Variable ratio mark-up has different mark-ups depending upon
two factors—the type of design or the type of flower and the labor required to
design with it. Labor-intensive designs or flowers would have a higher
mark-up. The strength of the variable
ratio mark-up is that the labor aspect of designing is included in the design.
However, the planning for net profit is still a matter of guesswork. Another
weakness may be the confusion of so many mark-ups. The owner can periodically
post a retail price list with the varying mark-ups included (but not shown)
without causing confusion to the employee.
PERCENTAGE MARK-UP
The percentage mark-up is a pricing method that plans for
profit. The percentage mark-up method is the wholesale cost of goods divided by
the cost of goods percentage as determined by the shop's financial statement.
This pricing method requires the florist to analyze the business' financial
records to determine the percentages of the four major aspects of gross sales.
At first, this analysis may be time- consuming, but once completed, the
percentage mark-up is easy to calculate.The four areas will vary somewhat from
shop to shop. Gross sales are the total dollar amounts that the florist sells.
Operating expenses include the costs of running the business, such as rent or
costs of owning the building, salaries, selling costs, delivery costs, and
administrative costs. The operating expenses may be lower if the florist owns
the building, requiring no mortgage payment or rent. Labor is an operating
expense that is calculated separately. Labor is the cost for the required time
to design the specialized products that florists sell. Cost of goods is the
cost of purchasing merchandise and materials that comprises the designs,
plants, and giftware sold in a florist.
Now, how do these figures relate to pricing? The cost of
goods used in a design is calculated as 30 percent of the design price. For
each arrangement, 30 percent of the price will be the actual wholesale cost of
the flowers, foliages, and supplies.
Let's use the vase arrangement in Figure. The wholesale cost
of goods .To find the price, the cost of goods is divided by the cost of goods
percentage. This method is also called the divisional percentage markup.
Remember, the cost of goods is divided by the cost of goods percentage.
The strength of the percentage mark-up is the planning for
profit and knowing the specific percentages for each category, including cost
of goods, for the individual floral shop Although the preparation of this
information may take some time, the effort will pay off with an efficient
pricing system. A disadvantage is that the employee may not know wholesale
prices of goods to make the calculations. However, the manager or owner could
determine prices using this method for specials and for numerous commonly
purchased designs, plants, and corsages. Planning for profit is profitable!
If the customer requests an arrangement for a specific
amount, the price is multiplied by to
determine the cost of goods that can be used to make the arrangement. For
example, a arrangement should have of wholesale costs in flowers, foliages, and
supplies, including the vase.
A florist must decide which pricing method fits the
management style and the type of operation. The method chosen should provide
the owner with enough profit without charging exorbitant prices.
PRICING STRATEGIES
Pricing strategies are well-planned methods and practices of
pricing to attract customers to the floral shop and to motivate them to buy the
products, perhaps more than originally planned. Using pricing strategies can
help to increase sales volume and gross sales.
STRATEGIES TO ATTRACT CUSTOMERS
A good retailer is always thinking of ways to attract new
customers to the floral shop. Advertising through window displays or print
media can lure new buyers into the shop. Leader pricing, tie-in pricing, and
advertised specials offering a good buy or a free item can bring new customers.
Leader Pricing
Leader pricing is a method of offering commonly purchased
and recognizable items, such as carnations, daisies, roses, or special
giftware, at a significantly reduced price compared to the competition. This
strategy will attract new buyers and price-conscious customers and give the
impression that all of the prices are more reasonable than the competition. The
leader pricing method can be effectively used when good buys have been
negotiated with trusted suppliers.
Multiple Unit Pricing
Multiple unit pricings is a strategy to encourage the
customer to come to the shop and then buy more by offering price breaks for
purchasing additional items. For example, one iris costs and three irises cost.
The customer will feel that they are getting a lot for their money.
Advertised "end of the week" bouquet specials can
encourage customers to stop by and pick up some flowers. Make (or purchase)
cheerful mixes of flowers, give the bouquets a catchy title, and place the
display in a prominent place to encourage the buyer. The single stems priced individually cost more than the mixture, which encourages the customer to buy
the whole bunch.
A "buy one, get one free" special is another
multiple unit pricing strategy. This method attracts customers to the shop because
of the great bargains being advertised Plan ahead for this method and work with
the suppliers to find some good flower buys. Use this strategy carefully so zhe
shop will not develop a "discount store" image.
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