Pricing in a vacuum?

[Rich]

Here's an interesting angle on pricing:
http://blogs.hbr.org/cs/2012/08/pricing_lessons_from_new_engla.html

What do you think?

Rich

[sofadoc]

I'm not sure the strategy applies as much in the upholstery field. Maybe in densely populated areas where there are a lot of shops in the same market. Most small-town shops don't have much (if any) competition anyway. Being one of those small-town shops myself, it's hard for me to say.

[byhammerandhand]

One of the billboards that I've driven buy a few times in the last week:

Think we're expensive?  We're not.  
Oil change $79.95

WHAT?  Most anywhere you can get one for $20-25.   Except at this BMW dealer, perhaps.

---------------------

I did an Angie's list review this week.   I went to the home and spent a bit over 3 hours and fixed 3 chairs and deluxed up a cocktail table with a lot of wear and tear on it.   I think I charged $120 for the table and $50 each for the chairs.  I thought that was a fair rate.   The review said another firm had quoted 4x what I did the job for.  There's no way I could justify charging $1000 for three hours work.

[SHHR]

One of the billboards that I've driven buy a few times in the last week:

Think we're expensive?  We're not. 
Oil change $79.95

WHAT?  Most anywhere you can get one for $20-25.   Except at this BMW dealer, perhaps.

I may have to start an ad for this type of work. Saturday morning I put a new top on a 99 BMW Z3 and they asked if I knew how to reset the oil change light on it. They just had the oil changed, and the quick change center had no idea how to reset it. It turns out that you need a special BMW/European auto scan tool to do it. Anyway a few years ago I repaired a seat in another Z3 with an airbag code that needed adressed so I bought a scanner for european airbag codes and it also resets oil change lights too. I know beemers recommend their own brand of synthetics which is more expensive, but not that much. Anyway the 80 bucks you're shelling out is for a factory trained tech to plug a wire into an underhood socket and press a button, Maybe a 30 second job! very good profit margin!
Kyle

[baileyuph]

Do you suppose the $79.95 was for synthetic oil?  Was a filter included?  Some of those cars might take more oil than the routine car does also?

Nothing is cheap is it, I can't buy regular oil, filter, and change myself for under $25 after paying taxes.  At that I have to make two trips, one to get the new oil, the second to dispose of the old oil.  Add $5 worth of gas and my time for all this and I would probably be better off to just pay someone a bit more than $25 to do it and it is over. 

Yes, those German cars, for example using synthetic do use more quarts, the only answer I know is try to cut back on the miles.

Doyle

[kodydog]

I wonder if most people driving Beemers, Mercedes or Porsche's worry about being overcharged for an oil change?

Do you car guys charge the same for a luxury car as say a Mercury Cougar?

[SHHR]

Doyle, synthetics do cost more. I use them in my cars, but  I have picked up a MPG or two, no big gain but I just do it. Of course I do my own changes and it costs me about $45 for each of our two vehicles, I can also go a little farther between changes. Dealers usually purchase their oil in drums and pump out the required amount, doing that does let them buy cheaper and thats why a standard oil change runs $20-$25. Assuming thats the 5 Qt. standard and a cheap filter.

Kody, I don't charge more for labor, It's just when you're talking materials; most of the luxury (german) has leather, higher quality carpet, etc. The same guy who owns the BMW I mentioned aso has a couple of Cadillac DeVilles. I have done some mechanical for him like brakes. These two cars have the same brakes as Basic GM models like Chevy Impalas/Caprices. At one parts store which I no longer deal with would charge one price if you asked for brake pads for a Chevy and another higher price if you asked for Cadillac Pads. These were the same part numbers that any do-it-yourselfer weekend mechanic would never know about. So in a sense prices do go up when a luxury name is involved.

Kyle

[byhammerandhand]

A co-worker of mine used to have a BMW ( I think he was always afraid to say he made a mistake, but he replaced it with a Ford Escort that he said was the best car he ever owned).

In addition to have to know the secret code to reset the oil change indicator, if you did not reset it, the BMW would eventually disable the starting.

[sofadoc]

Where are you guys getting these $25 oil/filter changes? My local Jiffy Lube charges me $45 for a Dodge PU. I shudder to think what a Beamer would cost.

[JDUpholstery]

I get my 2010 Dodge Ram serviced at the dealership. Oil, Lube, Filter and tire rotation for 30 bucks....the newer trucks are on a 6 month 6K mile schedule so only have to do it twice a year...almost 3 years now and I haven't drove 15K miles yet lol

[gene]

What did we learn from  "Pricing lessons from New England lobster glut"? It costs money to have your oil changed in your car or truck.

