get $5 extra on the rest, well, do the math. And remember, don't be afraid (there's that fear thing, again) to market outside the logical grid you've established. Look for those great mark-up opportunities. They are out there, just look for them. That's all for now, next we'll talk about setting some prices that set you apart from the competiton giving you a distinct advantage. Have you ever wondered why Taco Bell sells their taco for only 59 cents? I'll tell you about our 59 cent Taco, next time
     
  22. meko1

    meko1 True Grumbler

    Good discussion!
    I want to add encouragement to not "forget" to charge for all the little things. When we don't make enough money, it makes us want to quit or have to quit renting a retail space and move home. Then we are doing a disservice to the people who would have been glad to pay for good quality and good service. But low price too....no.
    Like he said in the last message, no matter how low you are in price, there will be people who think you are too high priced.
    I had a customer one time(when I first started) spend almost 2hours then pulled out her wallet for a purchase of $9.50! Wow!
    Sorry...I got off the subject of gross margins and cost of material percentages
    a bit.
    Here's a question, does anyone know what percentage of gross sales you spend on advertising?
     
  23. JRB

    JRB PFG, Picture Framing God

    Meko1, Start a new thread, please. Bobs on a roll, let's not stop him by changing the subject.
    Bob, keep going.
    John
     
  24. osgood

    osgood SGF, Supreme Grumble Framer

    I have been watching this thread with great interest. I have a couple of theories myself on pricing:

    1. For a 10 x 8 mat, I charge the customer whatever the entire mat costs me and prices rise as the sizes rise from there. That way the material cost has been covered. I don't know about anyone else, but I have a lot of 'offcuts' in my racks. (They're paid for already)

    2. I don't try to beat any other framer on price. I do a better job than they do, so the customer is getting value for their money.

    3. If I buy some component at a reduced price I do not reduce the selling price of that component. I get a little more profit from it to make up for the times when I haven't made enough profit from something else.

    4. Framers who sell their work way cheaper than everyone else to get more customers are just devaluing the entire industry.

    Final question: Why do so many framers find it necessary to be 'cheaper' than the shop down the road? Why not be 'Better'?

    [This message has been edited by osgood (edited September 26, 2000).]
     
  25. Zorro

    Zorro Grumbler

    Please!!! Enough!!!!! Listen up framers, you are making this job way to hard. When do you ever find time to frame? OK, lets have it.
     
  26. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    I agree with Osgood and I hope he sees that my entire purpose is to allow everyone to base their prices on knowledge. My constant drum beat is to be sure you're getting the most the market will allow, and you don't (won't) know that unless you do the things I've talked about. But let's face it, if everyone knew all the answers we'd have a lot of millionaires in this business. Instead we have the Zorro's of the trade who can't seem to get their work done and still have any time left over for anything else. Maybe by using a lot of good business acumen, the Z-man (whose comments I really do like)might grow his business to the point when he can hire some employees and start spending some quality time on the beach drinking Pina Coladas. The shortest trip to that goal is called making more money. I hope nobody disagrees with that point. Otherwise, I may have to cross sides and join the dark side with Don Diego
     
  27. Framing Goddess

    Framing Goddess SGF, Supreme Grumble Framer

    The Goddess wants all to know that she has printed this thread thus far and has made her loyal subjects read it!

    Good stuff, Bob. I will always make time in my hectic framing schedule to daydream about the beach... er, uh I mean to absorb and implement improved pricing strategies!
     
  28. Lance E

    Lance E Member

    The comment about when do you find time to frame is interesting, having recently replaced my position in the workshop and allowing more time to effectively manage the framing (6 months ago) my prices have increased by an average of 18%, previously I had no time allocated to management.
    My point? Listen to Uncle Billy-Bob, the advise is worthy of consideration.
     
  29. Bogframe

    Bogframe SGF, Supreme Grumble Framer

    I price everything by the running (not united) inch. It's a simple method that somehow allows for labor, glass, backing and fitting. Simply put, add the length and width together and multiply by 2 (16+20X2=72)
    Then you take the Join price for the moulding and divide that by 4.($4.00Join divided by 4=$1)Paper mats are .15, acid free are .30, V-grooves are .10, etc. Add all your inch prices together, multiply by the total inches, and you have your total. If you drymount, add $10 for under 16X20, $15 for 16X20 to 32X40, and $25 for oversized. I also add $25 for anything over 32X40. Try it!

    [This message has been edited by Bogframe (edited September 26, 2000).]
     
