This month Robin Kavanagh, Sawgrass’ public relations manager talks about pricing and you can set yours accordingly to maximise profits.
How much should I charge? This is one of the most common questions we hear from customers.
Pricing is a delicate balance between making a profit and the price people will pay. Set your prices too low, and your cash flow and profitability will suffer. Set them too high, and your sales will suffer.
There are several things to think about and add into your calculations when setting your prices. Here are a few tips to help you strike the right chord with your customers and make the most of the potential profits that come with making sublimated products.
Know your market
Identifying trends and introducing new products is a great business strategy. To be successful with new products, find out who else is selling similar products in your target markets and what prices are being charged. Look at what the products are, how they are presented, and any other information such as sales volume.
Once you have evaluated the market, ask yourself some essential questions: Is there enough room for another business? What new and innovative ideas can you bring to customers to make yourself stand out? What range of pricing is there within the market now, and how well can your company work within those parameters?
All too often, small businesses focus only on the cost of substrates, ink, paper and shipping. This is a costly error that often results in struggles to keep financially afloat.
A pricing exercise must include all costs associated with running a business. If you’re at the hobbyist stage, this is a great time to think about how to make the jump to becoming a profitable sublimation business. If you’re ready to take that leap or are adding sublimation to your existing business, you know that your overhead expenses need to be built into your cost calculations. These include: rent, utilities, insurance, packaging, software, ink, printers, paper, substrates, memberships, etc. And, yes, it also includes your wages.
This overhead cost will translate in to an hourly cost of production. For example, you may find that to produce any sublimated product costs you £21 per hour in total. Now consider the product you would like to sell and the price that it is already fetching in the market. How long would it take you to produce that item?
Sublimation is a process of create, print and press, with the printing and pressing only taking an average of two minutes. The creation of artwork and preparing of files takes the most time within most sublimation jobs. Estimate how many minutes it would take you to complete the create, print, press process to come up with a true cost of your product.
The more you produce, the lower the cost – and the higher the profit you can make. Taking advantage of jobs where you can print and press multiple products at once will result in even greater profit.
Forget the old formula
The rule of thumb for most retailers is to multiply cost times two or three, to ensure profit. With sublimation, however, this formula can leave a lot of money on the table. The reason for this is that the cost of production is often many more times less than the price the market will bear.
For example, the cost to produce a 14x14in velvet pillow, with a premade design, may cost you £3.50 to make, and can easily sell for £14 in most markets. That’s cost times four. If you tweak the design to add in someone’s name, you can add another £3.50 to £7 to the price – resulting in cost times five or six.
Adding pictures, names and custom colours always add value to a product in the eyes of the customer, but not much to your expenses. To keep design time down to a minimum, focus on creating designs that can be quickly and easily edited to includes these little premium additions. The result will be more cash in pocket, with minimal time added to your production.
Pricing is one of the most important and mystifying aspects of doing business. Luckily, there is a lot of guidance out there to help you as you navigate your way through this maze.