Jenny (00:30)
Welcome back to part two of navigating a flower pricing. If you missed it, I started talking about flower pricing in the previous episode, which was episode number 34. So be sure to go back and listen to that if you haven't yet, since it really serves as the foundation of this pricing talk. And so I'm just going to pick up right where we left off before, because in the previous episode, I talked about basic flower pricing, like industry standards.
understanding why prices might vary so much in the flower world, and then also understanding your costs and how that affects the prices that you charge. And today I'm going to be going over three pricing methods to take into consideration when you're setting your prices, as well as factors outside of your business and sometimes out of your control that might affect your prices. We'll also be talking about some pricing markup formulas, which might be a little bit different of a conversation than you'd think.
So let's just dive into pricing methodology because like we talked about in the first part of this two-part series, pricing varies widely and only you can really determine how to set your prices appropriately for your business. And quite frankly, what other people charge has very little to do with you and your business, but yes, it can affect your pricing and how you price.
and have a part in it. And so we're gonna be talking about all those different factors today. Now the biggest factor that you have to understand is you have to know your costs of production and your overhead costs to run your business in order to set your prices so you're making a profit on them. And we talked about this in the last episode, but that's really the most important thing you need to understand.
So put your farm under a microscope and figure out exactly what it costs you to grow and market and sell your flowers. And I have an entire module about this in Six Figure Flower Farming, my online course that I teach. But you just really need to know what it costs you to grow flowers.
But pricing in order to earn a profit involves more than just that. Like we have to be aware of things, like not only of our costs, but the perceived value of our products, the market that we are in, what the market can bear, your competition, and
how you market your business and how you show up in the world will also determine what you can command for price. So we're going to talk about all that, but first we're going to be talking about the three pricing
methods
The three pricing methods
to take into consideration when we're talking about pricing are one cost plus pricing to market based pricing and three value based pricing. So these are three different pricing methods that a lot of people use to set their prices. We're going to talk about each one of them individually, but before we dive into that, I just want to make sure you understand that.
when you are setting your prices for profit, you really have to take all of these pricing methods into consideration. So the first one is cost plus pricing. And this is very basic. You're basically just calculating the cost of producing your flowers and then adding a predetermined markup onto that to determine the selling price. So the formula for this is just taking your cost to produce, adding a markup, and that would be your selling price. However,
If you only go by this pricing model, you might not be taking into account market demand or like customer perception of value, which can potentially lead to either under pricing or over pricing of your products and make it so your customers won't buy from you as much. So an example of this would be if you were super inefficient at growing dahlias, like you've never grown dahlias before it's all new to you. You're still learning how to get your processes down and everything. And let's say that you find out.
that they cost you $50 per bunch to produce. Well, you can't exactly charge $60 a bunch for dahlias. You'd be pricing yourself out of the market in most cases, unless you have some crazy valuable variety that you're selling to a very, very high end market. But for most of us, that's not going to be the case. And so this pricing strategy might not work for you in that scenario. And there's other issues here too, right? You obviously need to get more efficient at growing.
But then let's look at the second pricing method. This is value based pricing. This is where we are talking about the selling price that is based on the perceived value of a product rather than its production cost. So this allows businesses to capture a higher share of the value they create for their customers, which can potentially lead to higher profits. And
I gave an example of this in the last episode about snapdragons, about my snapdragons specifically, but just to refresh your memory, my cost to produce snapdragons is really low because we are really good at it. get multiple flushes, we pinch, we get lots of stems, and we're just really good at growing them. So it costs me about $2 and 75 cents a bunch to grow a bunch of snapdragons, but I sell my snapdragons.
for anywhere between $15 and $20 a bunch because my sales outlets are directly retail and my market can bear that price, which I'm always surprised at because I think that that's like pretty high for Snapdragons. Like I don't value Snapdragons that much, but my customers actually really like Snapdragons. So I just go with it. So in this scenario, if your costs to produce are low, but you can still get a higher price for it because the market will pay it.
then I think you should do it because the perceived value of them, of Snapdragons in this case is more. And this will not be the case for all of your flowers, by the way. But the other thing that affects the perceived value of your products is your brand positioning. So a brand positioning just means that this is the way you position your business and market your brand. And that will determine the prices that you can charge.
