Package Pricing An Alternative to Discounting By Cliff Wilson, MCPF Package pricing can expand your business with price-conscious customers without the need for discounting t happens to everyone: A customer walks in with a potential framing project, spends time looking over moulding and mat - ting samples, and takes up a sales consultant’s time—only to Iwalk out when the price exceeds his or her budget. Some of these are borderline customers who just want ready-made frames. But there are also many others you can convert into regular cus - tomers—if you can only get them over their price resistance. In many cases, the best way to do this is to introduce them to custom framing through package pricing. It's hard to believe that low introductory prices can actually help your business, but the evi - dence says it definitely can while also adding to your overall income and profit margin along the way. What is package pricing? It is budget-level custom framing. It can also include all the options of traditional custom framing; it just starts with a set of simple, fixed prices. It is probably more accurate to call it “Fixed-base pricing for easy entry point framing,” but that’s way too long to say. At Framed In Tatnuck, we use two package systems. One we call a “Poster Special” while the other is called “Frugal Framing.” The Poster Special could also be called the “No-Mat Package,” but we’ve used Poster Special for so long that the name has stuck. The Poster Special starts with a choice of half a dozen metal frames, reg - ular glass, dry mount, and fit and finish. Customers have the option The Frugal Framing merchandiser nestles neatly among the to upgrade for $10 to UV filtered glass, $10 to non-glare, or $10 to corner samples. the Frugal Framing wood selections. Frugal Framing starts with a The basic difference between the two packages is choice of two dozen or so wood frames or the basic metal frames the inclusion of a mat for Frugal Framing. For either, from the Poster Special and regular glass along with any Artique if customers want a premium glazing like Museum mat, hinge mount, and fit and finish. The Frugal Framing package Glass, they pay the basic package price plus the differ - offers the same upgrade options as the Poster Special package. ence in retail prices between regular glass and the Museum Glass. All upgrades yield at least the same Poster Special (no mat) Frugal Framing (single mat) profit margins as traditional custom framing prices. Up to 11”x14”: $24.95 Up to 11”x14”: $39.95 The price charts at the counter include larger sizes Up to 16”x20”: $44.95 Up to 16”x20”: $59.95 and higher prices, but all signs and advertising use the Up to 18”x24”: $54.95 Up to 18”x24”: $69.95 basic charts so that everything appears to be under Up to 24”x36”: $79.95 Up to 22”x25”: $79.95 $100. An upgrade or two raises the price of a 16”x20” Up to 32”x40”: $99.95 Up to 26”x32”: $89.95 20 PFM September 2015 frame to more than $100 quickly, but the either not buy at all or will only buy initial perception stays. A Frugal Framing one time because they feel custom 15½”x19¾” with UV glass and fabric on framing is too expensive. Our experi - an 8-ply mat is $144.95—and the cus - ence is that package pricing customers tomer is thrilled. are new to framing, artists or hobbyists Why use such a program? It creates who previously did the work them - incremental sales at greater margins with - selves, or customers who previously out discounting. Many customers are took their “cheap stuff” to big box afraid of custom framing. Package pricing stores. offers them peace of mind and an easy- We have also found that new cus - to-understand entry point. When a tomers will often come in with a piece potential customer asks, “How much to of art, go through the design and pric - frame my picture?”, this system provides ing process, and then go back to their a quick, accurate answer based on size. cars for more pieces once they realize No more scaring a customer with “it they can afford them with this pro - depends” and a list of all the variables. gram. After they become more com - The caller gets the base price and is fortable with the process, they buy informed that there are added options at more upgrades like premium glass and a cost. This gives a potential new cus - fabric mats. Eventually, they say, “Let's tomer the confidence to come in and not worry about Frugal this time; this work up a design. There’s less fear, and is important to me.” Even regular cus - more callers become customers. Once tomers will come in for Frugal Fram - they know the base price, it’s easy to edu - ing occasionally, often saying that they cate them about options. were glad they didn't have to resort to This approach can be used to create a ready-made or one of the “coupon attention-grabbing print ads. At Framed stores.” In Tatnuck, there are two different print For free weekly newspapers and similar print It's important to remember that ad campaigns. One is more of a branding venues, ads featurimg actual packing prices package pricing is not a discount pro - have proven effective. program for glossy magazines targeted to gram. The profit margin on the base higher-end demographics. For free weekly newspaper ads, package should be as good as or better than standard pric - an actual package price chart yields much greater return ing. because potential customers understand immediately that When setting up package pricing, it is important to we can meet their budgets. This draws in customers who establish a maximum per foot price when ordering pro - might have responded to coupon ads, without sacrificing files. Moulding prices should be selected to ensure an profit margins. effective profit margin at each size. This is achieved using The common objection to this program is, “But I'll box programs, monthly specials, and closeouts. Never sac - lose my high-end framing jobs!” This is a reasonable rifice profit margins. Package Pricing is not a “loss leader.” response, but experience has shown this doesn’t happen. Of It should be a high margin package targeted to low retail all the frame shops we know of that have implemented this price points. Again: This is not discounting. approach, only one believes it may have resulted in fewer Let's look at a price analysis of one size, keeping in high-end jobs. However, that shop implemented the idea mind that each size needs similar scrutiny to maintain for its entire framing line. All the other stores implemented your profit margin. Using a 16”x20” package from the package pricing using only selected profiles and retained a Frugal Framing program with Framed In Tatnuck's whole - more traditional approach for everything else. The result: sale costs, the maximum size would use a quarter sheet of more new lower-end customers without any fall-off in high - matboard, a quarter sheet of backing board, a quarter er-end framing. sheet of foamboard, a quarter lite of regular glass, miscella - When customers are truly price sensitive, they will neous fitting and packaging material, and the moulding. 22 PFM September 2015 The desired price point for a 16”x20” package is All indications $59.95. To keep the profit margin reasonable, the desired are that 7 to 8 per - material cost for package price jobs is 23 percent (this cent of consumers might be closer to 30 percent if you buy chops). This frequent a custom should leave you plenty to cover your costs and give you frame shop. Much of their reluctance is ¼ sheet of matboard $2.25 due to price. Being ¼ sheet of backing board $1.75 able to advertise an ¼ sheet of foamboard $0.75 attractive retail price ¼ lite of regular 2mil glass $1.25 is a draw for con - Miscellaneous material $0.65 sumers who have Total without moulding $6.65 shied away from Moulding $7.10 framing or been Total material cost $13.75 turned off by mis - the desired profit. Your target percentage might be differ - leading coupons. ent, but you should not compromise profit for this pric - Package price ing system. So, in this example, the cost of all materials is offerings have $59.95 x 23 percent, which rounds to $13.75. Subtract - increased business ing everything but the moulding cost leaves $7.10 avail - for many frame able for moulding. The actual moulding width is shops. If your shop unknown, so moulding usage is estimated at 9’, which is at capacity or is allows for waste. The target wholesale cost for moulding is branded such that therefore 79 cents a foot. This is the maximum allowable you don't want for the moulding. If there is moulding at a better price, lower-priced offer - your profit margin increases. If other materials are on sale, ings, this system that also adds to the profit. might not be for Since most shops are not near capacity yet schedule you. However, you backroom help with the same hours every week, there might consider may be no additional labor costs in many cases. This implementing a works because the number of these packages typically package-priced sys - forms only a small part of a shop’s workload.