Sign Pricing 201 - Advanced Pricing Methods
Pricing is by far the single most debated and discussed topic in the sign shop industry. That’s fitting, though, as pricing is also one of the most important aspects of guaranteeing your own success.
We, here at shopVOX, started this blog to help business owners grow their companies, not just learning about shopVOX print shop software but also by getting the best industry insights and advice. Previously, we provided you with a helpful beginner’s guide to sign pricing to help you understand the basics of sign pricing.
Today, we’re going to get a little more advanced and discuss two commonly used pricing methods that you can implement in your sign shop today. You’ve already gotten the hang of Pricing 101. Consider this Pricing 201.
Let’s get started.
Metric Pricing
Metric pricing is an interesting and useful way for sign shops to set up their game after their first year of business. The reason you should wait until you have at least a year of business under your belt is that, for metric pricing to be accurate, you need a history of consistent sales to refer back to.
With your past sales data in hand, metric pricing requires you to use the cost-plus pricing formula (this means adding up your material, labor, and overhead costs, then multiplying the sum by a predetermined markup percentage of your choosing). Doing this for each of the various sign categories your business offers, such as awnings, channel letters, lightboxes, vehicle wraps, vinyl jobs, or others, will give you a variety of prices that you can then break down into the total metric that you will use to quote prices in the future.
For example, if you sold five channel-letter jobs last year by using the cost-plus pricing method, you will then have to break those jobs down by cost-per-vertical-inch. Five different jobs mean that you’ll end up with five different numbers, which you can then use to create a baseline data average.
So, again keeping with our five channel-letter jobs example, let’s say you come up with an average of $15 per upright inch. You now have a useful way of quoting any new channel-letter jobs you get, meaning you can turn around estimates much faster.
Worth noting is that metric pricing lends itself to including add-ons in the form of flat fees. For example, you might be able to break down the cost of a raceway by the footage or the price of extra paint or vinyl colors. To reiterate, though, before setting add-ons, you still need to use the data you’ve accumulated over your first year of business in order to get your baseline metric first.
Once you have your metrics and add-ons all figured out, you can easily formulate a product inside of shopVOX, which will allow you to efficiently identify the correct questions and turn quotes around more quickly.
If you’re not ready to begin metric pricing yet, shopVOX features can still help; our sign software makes it easy to catalog the average prices over a lengthy period of time. That way, later, you’ll have all the data you need to put together a pricing metric that works for you and your sign shop.
Value Pricing
Value pricing is a complex pricing method that should really only be used by sign shops that have been a business for multiple years and that have gotten a great grip (not a good, great) on operations, the sales process, and customer service. Simply put, before you try value pricing, it’s important to have a good foundation of experience and data assisting you.
The general theory behind value pricing is that there is going to be value added to your product or service that the customer will appreciate enough that price becomes secondary. This could come in the form of unique designs or products that only your company offers or even a new product that your shop specializes in.
Typically, the value lies in whatever sets your sign shop apart from your competitors, and customers need to know that. Maybe you’re the only authorized reseller in your area. Maybe your design is one that blew the customer away, and they want to go with you because other sign shops simply weren’t up to the task.
When you’re able to sell based on value, it makes for an easier sales experience for everyone involved, the customer included. When you demonstrate added value to a customer, that customer won’t just be satisfied; they will fall in love with what is coming their way!
Customers understand that when they’re getting something special and distinctive, something that can’t easily be duplicated or gotten anywhere else, a premium is going to be placed on that value. In some cases, the value-added proposition may be too far outside their budget. That doesn’t mean the value-added is purposeless; on the contrary, it can act as support for a new quote that is inside the customer’s budget to help close another sale.
shopVOX Helps You Price Your Way to Profitability
Metric and value pricing are two great methods for creating quotes that both meet your customer’s needs and increase your sign shop revenues. It’s important to remember, though, that these are just two pricing models of many. In a future blog, we’ll discuss a third advancing pricing method called “book pricing.”
If you’re interested in learning more about this or other topics to help you grow your sign shop business, shopVOX is here to help. Let us share our knowledge and experience with you, and don’t forget to try our innovative sign software system to push your business to even bigger and better heights.
Discover the benefits of using shopVOX today!