|Posted by Lilly on June 16, 2012 at 9:35 AM||comments (2)|
Pricing Italian Ice can become a complicated mathematical algorithm, if you take into account the many aspects people will advise you to consider. Even I have a post explaining pricing that crunches numbers considering demographics, sales tax, geography and competition. But there's an easier way, too.
Independent of which ice wholesaler you choose, and which size tubs you sell from, you simply need these two things to start:
Watch how easy this is.
My supplier sells in 2.5 gallon tubs. They've informed me that I can get 45-7oz. servings and that, if I price them at $2.00, I can make $90 per tub. With that information, I multiply 7 x 45 to get the total number of ounces in each tub. That equals 315 ounces. (Be sure to ask your wholesaler for this information. They will surely know it, and you will definitely need it.)
However, 7oz. is a kids' cup if you see it with your own eyes. Since I'm keeping it simple, I'm using larger 9 oz. cups only. One Size, One Price. I'm actually going to write that on my menu! But when I take that 315 ounces per tub and divide by 9 oz. cups, I will now only get 35 servings. Yet, since it's a larger amount and looks and feels like more, I'd like to price these at $3.00. What happens?
I make more, for less!
If you're like me, you shop at grocery stores and compare prices using the "price per ounce" method to see if you're really getting a bargain on an item. This is the same thing, only you're the seller. A larger serving is what a customer would like, and a beautifully mounded, overflowing 9oz serving is definitely worthy of its $3 price.
But it gets better! For the work of throwing in one more 2 oz. scoop of Italian Ice, I increase my revenue per ounce, from $0.28 to $0.33. That's the power of marketing and packaging. Then, it hits me that I'm making $15 more per tub over my supplier's suggested selling size and price, while also using 10 fewer cups and 10 fewer spoons . And since my cups and spoons are biodegradable, they cost me more than regular plastic ones. Numbers are a beautiful thing.
This, of course, is only my interpretation of pricing, and we all think differently. So, how about you? What are you planning to offer? How did you come to your pricing scheme?
|Posted by Lilly on April 30, 2012 at 8:00 PM||comments (1)|
One of the questions found on other Italian Ice forums is "How do I know what price to set for my Italian Ice?" And inevitably, answers in all ranges come out. Then one wise soul pipes up and offers this sage yet vague advice: it depends on many factors.
But, in fact, that is the case. Some questions to answer will be, where are you located? How many sizes do you intend to offer? Which of those sizes is the most profitable? How much does your wholesale ice cost? What are competitors in your neck of the woods charging? Are there any competitors? What is your overhead? How much does one serving cost you in product, cup, spoon, napkin, etc.? And on and on...
So how can you figure out a way to price your ice? One way I've heard from seasoned vendors is, if you're at an event, look to see what hotdog vendors are charging for their dogs. Your ice should be priced the same. Of course, that doesn't take into account how much you're offering your customers. Is it that tiny paper cup I see people feebly holding on some YouTube videos? Or is it a generous size serving, with addons?
Here is how I've figured out what I will be charging. It is a rough model, and it takes into account the demographics of where I live and my customers' expectations. I do have competitors around. Well, it's one competitor with many stores, Rita's. There's one in every little town around me. But I have a unique plus in my corner. There is demand for Rita's (or its product), but there isn't one in my exact town. Nor does Rita's offer any mobile sales, besides catering (that's a future blog post). So, I've been hitting up Rita's a lot lately, to taste-test their product against mine, but also to weasle out company information from the unsuspecting highschool employees who work there. Actually, it's easily found information, but I like the mystery. It adds excitement to my boring day in front of the computer, researching and writing.
First of all, quite a few experienced Italian Ice people have already told me repeatedly, don't get into offering different sizes and different price points. This makes sense. Between deciding among four or more flavors and then three sizes, you create a backlog of anxious customers waiting for people ahead of them to make up their minds. Add in that offering three sizes means your portable little business now has to carry three different sized cups. No, that's not for me. I want simple, simple, simple. Why complicate something as effortless as Italian Ice and slow down sales? I only have five months to sell!
If you've researched the internet for Italian Ice business profit calculators, you may have encountered a few, as I did, that allow you to plug in hypothetical prices and cup sizes. I played around with these at two different sites. But what I found enlightening is that each one listed that sweet spot where price and quantity came together harmoniously. Offering a small cup, approximately 6 oz. is actually the highest grossing size. But it's such a small size that customers feel slighted or "jipped". The medium cup is where quantity and price are ideal. You offer slightly more than the small cup, but not double. Your price point, however, is usually double. The cost of the cup, spoon, napkin stays the same, as do all other costs. And both visually and physically this size offers a generous amount. Moving up to the large size, however, tips the scales, and now you are offering more product and charging more, but the balance is disrupted. You cannot charge double the price of the medium for the large without customers, either rightly or wrongly, feeling that they're being overcharged. A psychological point is reached where they feel they're overpaying, since the large is never double in quantity. So now the seller is losing profit. The larger size also burns through product faster at this reduced profitability. It's all very interesting and mathematical. But analyzing the profit calculators reveals that point at which you make the highest profit for the lowest cost at greatest customer appeal. That is what you're striving for. And it's found in the medium cup. That's the one that's about 8-10 oz. of product, not too small, and not too big. Just right.
Now I know the cup size I'd like to use and an approximate quantity of Italian Ice that will go into it. At my Rita's, I can order a kids' cup that is only 6 oz. This will run me about $1.59. It's small... looks small, feels small. It's plenty for me, but I'm not most people. Moving along, the regular cup, it turns out is 10 oz. (look at the bottom of the cup for this info, it's clearly marked). For this they charge $2.59. I am planning to use 9 oz. cups, smaller. But... unlike Rita's, who only fill their cup to the top and then create a funky flattened dome, I will be using ice cream scoopers (dishers) that will create a beautiful and bountiful classic overflowing round ball above the rim of the cup. So, really, I will also be giving my customer 10 oz. But I'm charging $3.00, slightly more than Rita's.
I can see this is becoming a long post, but bear with me. Rita's does not include tax in the advertised price, so when it's time to pay, with Pennsylvania's 6% sales tax, the customer actually pays $2.75. My Italian Ice, however, includes sales tax in the $3.00 price. Now we're only a quarter difference in our pricing, and I eliminate any hassle of dealing with coins or strange change amounts. But I am mobile! I'm bringing superior Italian Ice to wherever my customer might be. The cost of driving and gas is mine, not the customer's. So, broken down, I am pricing my ice just right to appeal to my customers' expectations for the size of cup and quantity provided in my area. Simple!
I do hope this helped, and that I didn't just lose you forever. Please note, In the absence of competitors, no Rita's (you lucky dog!) and demand for your product, you could charge more. The venue also has a lot to do with pricing, as we all know food costs more at stadiums and exclusive events than in your general neighborhood. So take that into account as well.