Friday, July 8, 2011

Pricing: Getting Your Mind Out of Yesteryear

A fellow caker sent me an email with a pricing question. It seems her mom made cakes in the 1970s-1980s and was frequently telling my caker friend that she was overpriced, reminding her of how much mom sold cakes for 'back in the day'. My friend was asking me, "Was mom underpriced or am I overpriced? Have things REALLY gone up that much?"

This type of thinking is more common than anyone cares to admit. Many folks get their mind locked into a certain era in time and their vision of what pricing trends are today are blocked by their wall of yesteryear's thinking. Plus, as we age, time seems to stand still. I remember a few times when I have referred to something that happened during my high school days ... then I have to pause and remind myself that was (gulp!) 35 years ago!

A friend of mine who is a realtor tells me that the hardest client she has when it comes to selling a house is an older, retired couple who just can't believe their house is worth THAT much money. If they bought the house for $20,000 forty years ago, they figure they are doing well if they can sell it for $40,000. My realtor friend says the hardest part of her job is convincing them the house is worth $110,000. The couple's idea of pricing is blocked by the wall of yesteryear's thinking.

What I shared with my caker friend is a little of my own history.

In the late 70's/early 80's, I was charging 75 cents a serving for wedding cakes. that included delivery, set-up, AND I'd stay and cut-n-serve it! Someone told me back then they had a relative in another state that was charging (gasp!) $1.25/serving!! I remember saying, "Wouldn't it be great if I could charge $1/serving!" And I think we ALL did it on the side back then! (health license? you needed one of those? No kidding? Huh! Whadda ya know!)

So .... an 8" round 2-layer cake that serves 24 at 75 cents/serving = $18. but .... since I didn't know much about proper pricing structures back then, I probably charged $12 or $15 for it.

In 2006, I was charging $1.75 for cake and $3.00 for the cake package: cake, plates, forks, mints/nuts, punch/cups, tablecloth, delivery, set-up, cut-n-serve, clean up and tear down. Within a year or 18 months, I was up to $3.50 just for the cake. doubled the price after I became educated about current cake pricing trends and a few good lessons on how to develop a proper pricing structure.

Yes, things HAVE gone up that much. In the 70's we all gasped when gas went up to oh my gosh 36 cents a gallon! We thought for sure gas rationing was coming with the price so unbelievably high! McDonalds used to have a commercial showing a guy counting his coins and ordering a hamburger/fries and coke ".....and we give you something you dont' expect .... change from your dollar!" You could get a whole meal AND change from your dollar!! Now we feel lucky to get ONE THING for just a dollar.

I sold little quarter sheets for $8 back then. The infamous "star" cakes (Wilton shaped pans) I sold to my friends for $12 or $15 because they had so many colors and were so much work. Today, if I got desperate enough to make one of these, they would have a price tag of $35 or more.

It's hard to imagine we actually made money back then. But we did. My husband worked a factory job and during the 1970s recession he was lucky to work 4 or 5 months a year. My cakes paid our rent.

As we age, we like sharing stories on how much things cost us 'back in the day' (don't even get me started on the price of a Hershey chocolate bar today!) but we also have to remember that these are stories, not pricing guidelines etched in stone, never to be altered or adjusted to meet the costs and inflation of today.

That's what my caker friend needs to remind her mom ..... that mom's pricing was probably just fine in 1972. But forty years later, things cost just a little more!