A Serious & Rational Discussion About Pricing
Business By DeliciousDesserts Updated 10 Oct 2013 , 11:30pm by SystemMod1
Surely you must see how that isn't realistic. Do you want people who live in less affluent areas not to sell cakes? Or should they just go to a money tree and pick enough money so they can move to a more wealthy community that will pay respectable prices? Better yet, they should change professions and go back to practicing medicine......since it's so easy to go find another well paying job.
I'm not directing this directly to the person I've quoted above....... It's like the republicans verses the democrats here at CC we can't find any middle ground with each other. Why is it all or nothing?
This is about fair cake prices, not who deserves cake. The product should not be priced lower a because baker can afford to discount them. People should buy the cake they can afford, bakers should not be saying, "Oh, you can't pay what this cake is worth? How about half price, will that work? I don't want to feel like a meanie".
Because that's not business.
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Original message sent by Stitches
Surely you must see how that isn't realistic. Do you want people who live in less affluent areas not to sell cakes?
DD's point is that some areas don't have the demographics to support a custom cake business across the entire market (e.g. how far someone would realistically drive to pick up a cake or pay for delivery), not just surrounding towns. In those areas, upscale cake businesses are not sustainable.
If you live in a large metro area with millions of people, there should be a critical mass of upscale customers within a reasonable delivery distance. We served customers in some very affluent communities within a 30 mile radius of where we lived (Milpitas, which is one of the least upscale cities in the SF Bay area), they would typically send the hired help to pick up their orders or just pay for delivery.
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DD's point is that some areas don't have the demographics to support a custom cake business across the entire market (e.g. how far someone would realistically drive to pick up a cake or pay for delivery), not just surrounding towns. In those areas, upscale cake businesses are not sustainable.
Yes, I understand that.
They aren't sustainable which is why there are so many spousal supported cake businesses.......that drive some people here nuts.
You can't rationalize away someone's dream. Everyone wants to be that one in a million lottery ticket winner........and they see their lower prices as something they are willing to do. They'll work twice as hard as the next cake decorator to make the same income! They see you/us as lazy fat cats.
The food business is dominated by illegals from Mexico who will do the same work as others for half the price. It's something I've faced my whole career. Illegals will always exist.......
Educating the underpricing cake decorators will work far better than trying to regulate the industry.
I'm not sure how I wound up playing devils advocate here.............
There is NO ANSWER, NO RESOLUTION..... some preach over and over as if to regulate our industry. But you can't regulate others.
Which is probably why some of the more rational members here aren't posting.
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I'll go.
8, 10, 12 - flavors were lemon, chocolate, vanilla, frosting was lemon SMBC, chocolate FBC and vanilla SMBC. Fondant covered and fondant accents, gumpaste topper. Cake was delivered 2 miles away. I also did a 6" smash cake in vanilla with ABC only.
I did this cake for free so I don't have a price to share.
This cake would be $670 for me. And that's assuming the tiers are at least 4 in tall and I usually make the edges a little sharper. The ball trim, topper work. I'd have to see the smash cake to quote it out.
Good Vibrations, I would like to point out that even though one person may live at one side of a city and another at the other, you are still serving the same "area". You have all of Houston to sell to, but if you just want to stick with your area of The Woodlands...here is some data worth considering. The Woodlands is rather affluent area of just under a hundred thousand people with a median household income of $103,000 which is double the national average. And that's with relatively low housing costs compared to many areas with a high median income, so there's lots of disposable income in that area.
Compare that to Colorado Springs, which I assume is the Pikes Peak area Elcee serves, with a median household income of $53,000. I would love to see how Elcee's quote compares to yours. Elcee's pricing comments sound thoroughly researched and I can understand what she's saying, but I can't figure out why your price would be so low.
The food business is dominated by illegals from Mexico who will do the same work as others for half the price. It's something I've faced my whole career. Illegals will always exist.......
Educating the underpricing cake decorators will work far better than trying to regulate the industry.
The statement about illegals from Mexico dominating the food industry is too broad and may well be one of those stereotypes we love to point at.
About educating the underpricing cake decorators - I have no confidence this strategy will work. The rampant disrespect, stupidity, and greed within our culture leads me to believe there is no hope for educating all those folks who only need a kitchen to set up shop,
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The statement about illegals from Mexico dominating the food industry is too broad and may well be one of those stereotypes we love to point at.
In the Chicago area I promise you that is not a stereotype, it is the reality. It's not something I've read, it's something I've lived.
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Original message sent by Stitches
There is NO ANSWER, NO RESOLUTION..... some preach over and over as if to regulate our industry. But you can't regulate others.
I don't know who is advocating more regulation...if anything, the industry is in the process of deregulating as cottage food laws become more prevalent. But we have seen negative impacts in states with more liberal CFLs since it removes barriers to entry and allows people to jump right in to a business without the need to think about a rational pricing structure.
As you mentioned above, the middle ground might be the best solution: a cottage food law that allows home bakeries but still requires some up front investment of time and money (such as a license fee) to help weed out those who aren't serious about a sustainable business.
I'm not sure I understand your point. When I drive up with a cake, I'm pretty sure their mortgage payments are many times that. I don't know what the payment is on the typical, say, $800,000 dollar home, but I'm thinking it's over $20,000.
