When asking home bakers what they struggle with the most within their home business one of the top two is pricing. With so much advice out there it is hard to decipher what is valid. Pricing is a big part of the success of your business. It is something we are often scared to get wrong. So let’s dive deep into top pricing myths for your home baking business.
What are the top pricing myths for a home baking business?
Myth #1: Ingredients x 3 = price
Just no! I have heard this so many times. People say this is the industry standard.
If you are pricing solely based on your ingredients then you are leaving a lot of money on the table.
One of my most popular cupcakes costs .11 cents to make each cupcake. I charge $3.5 per cupcake.
Macarons are $1.46 for over a dozen macarons! Macrons I charge $3+ PER MACARON!!
According to the x3 method, I am charging a crazy amount. When pricing this myth in mind you are leaving out your skills, your time, and design difficulty.
Myth #2: You should charge less than grocery stores
I had this same feeling when I first got started. When making desserts I would think "Well they could buy this from the grocery store for $15 why are they going to buy it from me for $30?"
It didn’t make sense to me
But I had to realize:
Grocery stores have access to bulk ingredients at a lower cost.
They have multiple people working
They are not as customizable
People like the flavor of homemade!
People like to support local small businesses
You are selling a specialized treat! You do not have the resources of a grocery store, so yes it is ok to charge more than a grocery store. People will still buy it!
Myth #3: You have to price your products based on what your competitors are charging.
One of the most common myths about pricing in a home baking business is that you have to charge the same amount as your competitors. Everyone has different styles and techniques. Everyone has different strengths. All of these things allow bakers to charge different prices.
It is great to look at the competition to make sure you are in the right range of pricing. But that doesn't mean copying exact pricing. Make sure when doing so to look at the prices of bakers in comparable cities.
For example, when I started selling wedding cakes I looked up the average price and I went from there. The problem was that I saw the national average!! Living in San Diego, California the national average was much lower than the San Diego average.
Myth #4: You should price your products to be affordable to everyone.
Another pricing myth is that you should price your products to be affordable to everyone. But not everyone is going to be your client.
While some might say your prices are too high some also might say your prices are too low! It is important to understand your ideal market and the price point they are the most comfortable with.
When you price to just be affordable to everyone you are downgrading your worth. What you do is valuable it is a specialized skill! You deserve to be paid accordingly. While you might be helping others by “making it affordable” you are causing it to not be affordable to you. It is not going to be affordable to continue your business if you are not receiving what you are worth.
Myth #5: You should always offer discounts and giveaways to attract customers.
Constantly offering discounts can devalue your products and make it difficult to increase prices in the future. Louis Vuitton does not discount their products ever. This is pretty wasteful but they actually burn all leftover products so that they never lose value. They go to extreme measures to retain the value of their brand and their products.
When doing give away you have to be very strategic if you do decide to do them. A like, a follow and a share does not promise income. Giving something for free to one person does not ensure they will come back.
When it comes down to your ROI ( Return on Investment) it is not worth it. The time you spend promoting your giveaway and actually making the giveaway doesn’t usually end up in a financial benefit.
Instead of relying on discounts, consider other ways to attract and retain customers like strong branding and being on multiple sales platforms. By focusing on providing value to your customers and building relationships with them, you can create a loyal customer base that will support your business over time.
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Share below what are some myths you have heard in the baking community!