Those in the sublimation supply business hear it all the timeâ€¦â€What do I charge?â€. Oh, if we only had the answer! To find a reasonable response, one has to wade through a quagmire of formulas, various scenarios, and an on-going debate as to what the best method of pricing really is. For example:
Keystoning: This refers to gift shop pricing where someone buys a product and sells it. Typically, they keystone, or double what they paid for it to find the selling price. This has been a standard for probably a hundred years but even this is being revised to something called, â€œkeystoning plus 10â€ meaning you double the price and then add an additional 10% as retailers struggle to keep up with inflation, souring overhead costs, breakage, etc.
But this doesnâ€™t work for sublimated products because we add value to the product by imprinting or personalizing it. The ordinary gift shop just takes it off the shelf. We add value to the product with personalization and this should, by all accounts, increase the value and the price. It also adds to our overhead because:
1. The base cost of products generally runs higher. A coffee cup might cost a gift shop $1. A sublimatable cup might cost three times that.
2. Because we work with the product, it increases waste. No matter how good you are, you are going to spoil a percentage of the products you make. On a good day, it might be 10%. With some products that are unusually difficult to make, it might be 50% or higher! Oh, and then there is the problem of misspelled names or blunders like forgetting to mirror the image. These all have to be figured into the formula.
3. Sublimation takes specialized equipment the average gift shop doesnâ€™t have to have. This equipment depreciates, requires service and repair and just wears out over time. Replacement costs and service also have to be figured into the formula somehow.
4. And then thereâ€™s the time required to make the product. How cheap do you want to work? $50 an hour? $20 an hour? $10 an hour? $5 an hour? Zero dollars an hour?
It should be clear by now that whatever method of pricing you chose to base your business on, keystoning wonâ€™t do the trick â€“ at least not in the traditional sense.
Manufacturing Method: Although this isnâ€™t true with every manufacturer or every product, there is an old rule of thumb that says a manufactured product should retail for about six times what it costs to make it. This is expected to account for labor, R&D, shipping of raw materials, advertising, the raw materials themselves, etc. Because of the nature of sublimation, it can be argued that we are manufacturers of our products and rightly so. We import a raw material (a cup for example) and decorate it, package it, market it, ship or deliver it. Therefore, marking everything up 600% would seem logical and in some cases, that works but in others, it is either ridiculously high or ridiculously low. It just doesnâ€™t work â€“ at least not all the time.
A good example might be a quality shirt. Initial cost might be $8. Already, that is higher than people might consider paying for a T-shirt but this is an exceptional quality product. Now, after marking it up 600%, the shirt should sell for $48. Can you sell a shirt for that price? Some companies do but the consensus is probably, â€œnoâ€. So, we still donâ€™t have a viable pricing solution.
Cost Plus: Another method is to determine the actual total cost of a product including the base product, shipping, ink, paper, time, labor costs, a percentage for overhead and equipment wear and tear. This method is often used by manufacturers and it makes sense. I used to know a major manufacturer in our industry who could determine all these costs down to Â¼ of a penny for every product he made but he only made a few products and he had been making them for years so he had a long history of data to pull from. How much time do you want to invest into determining all these cost factors and to maintain their accuracy over time? Just doing that would add tremendously to the cost and I doubt if any of us want to spend our time in this way. Still, this information is critical to know â€“ at least in general terms and I have a formula for how to do this but that is for another time.
An example to illustrate this is the lowly name badge. A sublimated badge, with finding, ink, paper, etc., might price out at under $1. What percentage do you add to make this retail for a reasonable price â€“ reasonable for you that is? I sell badges for $5 to $14 depending on quantity. How do I reliably get from $1 to where I want these to be? It just doesnâ€™t work.
Then there is something called Perceived Value: This is where you look at a product and guess-a-mate what someone would be willing to pay for it. Obviously very subjective, this method is more likely than not to leave us selling our products far below the real perceived value just because we know how little some of them cost to make.
Again, the name badge is a good example since, knowing how much they cost to make, many sublimators feel $3.50 is a fair price for a finished badge. Perhaps it is in a huge quantity but think about how much time it takes to create the art, heat the press and make a single badge. That kind of perceived value will make us all non-profit businesses!
Perceived value is very important to our ability to price products fairly and reasonably but this alone just wonâ€™t cut it.
So, if none of these work, what do we do?
We use all of them. For some products, one method works better than another. Over the next few months, I will be examining the most popular sublimatable products and applying one or more of these methods to find a reasonable, manufacturerâ€™s suggested retail price (MSRP) for it.
These prices will certainly not dictate what you should or should not do with your pricing but they are intended to help you find a reasonable framework for your products that can make you the maximum amount of profit and at the very least, keep you from losing your shirt!
I see products being sold almost every day that I have to shake my head at. Sure they are selling lots of product but they canâ€™t be making very much money â€“ if any at all! In no wise is this intended to â€œfix pricesâ€ (which is illegal) but to educate and in some cases, open a discussion about what is fair and what isnâ€™t. With so many of us competing on the Internet, it is more and more vital that we all start at the same place: Rule #1 which is, â€œto make moneyâ€!