Welcome to the second pricing blog post in this little series. This blog is all about seven super top tips that you can action right away to help you price your cakes.
(In no particular order)
• High end price points vs low end price points……vs somewhere in the middle
Decide which pricing bracket you want your cake business to belong to. Want to be in the low end priced group, then volume is your friend. Think farmers markets, food festivals and wholesale. If you want to be in high end price group then think bespoke cakes for celebrations (i.e.weddings and milestone birthdays), as well as corporate orders. Then there is the middle price group which can be divided further into lower middle and higher middle. If we think of it in terms of fashion we have Primark, H&M, New Look at the low end price point. Then the likes of Gap, Diesel, The White Company, Boden, LK Bennett, Reiss, French Connection at the mid to mid-high price point and Mulberry, Dior, Chanel, Gucci, Chloe at the high end price point.
Take Action: Ask yourself which bracket do you want your business to fall into?
• Survey for potential customers
What would your potential customers pay? This is just to get an idea of what your target market would happily pay. If the market you survey isn’t happy to pay your prices, don’t be disheartened and drop them asap, start researching and looking for a target market that would be happy to pay. It may mean you have to widen your search area or they could be underneath your feet already. But survey’s are great for finding out a wealth of information.
Take Action: Create a short survey of no more that 5 questions using Google Forms, Survey Monkey or Typeform. Then share and promote to your customers and friends on Facebook, Twitter, Email, Royal Mail, or even survey passersby in the street or cafes (make sure you get permission to do that first though!).
• How much do you want to earn a month?
Take the time to work out how much you want to earn from your cake business per month is another factor to deciding how to price your cakes and creating an hourly rate that is realistic and feasible to you.
Take Action: Ask yourself if you want to earn an extra couple of thousand a month or a couple of hundred? Write down what you want to earn this year, next year and the year after. Then start incorporating that into your cake prices.
• Timing and labour!
Work out how long it takes you to do everything involved with creating a cake. From the admin, to the ingredients shopping, to actually baking the cake, to decorating, to the washing up. Work out absolutely everything. Having an idea of timings is one thing, having actually written down in black and white will help you decide what you want to charge for your labour.
Take Action: Create a spreadsheet or jot it down on a piece of paper. Create four columns and head them with activity, time started, time finished and total time taken. Then for every task that relates to the cake order you are creating, enter in all the timing details.
• Working out the costs
Identify every single cost involved with creating your cakes, similar to working out the timings for each cake. Working out the costs involved can takes effort in the beginning but so important to pricing your cakes for profit.
Take Action: Again create a spreadsheet or jot down on a piece of paper everything that is involved in creating your cakes and the corresponding prices. From electricity, gas and water to every single ingredient option for the different size cakes you make, to fresh fruit, supplies and more.
• Tiered pricing strategy
When it comes to sharing the price of your cakes with your customers you want it to be as easy as possible. Once you have worked out the labour and costings involved you would group certain types of cakes together and take the average price. For example if you run a birthday cake business, you could have a three tiered pricing strategy for each cake size. An entry level cake would be a 8” round fondant iced cake and piped birthday message, a second level cake would be a 8” round fondant iced cake, piped birthday message and 1-2 hours decoration. Finishing with a third level cake, 8” round fondant iced cake, piped birthday message and 3-4 hours decoration.
Take Action: Start thinking about adding a tiered pricing strategy for your cakes.
• Creating quotes
It can be hard to quote for your customers, as in the back of your mind you can often thinking “will they judge me, will they think I am too expensive, will they think I am crazy…etc”. This is just your inner thought process. As time goes by you and become more confidence with your prices that inner chatter will start to clear. One way to reduce it faster is by quoting using the top down approach, or in other words anchoring. When I quote, I always like to do it by email so that it is in writing. I start with the most expensive quote (the anchor) and then the middle quote and end with the cheapest. You will be surprised at how many people go for the middle or the top.
Take Action: Next time you send a quote try this method and tell me know how it helped you.
I hope these pricing tips help you and your business. Have another tip, feel free to leave a comment in the box below or tweet me @MMWCHQ.