And this is just sort of like where you fall in the market space. Like, are you a low end brand, a middle of the road brand, or like a high end luxury brand? So another way to say this is, are you a Target, a Gap, or a Prada? Or are you like Hershey's chocolate, Dove chocolate, or Godiva? Or are you, if we're talking about cars, like Hyundai, or do you drive an Audi or a Lamborghini? So like lower end brands like Target or Hershey's and Hyundai are more affordable.
But they usually come without any added benefits and like bells and whistles and might not always be the highest quality. Whereas luxury brands such as Godiva or Prada or Lamborghini are more expensive and offer more added benefits, quality, and often like customer care and connection. Like a huge piece of this is status as well. So the more luxury your brand is, the higher prices you can charge, but you have to live up to that high touch, high value hype.
And this is what really affects the perceived values of your flowers. Like how much do your customers think your flowers are worth? Is this based on your brand and your marketing and your sales approach? Of course. So for me personally, my farm falls into like the middle of the road brand. Like we charge the like high end prices within that like market space for our flowers, but like we don't charge as high prices as you would see in like a luxury flower shop where honestly you would probably see completely different products anyways, like.
high end arrangements and like wedding packages and value added stuff like that, which I don't do any of. I'm pretty much just like market bunches and bouquets. However, I'm able to charge pretty high prices because of the consistency in which my business shows up in the world with my marketing, the level of service and quality that we provide, like the photography and the quality of our online presence, our experience in the industry and our marketing and sales strategy and
Probably more than anything, the customer experience that our customers have in person with us when we're selling to them. And so all of this adds into our perceived value of our product. Like we're not able to charge luxury prices because well, you know, one, I don't offer luxury floral products. Like that's not our customer base. That's not who we're targeting, but I also don't provide like high touch services such as full service wedding packages or like really high end floral design. So.
I don't want to be a luxury brand. Like I don't want to do super high touch products. I don't want to hold someone's hand the whole way through the buying process. So like that's not for me. But within this middle of the road place where we sit in the marketplace, like I am still able to charge pretty high end prices because of my marketing and all of the front end work I put into growing and scaling my business the right way. So
A low end floral brand example would be, this is not even really a brand, like the guy in the next town over from you that puts an old dirty bucket by the side of the road in front of his house with a bunch of fully blown open Gladiola's at the end of his driveway. And he charges like 10 cents a stem for them. Like, okay, this is a real life example, by the way, because literally around the corner for me, there's a guy who does this and he charges 10 cents for Gladiola stems.
And so, you know, you're never going to be able to compete with them on price. You're never ever going to be able to do that, but they also don't try very hard. Like this person down the road for me that doesn't, they don't have like a real business, but that's besides the point. They don't have any online presence. have no marketing strategy, like no professional photography, no branding, super low quality product. And then, so of course they only get 10 cents a stem for their blown open gladiolus. So.
Okay. Let's just talk about luxury example for just one second. this would be somebody like, I like using Tulipina or Kiana Underwood as an example. And she has this high end floral design company. And although I don't think that she grows her own flowers, but if she did, she has this amazing brand with this amazing online presence and like a defined very on brand signature style portfolio. has a very specific.
style and portfolio. And she also has a very clear marketing strategy, elite photography, exclusive branding, like insanely high quality and high touch products and offerings. So the way that I want you to look at this is think about how you want your business to show up in the world. Like are you, if you want to be like a lower end brand where you sell your flowers for a cheaper price and you like don't put that much effort into marketing, like
You do you, I don't think that's the best way to go about things. think that's lazy business ownership. I think that you should always be striving to provide the best quality product and best customer service that you can. So you can demand the prices that you need to have a thriving flower business. And there's all kinds of reasons we should all have thriving profitable flower businesses, but that's a whole other conversation. Right? So how you position your brand will really determine.
how much your customers think your flowers are worth and how much you can charge for them. So moving on to the third pricing method, this is market-based pricing. And this involves setting the price of your product by basically benchmarking against prices charged by your competitors or others in a really similar market to yours. So market conditions and competitor pricing really affect how you would set your prices in this pricing method. However,
Ro relying solely on market-based pricing may lead to price wars. So a lot of the times pricing becomes like a primary basis for competition rather than value differentiation, which I'm all about value differentiation. I truly believe that there's room for every flower grower in the marketplace because we all have our own unique gifts and things that we offer to the world. Like I know I've talked about this on the podcast before, but like
I sell the same kinds of flowers as like five other flower growers in my area, but we all specialize in different things. And so we have that value differentiation. So we are really good at conveying the value that we provide. So we don't have to compete on price. So about market prices, like what are others charging for what you're selling? Like, I think it's important to be aware of this.
and just like look at the range and see where your business might fall. This should not determine your pricing, but you can always take these numbers into consideration. For example, let's say farmer Gary sells retail dahlias and two other farms in Gary's area might also sell retail dahlias for like, let's say one sells them for $10 a bunch and the other person sells them for $20 a bunch.
