Friday, September 6, 2013

Do You Negotiate On Your Pricing?

Should you negotiate on pricing? There are a couple of schools of thought on this.

The first is that as soon as you discount your pricing in response to people complaining that your prices are too high you're saying "Yeah, I don't think I'm worth what I was charging to begin with since I'm willing to knock the price down when you whine a little bit."

This is usually the perspective that people who have worked out their costs and have figured out how much they want to earn take, since they've actually thought about how much they need to make a decent salary. If they negotiate they're cutting themselves off at the knees. This group is usually the one that gets offended if someone asks for a discount.

The second school of thought is that the new normal is negotiation, and that clients are going to try to get discounts regardless. So these people are willing to go into a discounting situation on a regular basis. A lot of businesses do run this way, and the owners don't get offended when people ask for money off.

You need to decide ahead of time what you're willing to do as far as discounting goes. If you want to allow people to negotiate on a regular basis, you might want to add some wiggle room into your pricing. That way if someone does want to negotiate you'll have room to move on the price and still earn a decent amount on each cake. If you don't want to negotiate at all, and you think your pricing is fine, then you can just prepare yourself to say no if people ask for a discount, or you can have something that you can add on as a value-added offer instead of a discount.

Now of course there will be times when you're asked to match a price, or give a discount, and if that happens you can decide whether you want to do that or not. Don't take it personally, though. And don't be afraid to say why or why not you'll agree or not agree to the discount.

I had a client who called me to say that they really wanted to hire me for a cake with a very specific design, but another baker gave discounts for deliveries to a certain venue, and they wanted to know if I would match that price. I asked what the price was, and I told them that I wouldn't match the price but I would waive the delivery fee. And the reason that I gave for not matching it was that I knew that my cake would look better than the other baker's cake for that particular design. So I told them that, and they hired me.

The important thing is to decide ahead of time what your discounting policy is so that you're not put on the spot. I usually say that I don't do discounting at all, but as in the example above, it depends on the cake. If it's something interesting I might be willing to discount a little, but I'm not going to match a price that's way below what my skill is worth.


Kara Buntin owns A Cake To Remember LLC,  online cake supplies at  www.acaketoremember.com and www.acaketoremember.etsy.com

2 comments:

Jenniffer said...

I almost never discount my prices unless the client is willing make concessions on the design. I recently quoted a price and the client came back with "(a competitor) priced this same cake $75 cheaper". I told him to go online and look at both our galleries and then make his decision. He called me back and booked saying that he would rather pay more and be assured that the cake would look like he wanted.

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