Embroidery Pricing Models Explained · 1/20/2019 Embroidery Pricing Models Explained BEFORE WE...

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


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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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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ABOUT VALUE

What’s the difference?6

$6 $60


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


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.


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.


KNOWING YOUR SHOP

Your shop is unique.

No simple spreadsheet or price-per-thousand can be universally correct for all

shops and situations.


KNOWING YOUR SHOP

Your Shop’s Position

Total Costs

Equipment

Region

Local/Niche Market

Unique Value


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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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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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


DOING THE MATH

Production Possibilities

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Know the labor your shop can

reasonablyachieve.


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


DOING THE MATH

Initial Pricing by Stitch Count

Yearly Minimum to Maintain / ‘thousands’ per year

= Minimum Price per Thousand Stitches

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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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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


DOING THE MATH

Time Studies

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● Hooping● Trimming● Finishing● Packaging● Stitching*

More accurate than estimates


PUSHING FOR PROFIT

Building Profit Beyond Minimums

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Garment Price + Markup and Decoration

Garment Price + Profit-adjusted Decoration

Flat Rate Pricing


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%


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


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


Markup/profit is applied to Decoration


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


PUSHING FOR PROFITFlat Rate - Package Model

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(Includes specific

garment + left chest

logo only)

Package Model with Restrictions

1 LogoThis polo


PUSHING FOR PROFITFlat Rate - Location Model

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Garment Cost $5

Left Chest Logo $20

Sleeve Logo $10


Price per Location


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


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


PUSHING FOR PROFITDiscounts by Volume

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How is it profitable?● Reduced switching costs

● Reduced cost from vendors

● Reduced chance of errors


DEALING WITH DIGITIZING

File Ownership and Revealing Fees

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Passing it On

Loss Leader

Dividing by Garment



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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



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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



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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


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


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.


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.


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.


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?


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


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.


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.


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


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


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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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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IN CONCLUSION

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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Date post:	03-Jul-2020
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Embroidery Pricing Models Explained · 1/20/2019 Embroidery Pricing Models Explained BEFORE WE...

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