After reading an article about countertop pricing, which begins on p. 74, in the
January 2011 issue of Stone World, we want to offer this advice to countertop fabricators:
Taking the time to relay important details to your customer is a key factor in selling your service. The Home Depots and Lowes of the industry sell their countertops as a SKU, so competing on price is not a competition at all. Also, break down an ad that lists multiple offers because the listed items are not always relevant (they might already be included in the service and are not really a deal.)
There is a need to determine fixed costs (business costs that do not change) and variable costs (business costs that change with level of production.) Direct costs such as freight, materials, power, tools, commissions, labor, etc., do not change. “Indirect costs” are things such as administrative staff, insurance, marketing, and safety programs.
There are various pricing strategies in the market:
- Square-foot pricing: not very effective when differentiating businesses
- Good/Better/Best pricing: varied pricing for different market segments (retail, k&b, designer, contractor, etc.
- Bundle pricing: encourages the use of a product in quantity by offering a discount for volume, allows for profit maximization
- De-bundled pricing: encourages customer to upgrade and choose
- Premium pricing: geared towards unique and high quality, maximizes profit
- Penetration pricing: for use in new and different markets
Tools such as software, time sheets, and job cost sheets help determine the level of cost in a fabrication business. Detailed pricing sheets that list cut-outs, edgework, radius corners, bump outs, lamination, seams, etc., are itemized so you are able to break down every detail of the customer's particular job. This is where you can possibly negotiate details with the customer if they do not like the price.
In a competitive market where price is always the first topic of conversation, it is important to outline the details and importance of your service. Check out
our post about the factors affecting the price of granite.