Farmer Gary can use this information to determine his own pricing. So he might fall somewhere in that range. and that's what the market will bear, but he could also charge more if he's really good at brand positioning and marketing and has a good established customer base and does a really good job at conveying the value that he provides with his flowers.
Pricing can vary dramatically based on location and demand. So for example, like I have flower friends on the East coast near major cities that easily get like eight, nine, $10 a stem retail for peonies. And then on my farm, like I live in like pretty rural New York, I have an 80 acre peony farm that is 20 minutes from me and another 20 acre peony farm within 20 minutes of me.
And those two very large peony farms, sell a lot of peonies for like a dollar a stem. And so they sort of flood my market with peonies. And so I'm really lucky if I can even get $3 a stem retail for them. And so I'm still making a profit on them, but it's not as much as I would like to, but this is just the way that business goes. And so these average retail prices very widely across the country and even within your own local areas.
just depending on someone's scale and cost of production and customer base. So my advice to you is to do some market research to see what floral wholesale prices are in your area, see what other people are charging, other flower farmers, and just kind of like get to know the markets. And florist pricing can really help with this. And a lot of times it just takes like time and experience to fully grasp the industry and its pricing in your area.
but you also need to think about how your product compares. So for example, in many cases, your flowers that you might sell direct to a florist, in most cases should probably be more expensive than the same flower that that florist would buy from a wholesaler. This is because A, you're cutting out the middleman of the wholesaler, and B, your product theoretically should be way higher quality because it's not shipped, it's not shoved in a box like.
They're getting it to you fresh every single stem and that bunch should be saleable. And that is all like great stuff to use in your marketing, by the way, when you approach forest, you can say that there there's no shrink. And when they get bunches from a wholesaler, a lot of the times they just expect to have some shrink and be tossing out some stems because they're not as high quality. And this comes back to, you know, your talent as a grower, obviously too, you have to be able to produce quality cut flowers to demand quality prices for them.
So you need to think about that as well. You just never want to like, just match what a wholesaler is charging for flowers. It, I think that's again, another lazy way of just pricing and selling flowers. So you just need to understand your cost of production. And I know we talked about that before. And if you don't know of any local wholesalers in your area, just to like get an idea about these kinds of things you can get on a national wholesaler.
availability and price lists like Mayesh is a good one. You can look on the USDA ornamentals wholesale list or just like ibuyflowers.com. But even when you look at places like this, you're going to see a big difference in pricing. Like because Mayesh's wholesale pricing is actually a lot more expensive than like ibuyflowers.com. And it's because they are a higher end.
Wholesaler. And so this applies this, all these pricing strategies and methods that we're talking about today, it applies to any kind of business, not just cut flower farms. All right. So those are the three different pricing methods to be aware of when you are considering setting your prices. the cost plus pricing value based pricing and market based pricing.
So when you are pricing for profit and within your business, you're taking all of these pricing methods into consideration. So let me say that a different way. Your individual pricing is going to depend on a combination of your cost plus markup, what your customers value and what your local market prices are. So I'm gonna switch gears just a little bit here and talk about pricing markup formulas.
because there are a couple of these like standard markup formulas bouncing around on the internet, which I think can be really useful to help you understand the industry as a whole. But I never stick to these because I don't think it really works and is applicable in all cases because of all the factors in these pricing methodologies that we just talked about. There really is no singular standard markup to follow because there's no such thing as one size fits all.
which I know is not the answer you want to hear, but I'm not ever going to just BS you on something. So, but an example of a markup formula, and this is just like a structured formula that I know a lot of people use in the flower industry is if you were selling to a wholesaler, you would probably add anywhere from 10 to 30 % of a markup on top of your cost of production. And then if you were selling direct to a florist, you might take that wholesale price and do a two times markup on it.
And then if you're selling retail, you would probably do a 2 and 1 half to 3 and 1 half times markup. And then if you're doing weddings, like if you do weddings yourself, you're a farmer, florist, a lot of times you would do a 3 and 1 half to 5 times markup. Now the varying markups for these different sales outlets exist because there are varying costs for selling through each and one of these sales outlets for your knowledge, your experience, your labor, expertise, your supplies.