  30. Le

    Le CGF II, Certified Grumble Framer Level 2

    Bob, I expense my mats as they are used for a job. I wouldn't dream of referring to my orderly scraps as inventory. I got into this business to be a picture framer, not a manager. Managing is something I have to do. I enjoy it, but if making as much money as posible was what I wanted, I wouldn't deal in a product. I don't want to sit on the beach either, or waste my time getting high. I do appreciate your commentary and respect your perspective. Thanks
     
  31. lise

    lise CGF II, Certified Grumble Framer Level 2

    Just an aside to the thread; Le, if you are an employee for a framing business, I can see how you would just be immersed in the framing end, but if you are a business owner, I've found that you have to wear three hats: one of the technician, one of the manager, and one of the salesperson. If all three are not balanced, then your business is not all it can be. Michael Gerber wrote a great book about this concept called "The E-myth Revisited". This book changed our thinking and our lives about this business.
    Anyway....
    About pricing strategies: Our problem has been getting twenty feet of moulding when we only need eleven. We won't order chops because we can usually use at some point the remaining nine feet. How do you price for this? Also, our inventory and accounting strategy has been to declare 25% waste on all purchases. How does one handle inventory in the case of worse case scenerio..an audit!?


    ------------------
    Lisa Kozokowsky C.G.A.H.
    Frameswest Inc.
    (888-230-5775
     
  32. Scarfinger

    Scarfinger Guest

    Bob,

    Could you please give a pricing analysis of the following:
    How would you buy and what would your selling price be?

    (based on LJ's Canadian price list and in Canadian dollars - no jokes please)

    Moulding number 651734 - Frame size 12.5" x 20" - we don't stock this moulding and need 1 frame for 1 job.

    The job can be done with 6 feet of moulding however if I order 6 feet I will likely get 10 feet. (maybe more)

    Basic price: 6.68/foot
    If I get 6 feet - 40.08 cost
    If I get 10 feet - 66.80 cost

    Chop: 63.75 cost

    Lets not worry about shipping cost.

    In viewing the many arguments about chop vs length I wonder if chop prices in the US are more competitive making chop a better idea in the US than in Canada. Perhaps someone could supply the US numbers for this product.

    Thanks,
    Scarfinger

    I couldn't find a smilie that was all ears!
     
  33. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Scarfinger-Thanks for bringing a real world example into the discussion. First, the decision to buy chop is a slam dunk. The probablity of 10ft or more is a given, and especially if it's a one time product. Remember, if you pay 66.80 for the item, that's what it costs you. Now for pricing: The two elements missing are 1) what the competitve prices are and 2) what we think we can sell it for. Absent those two factors, I would go on pure costing. We like to get about a 35% cost of goods, so based on that, I would probably charge $160.00 for the frame. Based on 63.75 cost I would yield a 40% cost of goods and with glass , matting, etc yielding better than that I would probably be okay. But remember that process yields safe margins(nothing wrong with that) but using the other two factors might be better margins. I hope that helps, if not contact me directly and I'll explain further
     
  34. TADPORTER

    TADPORTER MGF, Master Grumble Framer

    US
    CH= $7.16
    L= $3.97

    6' of CH= $42.96
    10' of L= $39.70

    In cases like this I always order the length and consider the remaining 4' "free" (we're talking 3 bucks difference). Should I be able to use that 4', that will yield approx. $70 in CLEAR profit (if you compare L vs. CH)If the 4' sits and is eventually used for kindling it really didnt cost anymore to get it anyway. You are out nothing with a potential of a $70/0% COG.
    My retail on that frame is $119 yielding either a 36% or 33% COG, both acceptable margins.
    Sorry to get slightly off subject.
    ---Mike
     
  35. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Mike-no argument on your price or logic. Would your answer still be same if you got12 or 14ft. That's the scary part of the equation. We rarely order length unless we are getting 5 or more frames out the bundle.We used to be length buyer and had enough unuseable shorts to build a fire brighter than the Olympic flame, but thayt's for another thread. You gotta love the friendly discussion on this topic. One thing I've certainly learned from this(especially from the Goddess) take your work seriously, but not yourself.
     
  36. Le

    Le CGF II, Certified Grumble Framer Level 2

    Bob, Enjoy your real world examples. If I am going to start buying chops I'll start with high end moulding. Do you have any thoughts on factors to be considered and cost comparisons?
     
  37. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Le-I'm going to move your question to a new thread to keep the pricing issue separate. I really only have two more thoughts on pricing, one coming Sunday. I know we will get plenty of play on chop ordering
     
  38. PicFrmProd

    PicFrmProd True Grumbler

    Why isn't there an icon of me applauding this brilliant exchange! Well done, well said!

    ------------------
    Have you heard of my old friend "Common Sense?"
     
