Competition Charging Way Less In Our Area

Business By cak3m0m Updated 1 Nov 2013 , 7:09pm by cak3m0m

cak3m0m Posted 27 Oct 2013 , 1:00pm
post #1 of 8

Ok, so I started a cake business out of my home this year to pick up some extra cash and work on my skill set as a cake designer.

I am currently charging $2.50 a serving and I also charge extra for sugar flowers, handmade figures and of course delivery. I do not think my prices are very high, but I have some home baker competition in my area that charges next to nothing for cake. I don't know how they stay in business but lately every time I price out a client with their idea, I get the same response. "So n so over there charges x amount less" How do I combat that? Is my pricing off? I personally do not think I am charging that much.

7 replies
remnant3333 Posted 27 Oct 2013 , 2:25pm
post #2 of 8

It sounds like so and so will soon be out of business if they continue to make cakes at less than 2.50 per serving!! To me, even 2.50 per serving is cheap so I can not imagine anyone going any lower than that!! It would not surprise me if this person that is giving the cakes away does not even have a license for a business!!! They are probably just baking out of their home but did not follow the proper procedure for being legal!!!!

-K8memphis Posted 27 Oct 2013 , 2:37pm
post #3 of 8

an idea for you is to use these encounters to get your message out onto the airwaves--i would not refer to my competition--i would repeat the phrase 'fair market value' a coupla times in reference to my product--how my prices were at rock bottom to still be at 'fair market value'

 

my thought for you--just let those chips fall wherever--you will eventually build a clientele--in a perfect world ;)

kikiandkyle Posted 27 Oct 2013 , 3:22pm
post #4 of 8

ADon't worry about losing customers who aren't willing to pay what your cake is worth. They'll realize why the other bakers are cheaper once they get their cakes.

costumeczar Posted 27 Oct 2013 , 5:49pm
post #5 of 8

If they're charging that much less and they work from home, there's a good chance that they're selling cakes for "fun" not a business. They might think they have a business, but they probably don't. I don't know if you're in a cottage food law state, but there are a lot of people who realize that they can sell cakes and do so, but they're using their household money to buy ingredients. If they're not keeping track of their expenses the way that a business would, everything looks like profit.

 

If you're running a business you have to keep track of your expenses and charge accordingly. It sounds like you know what you have to charge, so don't worry about your pricing being too low. What you should do is look at your marketing, and adjust there. If your customers are shopping for price and comparing you to someone who's losing money you need new customers, not new pricing.

jason_kraft Posted 27 Oct 2013 , 7:17pm
post #6 of 8

ACheck out the Pricing, Market Value, and Economic Damage link in my signature for some ideas on how to address this situation.

-K8memphis Posted 27 Oct 2013 , 7:49pm
post #7 of 8

Quote:

Originally Posted by jason_kraft 

Check out the Pricing, Market Value, and Economic Damage link in my signature for some ideas on how to address this situation.

 

 

how cool -- a comment from three peeps including anne heap--so cool for you--

 

i lightly skimmed this new article--i knew it was good before i read it anyway--i will refer others though--

 

i think your blog is invaluable--

cak3m0m Posted 1 Nov 2013 , 7:09pm
post #8 of 8

Quote:

Originally Posted by costumeczar 
 

If they're charging that much less and they work from home, there's a good chance that they're selling cakes for "fun" not a business. They might think they have a business, but they probably don't. I don't know if you're in a cottage food law state, but there are a lot of people who realize that they can sell cakes and do so, but they're using their household money to buy ingredients. If they're not keeping track of their expenses the way that a business would, everything looks like profit.

 

If you're running a business you have to keep track of your expenses and charge accordingly. It sounds like you know what you have to charge, so don't worry about your pricing being too low. What you should do is look at your marketing, and adjust there. If your customers are shopping for price and comparing you to someone who's losing money you need new customers, not new pricing.

Very true, this is a small market area. I do business out of my home as well, but I keep business expenses seperate from personal expenses as am running this as a business, not a hobby. Thank you all for the advice :)

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