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.
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.
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.
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.
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