  39. Scarfinger

    Scarfinger Guest

    Going back to my previous example:
    If the moulding in question was popular with my customers and I used a lot of it I could buy in box quantity at a cost of 3.67 per foot and the frame would cost me 22.04 Remember the chop cost was 63.75. If I buy chop in quantity the chop cost could be 54.18. The argument/discussion of chop vs length is interesting but needs hard numbers in the various cases to make good decisions.
     
  40. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Scarfinger-You are absoulutely right hard numbers will help. But before I answer your question, let me ask one. Who thinks because your costs went down that your selling should. Anybody that said yes, please stay after class for some remedial training. Because you have skillfully purchased better means you win, there is no automatic pass-through to the customer. Assuming that the $160 price is competitve(know your market) and you had no resistance, then it's still worth $160 not matter what you paid. Take that extra money as a reward for your superior buying skills and buy that new Kayak you've been eyeing. You've earned it and you deserve it. But if $160 is not a competitive price(know your market) than use that advantage to make(or keep) you competitve. But remember, just because you bought better doesn't entitle the client to the same reward. Their reward was being smart enough to select a skillful framer to do a first-rate job at a fair competitve price(know your market). That's all we as consumers expect when we buy from other merchants, isn't it? This lesson is as old as capitalism, and is worth repeating. But if it's worth $160, it's worth $160. Tje fact you did better is exactly that, YOU did better
     
  41. Scarfinger

    Scarfinger Guest

    Bob,

    Because I bought better doesn't mean mean my retail price SHOULD go down but it means it CAN go down. I may be able to beat my competition while actually making more profit.

    A frame shop displays a vast variety of goods and services for sale. It's time consuming and difficult to keep all the numbers accurate and available. I take a workorder out of the flow every few weeks and check it out. My software can print a page showing all the lookups, markups, etc for a given job and I can see if all is well. In fact the frame sample I gave above was from one work order I checked which turned out to be incorrect. We had sold the frame for 128.30 which cost 63.75 for chop. The moulding had been entered as a type 2 and should have been a type 3. In our software these types relate to how we buy and have different markups. We did make a profit on the frame but not as much as we SHOULD have and gave the customer a false idea of our prices which may lead her to be dissappointed next time.

    Sheesh! All these numbers - I'd much rather do French Mats!! Sorry, for a moment I forgot this was a business.

    From this I would like to start another discussion - please see "How to check the competition."

    [This message has been edited by Scarfinger (edited September 29, 2000).]
     
  42. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Scarfinger-It's getting scary that we are agreeing on so much, just saying it differently. Hopefully when you buy better the only thing that should change is your margin.But as I said you can use cost advantages to help you remain or get competitive.We are back to the old know your market thing. It's really a lot easier than it appears, and you don't need to do it daily. But the system needs constant upkeep and gets easier with time, trust me. But start soon, I'll help you in the set up. As far as shopping, I'm going to take a backseat on this for awhile. I'd love to hear from everyone else first, then I'll share our technique. But I feel I'm dominating the discussion and every is welcome to jump in
     
  43. MerpsMom

    MerpsMom <span style="color: red"><b><i>Charter Member</i><

    What an immensely interesting discussion. Hope there's much more to come. We price compare by snoop shopping, but it is hard to find a snooper who is knowledgeable enough (actually, make that "sneaky and larcenous" enough!) to do a good job. (I see income potential here.)

    Do you all think having POS software makes it less difficult to tweak prices, simply because it's less complicated to do so?
     
  44. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    This will be the last of my scheduled pointers on pricing, and I'm sure will raise some controversy. But before anyone thinks I'm talking out of both sides of my mouth(I am) read the whole premise and see if any of this applies. If not, disregard it in it's entireity as worthless drivel.
    A friend of mine owned several Taco Bells and we would talk shop often(and you think you have help problems).He related that his stores were doing fine several years ago-not spectacular-but doing well. Parent decided a new promotion was needed to drive more business to their doors. The idea was the .59 cent Taco. I think he said( an old faulty memory at work here)that the regular price was .89cents. The cry was universal-Why are reducing our price when a lot of us are struggling, already? The answer was they needed something to separate them from the competition and by using a signature item to do this, they generated a lot more traffic that bought a lot more high profit items(soda, etc) and lo and behold, every single objective was met. They drove more traffic, increased sales, captured a larger market share and put smiles back on the faces of a lot of franchisees. They took a single item, made it the sharpest price in their market and left the rest up to the market. Not across the board, but selective promotion. The rest is history.
    How does this apply to you? Try and find your 59cent Taco. Something that is complimentary to your regular line and pricing structure, but something that sets you apart. What we have selected is metal framing. We sell any item up to 24x36 for $49.95, including glass, dry mount on foamboard and a Nat'l brand round top metal frame. This is the part where people will tell me I'm giving it away after preaching price awareness and pricing to competition.. You're right except for the part of learning from others(Taco Bell). We do 100,000's ft of metal due to this promotion, so we buy awfully well(probably better than most local distributors)and have a cost of coods under 25% on these items. I know not everyone has these capabilities, but the illustration is to find some item, some process that will set you apart. In our case, this buying advantage sets a favorable attitude to our clients that otherwise feel our prices will be extremely high due to our high overhead(all our store are in mega-malls). This gives us the opportunity to show our skill and service while driving lots of traffic to us. The big payoff is when we get to do their regular work at full margin(sodas, nachos,etc)and the opportunity to capture this customer.Then it's up to us to keep them.
    So, what's your signature item? What can you do with either a skill advantage or a buying advantage (or any other advantage) that truly sets you apart? If the item is "I don't have any" then either you aren't thinking hard enough or you're just one of many that we love to compete against(we call them prey). But if you're sharp, you'll find your 59cent Taco. If it works for the big boys, it might work for you
     
