Pricing Products & Services in the Wedding Industry

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The most challenging thing that I think most small businesses face is the pricing of their products and services.  There is not one business in the wedding industry that I know that does not have this as a concern.  The question of pricing is one old and new businesses face every day.  And, it is one that is very important within our industry.

Today, we’re going to go over my simple approach to pricing.  I say it’s simple because it is pretty easy math.  But, it gets complicated because it really requires that you understand your market.  Tomorrow, we’ll talk about pricing within the wedding industry.  And, how pricing fairly affects the industry as a whole.

Easy-Peasy Pricing Math

Here is is folks!  It’s not rocket science.  This is the pricing equation:

COSTS + MARKUP (for products) + MARKET tolerance = PRICE

Did you blink?  (You may have missed it, if you did.)  You see what I’m saying?  It’s really only 3 numbers to consider.  Let’s break down these three numbers:

• Costs
  What are the costs of your product or service?  For example, an invitation designer would have paper, printing, designing labor and assembly labor.  A wedding photographer would have the cost of film (maybe), printing, books, shooting labor, and editing labor.  A wedding planner would have costs of labor.  This is not your overhead.  This is not your advertising or your rent.  This is solely the cost to produce your goods or services.
• Markup
  If you are in a resale business (a wedding boutique, invitation store, etc) you would have a markup that is inherent in your industry.  In retail, this is typically called “keystone” which is twice the value of cost.
• What the Market will Tolerate
  This is the tricky one.  What will the market tolerate?  What is the market telling you that your goods and services should be valued at?  What is the going rate in the market?  What is the perceived value of your product or service?  This is where you must know your competition.  You must understand the market.  You must understand your place in the market.  You must know your niche.

An Example

I’m going to break this down in an example.  Let’s say that a floral designer sell wedding floral arrangements.  The product is a gorgeous centerpiece for a client getting married in June 2010.  The niche is floral arrangement for people with an affinity for modern art.

Your floral costs to make the centerpiece =     $200
+ Your labor costs to make the centerpiece = $600 (this is the design, labor, and the assistant’s labor)
+ What the market will tolerate =                   $1200
.                                                                        = $2000 cost of centerpiece

How did the floral designer know that this is what the market will tolerate?  He knows the following:

• He is an experienced designer in the high-end market and knows how he compares to his competition in terms of design, aesthetic, pricing, and service.
• He understands his place in the market.  He knows where he fits among his competitors.
• He has defined his niche and knows the value that it brings to the market.
• He knows that for a June wedding the law of supply & demand applies.  There are few summer days in supply and there is high demand for those dates.  This is economic law.  (P = price, S = supply, D = demand)

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Lastly, the designer knows that pricing appropriately is not only important to the success of his business, but to the industry as a whole.  If he prices to low, he not only undercuts himself but also lessens the value of his profession within the wedding industry.  More on this tomorrow.