And so again, you need to understand your costs for selling through all these different sales outlets. But like when I used to sell my flowers through wedding packages, like they cost me more to sell through those because there was a lot more communication. was hard goods, like vases and supplies that had to buy. there's a lot of pressure that goes into that. There's a lot of talent and expertise and floral design knowledge that you need to have. And so selling through that outlet.
Was a lot more expensive than just selling to a wholesaler. Like a lot of times a wholesaler will just like come pick up a hundred punches from your farm or you just go drop it off. So there's not a lot of additional costs involved with selling there. Cause chances are you're not really marketing that much either. If you're just selling direct to a large wholesaler. So that's why there is this varying markup associated with all these different sales outlets. So for example, if your cost to produce a bunch of Zinnias is let's say $4 and 55 cents.
If you're going to sell it to a wholesaler, let's just say you add a 10 % markup onto your costs. That means that you would sell those Zinnias for $5 a bunch to a wholesaler. Then if I'm selling that same bunch direct to a florist, I would probably charge 10 bucks for it. Cause I would take my wholesale cost of five and do a two times markup. And then if I was selling that same bunch of Zinnias retail, I'd probably sell it for 15. And then if I'm selling it through a wedding, I'd probably charge $20 a bunch. So.
These formulas don't take into consideration two of the pricing methods we talked about value based and market based pricing. So I understand how this can be confusing for people who are just starting out in the flower space. And I think that looking at those standard markets of like, you know, take your wholesale price and do a two times markup for a forest or three times markup for retail or whatever can be really useful as a starting point, but I just don't think it's going to.
like workout, I think it's gonna take some experience for you to learn your customers and learn your local market and get an idea of what the market will bear in your area before you can actually figure out how to price for profit. But the most important part of all this pricing stuff, the basis of all of it is to really know your costs. So when you set your price, you know that you're not losing money on stuff.
So as you can see from all of these examples, there's a lot of different factors that come into play when deciding your pricing. So in this episode, we talked about cost plus markup, your local market prices, The perceived value of your flowers, which is directly influenced by your brand positioning. And then you also need to take all these pricing methods and approaches into account when pricing your products.
understanding and implementing these pricing strategies and approaches is going to do nothing except lead you to more money, like sell your flowers with more ease and more confidence.
So yes, there's a lot of moving pieces when it comes to pricing, but I'm never going to tell you, you just need to charge like $20 for your dolly is and $15 for your zinnias or whatever, because I don't know how much it costs you to produce your flowers. I don't know what your growing strategies are, what your growing practices are. I don't know what your local market is like. Like, I don't know what your competition looks like, which doesn't honestly matter a whole lot, but.
I don't know how you're marketing or how you're positioning your brand. Every farm is so unique and that's why no one can tell you exactly what to charge for your flowers. It just takes a little bit of experience and it takes some ingenuity and digging into what your costs of production are to understand what you need to charge. And then just looking at what's going on around you and not trying to price the lowest possible, just get sales. Like that's lazy business.
You can get the higher end of the spectrum for pricing. If you just put a small amount of effort into your product and your marketing and all of this, I'm saying all this, but if you're just kind of starting out in the flower farming world, it's okay. If you don't charge a ton of money at first for your flowers while you're still learning how, you know, how to grow them. And you're still learning the ropes and learning the industry and getting your customers, but
Eventually, you need to be working up to a place where you can raise your prices so you know that you're earning a healthy profit, you are pricing competitively, and that you are doing what you need to to make your business successful and profitable. I know that a lot of people just want cotton dry answers, but the truth about business is that that doesn't really exist. So I'm just being real with y'all. So thank you for being here for this two part pricing series and for appreciating.
that there are a lot of things that go into this. Anything from, know I've said it a million times, but understanding your costs, understanding why flower prices vary so much, industry standards, pricing methods, and then factors within your local market that could affect how much you charge. So I hope that this was helpful. I know it was a lot, but I really wanted to explain all of the details and all the things to consider that go into pricing in the hopes that you can get in much.
deeper understanding of it rather than just like a superficial understanding. And again, if you didn't listen to the first part of this two part series, go back and listen to that now. is episode number 34. And then I will see you next time on the six figure flower farming podcast. are releasing new episodes every Monday. So I'll see you next week. Same time, same place.
