A lot of bakers have asked me to address the problem of under-charging for cakes in the bakery business. The best way to avoid this problem is to make sure you are costing out your products. If you are interested in learning how to do that, you can check out this new book of mine: 125 Building Blocks for Your Bakery Business. But this tutorial isn’t about costing. It’s about strategy.
VIDEO: The Three Tier Method, A Cake Sales Trick
The Three Tier Sales Strategy
I’m going to share a sales technique that works great for selling big products without under-valuing them. I call it the three tier method. The way it works is, whenever you are negotiating the sale of something big like a wedding cake, you don’t just give the customer one price and one option. You give them three. Let’s take this step by step.
Discuss Design
First, you go into the meeting or the phone call with an open mind. You listen to everything the customer wants and doesn’t want. You take in all their design ideas. You ask them a whole bunch questions until you have a sense of their vision.
Determine Budget
During that conversation, you want to ask if they are working within a budget because sometimes they are and it’s helpful to know what their outside price limit is. If you don’t ask or they don’t tell you what their budget is or they are simply not sure, you still need to guess. A good way to guess is to ask about the other aspects of the event like where it’s taking place, who is catering it, what kind of food is to be served. Will there be a seated four course meal with an entrée of lobster newburg or will it be DIY buffet style appetizers? Is your client scraping together their savings to pay for the event or is someone else footing the bill? The answers to these questions will give you a sense of how flexible the finances are.
Once you have all of this information written down, it’s time to organize a quote that includes three different options. Let’s imagine that the options are shaped like a cake.
Create the Options
Tier #1 – The Expensive & Elaborate Option
We start by designing the big tier option first. This is the one that includes everything the customer wants. It is most elaborate concept with the highest price tag. Because the most amount of work is involved here, you want to pick a price that works for you.
Tier #2 – The Budget Option
Next, we design the small tier option. This is leanest concept with the lowest price tag. It’s the bare bones of the design that includes only the aspects the customer can’t live without. You want to make it as cheap as you are willing to go within the parameters of what is worth your while to sell.
Tier #3 – The Middle Road Option
Third, you design a middle tier option. This one strikes a compromise between the other two both in terms of price and design. It exists at the intersection of what is ideal both for you and for the customer.
Recommended Order of Presentation
Now it’s time to present these options to customer. When you do so, make sure to present them in the following order: Small tier first, middle tier second, big tier last so the cheapest option comes first. That way, the customer doesn’t get sticker shock.
Why Three Is the Ideal Number
Now I don’t recommend giving any more or less than three options. Less than three is not enough of a choice. More than three is too overwhelming. Three is just the ideal number for the human brain. Think Goldilocks.
The Advantages to This Method
What’s great about this method is that you’re much less likely to under-charge when you use it. Under-charging tends to occur when you give the customer only one option because when you do that, you end up trying to meet their needs both in terms of price point and design. With the three tier method, you separate the price point and design aspects of the sale and mix & match them to create choices. Ultimately, the customer gets to decide what matters to them more: staying under budget or having everything they want.
Shoot for the Middle Tier
Oftentimes, the customer selects the middle option because it represents the best of both worlds. So as you are designing the three tiers, think of the middle tier as your target.
Okay so that’s my solution to the under-charging dilemma. If you want to see a real life example of this method using an actual cake that I made, it’s included in the following kit.
Cake Sales Kit – Professional Forms and Materials
New to Wicked Goodies? Start *HERE*
I agree that the 3-tier “Goldilocks” method can be very effective. I’ve taught college for many years and used this method for negotiating many things from when assignments are due to committee decision making. Whenever I would bring a proposal to the dean, I brought three versions: Cheap, but only barely effective, moderate-expense but will get the job done well in a way most people will find useful and high-end all the balls and whistles. Having multiple options makes you appear flexible to meet the needs and well prepared and knowledgeable about the product. The same hold true for pricing bakery or other items.
And they sometimes choose the third option!
TRUE, TRUE. TRUE….I just did this today….but all the wrong way! Underpriced myself, made, no profit…..dang na-bit!
I try so hard to price my sweets to make a little profit. When I am finished I realize I lost money, or made a very small amount.
The three steps is a great idea, and I will surly use it.
However here is my main problem with pricing a layered cake or my desserts. The separators, supports the card boards. Of course my brain immediately jumps outside the box. I think I have to order special molds and cutters that, at the time, seem like they would be perfect for the project. I may only use these, ONCE, but, lol, I have em!. (my bad)
And the worst part is the delivery. No matter what I do they all seem to want me to deliver. At the end of the day I feel these are where I mess up on the pricing of the layers.
I take your videos to heart, I love them. I hope my compulsion to over do will help me with your three steps…Thank You so very much for your support.
Very good advice. All bakers should use this method because customers just don’t seem understand the cost of custom cakes and this might help.
Very interesting – the 3 options provide the customer with a comfortable way to choose the closest to their budget without losing face or feeling uncomfortable with having to say they cannot afford it.
Great concept. As an accountant I can totally relate to this strategy. My process was similar but never presented to the client (only in my head and calculations) and was never sure how to. Thanks for the technique.
Hey Kristen!! Great video – you’ve taken (what’s generally one of the hardest aspect to master in this business) cake pricing/making the sale and outlined it beautifully! This concept is so understandable, and doable!! Love it! thanks!!
I always enjoy your videos.
Hope you are staying safe in all the snow. Keep warm.
Love this 3 tier method! I will definitely use this as I head into wedding cake season. Thank you so much for sharing.
Thank you! Another great video with wonderful advice!!
Very smart solution. Thank you!!!!
You always have great information to share. Thank you
Love all your videos…they are always so helpful…you say it like it is and your so funny and a joy to watch
Thanks so much
Great advise! You make it so easy to understand. Thank you
Love your videos! Always great, helpful information. Boston strong 🙂 !
I am soooo appreciative of this concept…I have always been told that I undercharge and almost give the cakes away…I have yet to overcome the guilt of charging for cakes…yet I have so many hours labor and I pretty much charge just the cost of supplies…So many people want spectacular cakes but don’t want to pay the prices…
I never considered this strategy. I will be implementing it with my next order. Thank you for sharing your expertise. I’m curious as to why you are liquidating your supplies.
Like always you are spot on. I agree with the 3 tier method. Thanks for great advice! Alice
Thank you for such a helpful video. I will be using this strategy from now on.
Thanks very much Erin!
Excellent article! Also, portion size has changed over the years. Back when cakes were not as handcrafted and luscious as they are now, portions were smaller.
I enclose a photo of this years’ Yule log cake, with an orange spongecake hedgehog.
Very insightful!!! I’ve learned to give only a few options. From experience I used to try to accomodate the customer and way undercharge. Then I used to give way too many options where I get myself so flustered and upset. 3 is definitely perfect! Thanks!!
Great video and fabulous advice! 🙂
I really like this concept. Thank you so much for sharing. I sit down with the bride and she says this is what I want how much do you charge? Then when I’m doing it I think, man I should have charged more because there is so much to this. I really like the idea of 3 choices. Thanks for sharing.
That is a great strategy. Thanks for that. It’s very helpful. What happens when the customer makes the middle choice and then starts asking for changes. So much that it ends up nearly like the highest priced choice? And in general, how do you deal with change orders? Thanks!