Five Things A Butcher Can Teach A Florist About Pricing
This is a butcher shop at a local food market. It is an extremely competitive environment – in addition to fighting off nearby grocery stores, Walmart, Costco, etc. there are another six butchers on the same floor in the same building. Many of them go out of business and change ownership on a regular basis.
This one has survived for decades. The owner is an amazing and purely intuitive businessman. He didn’t go to business school. He's never studied pricing or anything. He’s just one of those people that gets it.
Like a florist he faces stiff competition. Like a florist he’s a small business owner dealing in a perishable product. And this is an important point – nothing is prepackaged. Everything is packed for the customer based on a conversation with the person behind the counter. There are a lot of parallels between what he does and what a florist does.
Different Lures For Different Fish: People Respond To Different Approaches
He sells great pork ribs, and he sells them two different ways. Most of the time, about three weeks out of the month, he sells them by the pound. Usually about $5.99 a pound. Then every once and a while he’ll sell them by the rack. He calls it a special and sells them for $10 a rack.
I never buy them by the pound. But I can never resist them at $10 a rack.
It’s generally accepted that a per pound price is better because it’s a lower expression of price – $5.99 is less than $10, and it seems more affordable, and that motivates people to buy.
But ribs aren’t like ground beef. You don’t buy a pound of ribs, you buy them by the rack. You can price them by the pound, but you sell them by the rack.
That leads to uncertainty. The customer is buying without knowing what it’s going to cost. A lot of people hate that (and there is a parallel there to delivery and service charges, we'll get to that later).
The per pound price also draws attention to a negative. With ribs there is a lot of waste in the form of bones that go straight into the garbage, and the per-pound price make you acutely aware of that. This is another parallel that we’ll discuss in a minute, but there are some good reasons to gravitate towards the per pound price.
One weekend we had friends in from out of town and I had promised them ribs. So I went to the market with my fingers crossed, hoping that day they would be on sale by the rack, the $10 special.
Unfortunately they were only selling by the pound. But I was trapped – I had promised our friends ribs. So, full of trepidation and anxiety I asked for four racks, certain it was going to cost a fortune. The actual cost? $40.24… almost exactly the same as if they were selling for $10 a rack.
I’ve been dealing with this butcher for twenty years and had to ask him what was going on. It turns out he’s a lot like a fisherman.
A fisherman usually starts their day tying on their favorite lure – the one that has produced in the past. If it stops producing they switch it.
The per pound approach is his favorite lure, the one that generally sells the best, and the one that he goes to first. But if things are slow he’ll switch it up and go to the per rack price – usually about once a month. And just like a different lure might stimulate a picky fish into biting the different pricing “activates” different buyers.
That’s what he saw over the years – when the ribs start piling up he switches the sign and different people start buying them. The ones that like buying by the pound? They’d had their chance for the last two or three weeks. If they wanted to buy ribs by the pound they likely already had. Now it was time to activate the other 30%+.
As you can see this butcher has a corner booth. Lately he has taken to selling ribs both ways, in different areas, to appeal to different buyers.
Don't Settle On A Single Approach
The per pound price is generally more effective, appealing to about 60% of the population. If it was an election there would be a clear cut winner.
But the people that don’t like the per pound pricing? They never agreed to participate in a referendum on pricing. It’s not like a group of friends were deciding where to go for dinner and they said “ok, fine, we’ll go along with whatever the group decides”. They’re never going to like that pricing.
Unless you’re prepared to just give up on large groups of potential customers you need to appeal to different groups. Bob does this by offering two different pricing models.
Don't settle for a single approach if it alienates some customers and presents a barrier to purchasing.
At best these decisions are made on an ongoing basis. Airlines for example – they know exactly what they should be selling every hour. If they aren’t doing it that adjust prices. It’s not something you can revisit once a month.
The butcher tackles this by always having a plan B. If Bob sees the ribs aren’t moving he’ll mix things up, right then. He doesn’t wait.
And it’s the same thing in the flower business. You need good reports. If it’s Feb 10 and your pre-orders are down 15% against that same date the year before you have to be ready to roll. You can’t wait for next year.