Most upholsterers think like the Chinese restaurants, wishing they could have cost plus gross margin.




It's Friday.

gene

[Rich]

I had a furniture restoration company tell me recently that my prices were higher then 3 other long time upholsterers in my area. I felt both happy and sad. Happy that I wasn't the lowest price in town. Sad that I may not have much room to increase my prices.

It seems to me that if pricing is done to cover costs or out of fear (or both) the big loser is the one who is setting the pricing. Then it's their competitors. I think it's all too common in this industry unfortunately.
Rich

[mike802]

In my area upholsters way under charge, and unfortunately customers don't understand that.  The average consumer compares our prices to what is being charged at the local furniture retailer and upholsters in my area cater to that type of mind set.  I have worked hard over the years to build a reputation of quality workmanship and excellent service.  The junk that furniture retailers are selling these days only helps me make the case for my quality workmanship.  I think trying to compete on price in the upholstery business with upholsters who chronically undercharge is a sure fire way to go out of business.  We are not moving a commodity, we sell our skills and ability's and a good reputation is essential to pricing in a value added way.

[Ihavenoname]

How do you figure your prices?

For me, I figure how many hours I think it will take and charge my hourly rate.
But if it's a small job that will take about an hour or less then I some times double my rate.
And if it is a big job, I will lower my rate some what.

But all in all I have a standard philosophy of pricing my work.

"If you don't want to pay the price, then you can't have one."

Or

"If someone else is less that's fine, It just will not be me doing the work."

I've never felt bad walking away from work that was not priced to make me a profit. OR at least a decent income.

I get some flack from friends who think I'm crazy for having such an attitude, but hey all have "J.O.B.s" I'm sure they want their paychecks at the end of the week and so do I. They would not like wondering how much they make a week or hour but like knowing all they have to do is show up and the income just follows. For shop owners, it's a fight every time someone comes in the door and wants a deal. Someone will always try to get a deal at your expense.

Also, tell me if this is how it always happens. You take a job and give a discount because you don't have a large back log at the time. So you figure something is better then nothing, but then you get 2 or 3 jobs at full price and feel stupid for taking work at a discount that you are obligated to finish.

I price my work so it is profitable for me and represents my work and experience. What someone else charges is not the same work being done.

So does anyone know how to cook lobster? I keep seeing it on the cheap and think...Why not?

A little Japanese radiation can't be that bad.

[crosjn]

I thought the article was pretty muddy in its point and applicability.  Custom project work is almost never a commodity which was basically what he was saying (I think)>

For my pricing, I make reasonable efforts to be certain my more commodity prices (labor to upholster a sofa) are within market averages for my area.  But, I'm certainly not the cheapest (all hail the "Can you help me, I got this great price from a guy on Craigslist but now he won't return my phone call.")  I have my non-commodity prices (Hell yes I charge more for the BMW guy than the Chevy guy because the guy I can count on to measure the seam width in that double-stitched leather isn't the Chevy one.)  I charge more for a designer (even though they bring more work) because I have to baby sit those jobs (can you restuff the cushion?  I think this cushion sits a little more firm than the other.)  But at the end of the day, I have to make sure all my prices cover my labor costs + the cost of doing business (rent, insurance, lights, etc...) plus let me make some money.

And for the little repair work that takes 15minutes, it still takes me 20 minutes to answer the phone, meet the client, explain everything, tag the furniture, write up the invoice, call with status, load/unload the furniture...  I have a minimum shop fee because I have come to realize there is a "fixed" time/cost with almost every job.

And finally for the really custom work, I have a higher per-hour fee because I can't charge for all the little intangible details I'll have to sort out before it is over.

IMHO, the lobster article just was short sighted in the example.  I'd bet strongly that the high-end restaurant is doing exactly what all of us are doing, looking at all their costs and figuring out a reasonable return/profit.  Plus being reasonably within the price range of other upholsterers (ever if we're the expensive one, I doubt we're 3x more expensive than the market average... Although there are high-end custom guys who get away with 2x here in Dallas.)  I just personally doubt lobster is most of the cost in that high-end restaurant.  It's the $1m decor + kitchen, the $12/sqft lease, the 20-person wait staff, the $60k head chef....  The lobster changing $2 would be like the price of our staples and tack strip moving around.  It does, but I don't knock $10 off the bill because of it.