Pricing: Beyond Cost-Plus

More and more shops are using the small/medium/large approach to pricing championed by Tim Huckabee, founder of FloralStrategies. There is lots of information about how versioning this way can improve profits.

There doesn’t seem to be much information on how the price increments should work and whether there should be any impact on margin. Specifically – should the upgraded versions (medium and large) offer the customer better value and the florist lower margins?

Most florists seem to be focussed on consistent margins. Their “medium” and “large” versions are priced according to the same formula as their base “small” version.

Other florists sacrifice some margin to make their “medium” and “large” versions more attractive to the customer. The idea is that the customer is ready to spend some money and, since you really don’t know when they will order again, you should try and get every last penny out of them, even if it means sacrificing some margin.

Other successful vendors take remarkably different approaches with different products.