It’s easier for Bob, he just puts out the sign. You need a way to connect with customers – use all of the marketing features in your POS system to spread the word fast.
People Don’t Like Uncertainty
It’s scary to buy something when you don’t know what it is really going to cost. The supermarket, where everything is prepackaged… no problem. And here, with the local butcher, ground beef is no problem – he'll pack up whatever amount you want.
But the rubs are a mystery. I have no idea what they are going to cost, and I don’t want to get a nasty surprise.
This is a big complaint about flowers among "regular" people, people outside the industry. I hear it from friends all the time… they hate ordering flowers because they feel like they’re getting screwed*. They commit to a price and then fees and charges keep getting added on. A lot of people don’t like that.
Bob gets around that by offering a per-rack price that takes away that roadblock.
*Do you all have people you can ask? There’s somebody in your life – a wife, a girlfriend, a boyfriend that tells you their partner never gets flowers. Have a beer with that partner and ask them why.
Don’t Draw Their Attention To What They Hate
One of the problems with the per-pound pricing on ribs is that it draws attention to the fact that a lot of every single pound goes straight into the garage in the form of bones. The other model, the per-rack price, avoids that.
In the flower business the bones are delivery fees and, when relevant, service charges. Discussing delivery fees with florists is always delicate. You’ll usually get one of two responses.
“We’re the only ones that can offer same day gift delivery and we should charge for it”.
Yes, you do have a monopoly on same day delivery and that means that you can charge for it. But that does not mean people will like it.
Remember 10 years ago before conducting and Netflix and Hulu and everything else? When we all had to deal with a cable company. Did you ever look at that cable bill and thing “damn, that’s expensive but hey – it’s the only way I can get HBO so I’m happy to pay it!”. Never happened.
The other answer you get from florists is “our costs….”. OK, but remember – your customers don’t care about your costs.
I'm kind of a lightning rod for anything floral related with my non-industry regular-guy friends. If they're upset about anything floral it's me they vent to.
One friend buys his pizza and his flowers from two different vendors in the same strip mall just under a mile from his house. The florist charges $15 for delivery some time that day, the pizza guy charge $3 for delivery in 40 minutes. He wanted to know why that was.
Ask a florist about that and they'll start talking about tips etc. They'll call that customer a deadbeat and a bottom feeder... but that's a customer! You can’t just write off customers that don’t like delivery fees.
And a lot of people don’t like delivery fees. Don’t let anyone tell you otherwise.
Yes, some people don’t care. A few people even like delivery fees. I have a friend, very busy and very successful, who is deeply committed to a philosophy that successful people buy the time of others, less successful people sell their time to others. Paying delivery charges reminds him he is buying his time back and makes him happy.
But that is relatively rare. A lot of people, maybe even most people, don’t like delivery charges. If you have any doubts about that think about Amazon Prime.
Amazon Prime was introduced because so many people don’t like paying for shipping. Amazon does a great job with their marketing, and a customer gets an email that their favorite author has just released a new book.
They'd click the link and then… they see the delivery charge. Never mind. Cart abandonment.
Amazon first tackled this with free shipping on orders over $X. It’s a great way to get people to spend more…. just add another item or two to save on shipping. The old trap of spend $30 more to “save" $5 on shipping.
And it works well, some of the time. But you can’t go to that well too often – if I’m excited about one new book it eventually gets hard to justify spending four times as much to get free shipping.
One solution? "Bundles", packages that include shipping and any other charges that are almost always applied to an order. When offered during a sales "can I interest you in one of our bundles that includes delivery and an enclosure card?" this will appeal to customers that want to understand their costs right from the front.
But it's not for everyone and, again, there is no one-size-fits-all approach. There is a reason florists and airlines have "unbundled" their offerings – it lets them advertise a lower price in a very competitive environment. But there is also a reason fast food has increasingly relied on bundles – they appeal to many customers. And don't forget – airlines don't only unbundle – if you don't want to deal with bag fees and paying for meals you can buy an upgraded fare that includes those things.