  45. lise

    lise CGF II, Certified Grumble Framer Level 2

    Bob, You really have business savvy!
    I think what you are referring to is known in marketing as a "loss leader". This is some item or promotion that may or may not make a profit for your store, but sets you apart by driving your clientele to your location to not only scoop up the loss leader item at an unbelievable value, but also purchase other custom framing (high margin items).
    We are doing this on our website by offering a "feature of the month" at a price where we really just make maybe 25-30% but clients will usually browse and purchase some regular priced items where we can make a 300% profit.
    The point is to get your client into your gallery or virtual shop and show them why they should buy from you.

    ------------------
    Lisa Kozokowsky C.G.A.H.
    Frameswest Inc.
     
  46. Greg Gomon

    Greg Gomon CGF II, Certified Grumble Framer Level 2

    Bob, this is a great thread and PLEASE do not sit in the background for awhile but continue to mentor us.
    We have 1 line of wood moulding in 3 colors offered at a very attractive 50%off price, for budget minded customers. We buy right and do not discount the glass, drymount,and fitting. End result is our poster would now run $99.00 for the same size. I like your analogy of Taco Bell and the 49 cent taco. Notice however they didn't run their special on the entire package meal, only one or two items in the meal. Their profit was made in the ice cube loaded soft drink at a regular price, or add-on items to go with the taco. For us, our margin is low for the budget priced moulding but still full retail for the other ingredients in a framing package. In your opinion, do you agree with this logic?
     
  47. MerpsMom

    MerpsMom <span style="color: red"><b><i>Charter Member</i><

    Ours is v-grooves.
     
  48. Le

    Le CGF II, Certified Grumble Framer Level 2

    We do metal, too. We probably don't buy as well as Bob does, but the major objective is getting people in the door, and making a profit.
     
  49. Bob Carter

    Bob Carter SPFG, Supreme Picture Framing God

    Greg_whatever works for you is absolutely the right path. Do what it takes to protect your regular margins, but give your customers a reason to separate you from the competition. If you can develop an advantage in your buying that moulding, even better. Remember sometimes the smallest advantage becomes a big benefit. But most importantly, you're thinking correctly and looking for that advantage. Maybe the next thread should be on buying strategies to develop an advantage. What do you think?
     
  50. JRB

    JRB PFG, Picture Framing God

    Bob, We started doing that over 20 years ago. We called it our " Poster Special "
    We would frame any poster up to 24 X 30 for $29.95, up to 24 X 36 for 39.95, and up to 30 X 42 for $ 49.95. At the peak of this promotion we had five framers that only did poster specials. The mounting press stayed on from 10.00 am to 9.00 pm seven days a week. We where raking in the money and spending it even faster. We started raising the prices on it $ 5.00 per size catagory, that only helped a little. The problem I ran into is we developed a reputation for being a cheap place to buy framing. We played **** getting a framing job of any type without discounting it. The whole thing almost cost me my business.
    We ended up closing that store and opening in a better location and starting over, We did not send any notification to our old customers that we had moved.
    Our business is now 95 % high end custom framing. The popularity of posters has greatly diminished since the 70s and 80s ( thank God ) We stil offer a poster special but the prices have increased since those days. We start at $ 44.95 with the largest size at $69.95. If it gets to the point of more than five a day, I will quit offering it. The only reason I do it now is as a courtisy to our old customers that hunted us down. I still advertise it in our coupons but our price is higher than our competition so we don't get overwhelmed with it.
    Any one who does this promotion should watch it closly and don't get blinded by all the money coming in like I did.
    John
     
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