Pricing is a tricky game to navigate — not only does it dictate the value of your products and services, but it also plays a major role in a prospective client’s decision-making process. Charge too low and your bottom line will suffer; charge too high and you’ll drive away budget-minded clients. It’s a fine line you must walk to realize your financial goals while also remaining competitive in the marketplace.
In the catering world, pricing is especially touchy as you must factor in the costs of ingredients which fluctuate throughout the year. Here are a few ways to assess and adjust your pricing structure to ensure it’s up to par.
Know your worth
Pricing insecurity is common in service-driven companies, since there is a lot of grey area that needs to be accounted for beyond concrete costs. All it takes is the loss of a major client or a slow season to get business owners wondering if they’re charging too much.
However, confidence in knowing your worth is the key to success in the catering industry.
“You have to be proud of the products you’re delivering and should never apologize for your pricing,” says Anthony Lambatos of Footers Catering. “I firmly believe that if you accept price as a reason for someone not booking, then you are accepting that the difference in the value you provide does not matter to the customer.”
Face the fact that some people will look elsewhere because they’re not prepared to pay the price you’ve quoted. This isn’t necessarily a bad thing; in most cases, you are simply making room for the clients who will see the value in your work.
Research comparative pricing
It’s essential to know where your company fits into the marketplace in terms of pricing. There’s nothing wrong with doing some research to learn what other restaurants and competitors are charging for similar menus.
“You get what you pay for,” reminds Lon Lane, president of Lon Lane’s Inspired Occasions. “There is the Golden Corral and Ruth’s Chris Steakhouse and a lot in-between — they all prepare strip steaks, but they are not all equal. Compare your pricing to the pricing from restaurants that provide your quality of work.”
In a high-pressure sales situation, it’s good to remember that your pricing is not the only thing that sets you apart from a prospect’s choices. Whether it’s a commitment to eco-friendly practices or a killer client experience, you have more to offer beyond the food prepared in your kitchen.
Meryl Snow, owner of Feastivities Events, assures: “The strongest way to eliminate the pricing feedback is to show them why you're different from your competitors from the beginning.”
The catch is that you must sell the added value of booking your company. You need to make it crystal clear what sets you apart.
“If one DJ is $1,000 and another is $1,200 and the client doesn’t see the difference between the two companies, they will book with the less expensive company,” Snow continues. “Wouldn’t you? This deserves to be repeated if a client tells you they booked someone else because of price that is due to the fact that the client did not see any differences between the two companies.”
Price around your goals
Making cost projections can be an extremely valuable way to assess how much you need to charge. “We have target goals for both our overall cost of goods sold and for the cost of our combined food costs and kitchen prep labor cost,” explains Lambatos. “Our pricing is based off of these numbers.”
When you make concrete goals, you have a better idea of future projections so you can be prepared for any changes in the market. “We try to raise prices in advance of increasing costs because so many of our events are booking six months to a year out,” he adds.
Mind your numbers
When it comes down to it, pricing is about the numbers. Get familiar with your company’s expenses and figure out how to land on dollar values that make sense for your services and packages. Find a formula that works for you that makes pricing an easy, continuous process.
Lane shares: “We evaluate actual value (Food Costs x a Multiplier = Retail Price), market value (comparing our product to competitors), and perceived value (i.e. a cup of coffee costs $0.08 to make, but perceived value is $2.50 plus). We try not to leave money on the table.”
The business of pricing shouldn’t be a mysterious process of smoke and mirrors. Instead, get into the details and be transparent with your customers — stick to your service’s value and be strategic in your decisions. Even after you’ve set your pricing, keep an eye on your bottom line to be aware of any fluctuations that need adjustment.