Well, they are seeing it wrong. The sole source of income for my household is my cakes and I struggle to pay the bills and make a go at this business. This is in very large part because of people playing at business and undercutting me. I work from my home kitchen and no longer have dreams of a store front custom cake business - opening up a storefront would be a foolish move in this climate. Why? Those dreams went up in smoke with the passing of the cottage food law in my state. I was an active supporter of the bill, and now I regret ever participating. It never occurred to me that people would be running cake businesses based on emotions and not operating in their own best interest. They may think they are working smart but they are shooting themselves in the food by destroying the industry they claim to be part of.
Maybe the smartest business move i could make would be to take on a husband. I really didn't want to do that, but if I want to be able to compete....
I don't know who is advocating more regulation...if anything, the industry is in the process of deregulating as cottage food laws become more prevalent. But we have seen negative impacts in states with more liberal CFLs since it removes barriers to entry and allows people to jump right in to a business without the need to think about a rational pricing structure.
As you mentioned above, the middle ground might be the best solution: a cottage food law that allows home bakeries but still requires some up front investment of time and money (such as a license fee) to help weed out those who aren't serious about a sustainable business.
The middle ground sounds sensible to me. In Texas there is absolutely no regulation of home kitchens. The health department cannot knock on your door without a warrant. You can keep your bird on the kitchen counter bring your cat along on deliveries (that actually came up) and the health depts have no power to do anything.
AOk I have a question. I have never experienced any pushback or realized any destroying of the market from home bakers. I'm a baker under the cottage food law, and the laws in my state are probably the least restrictive in the country.
There are 2 custom cake places in my area about 10 minutes are apart both have been open a while. I know of a few home bakers in my area. Maybe 5. We all seem to be getting business.
My question is how does people underpricing affect what you are doing? It would stand to reason that those people would just go out of business. Just wait them out....am I missing something?
I know that's not exactly what this thread intended to discuss but I've had that question for a while
AFYI, the mortgage payment on an $800K home would be about $3000 at today's rates with 20% down. A payment of $670 would buy you about $180K of house (again with 20% down).
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Surely you must see how that isn't realistic. Do you want people who live in less affluent areas not to sell cakes? Or should they just go to a money tree and pick enough money so they can move to a more wealthy community that will pay respectable prices? Better yet, they should change professions and go back to practicing medicine......since it's so easy to go find another well paying job.
I'm not directing this directly to the person I've quoted above....... It's like the republicans verses the democrats here at CC we can't find any middle ground with each other. Why is it all or nothing?
It isn't all or nothing.
That wasn't at all what I was trying to convey. What I mean is that a market will react to what it can bare. If I tried to sell that same cake in upstate SC, I would not be able to get the same price for it. I know this because I have discussed it during an ICES meeting with ladies from all over SC. I charge $4.50. Upstaters charge $2-2.50. That is all the market will bare in that particular area. It also happens that housing and some other costs of living are slightly lower. It is important to know not only your costs but also what people will be willing to pay.
I'd also like to say that getting this wound up does no good. When people start typing irrationally, others stop listening.
It doesn't have to be all or nothing. In Charleston, prices range $3.00-8.00 per serving. The lady who charges $3.00 is fairly new to the industry. Her skills aren't perfect but she does produce a nice cake. She doesn't use some of the fancy ingredients I use. She is able to gain the share of the market looking for less expensive cakes. At $4.50, I'm in the middle, and I have a fair share of the market. At $8.00 Jim Smeal delivers true works of art. His clients are mostly from IOP or Mt. Pleasant or out of town celebrities.
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Yes, that makes perfect sense. But it's not realistic. Wealthy people/people with extra income to buy extravagant things don't typically go slum shopping. They shop where they live, just like everyone else.
Actually, they tend to be even more discriminating about their purchases than average income people.
Really? Just had someone drive over an hour to come visit me.
Sometimes it's by phone & I deliver.
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Original message sent by morganchampagne
Ok I have a question. I have never experienced any pushback or realized any destroying of the market from home bakers. I'm a baker under the cottage food law, and the laws in my state are probably the least restrictive in the country.
There are 2 custom cake places in my area about 10 minutes are apart both have been open a while. I know of a few home bakers in my area. Maybe 5. We all seem to be getting business.
My question is how does people underpricing affect what you are doing? It would stand to reason that those people would just go out of business. Just wait them out....am I missing something?
There's no guarantee that a liberal CFL will always result in economic damage, just as a more restrictive CFL or none at all does not necessarily mean that everyone is pricing appropriately.
However, low barriers to entry can result in an unstable equilibrium, in that a single new business pricing below market value can spur other new entrants to follow suit, which can lead to customers perceiving the depressed market value as the new norm, causing non-savvy business owners to further undercut on price, and so on. This race to the bottom can poison a market and force businesses into niches to survive.
People who price below market value will eventually go out of business, but if they burn out due to too many orders then the economic damage has already been done, and with the aforementioned low barriers to entry there's nothing to stop a new business from taking their place.
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Stitches, your cakes are amazing and if I were having a wedding I'd pay you big bucks, but I'd have to know where to find you! Your work is worth a lot! i hope you find the right people to do business with. Just wanted to let you know that.
Well that cuts deep for me, personally. But I get your intentions.
I've been a professional employed second generation pastry chef for 25* years. I am an excellent baker, with-out any self-doubt. I've worked at some awesome fine dining clubs. I'm just an average decorator and I don't do this because I LOVE decorating and want to give people price breaks on cakes! I work fast and smart, I'm very skilled, I have an award winning fine art background and education I could become a better decorator if I had clients that would pay my time to do it..
BUT, I've only been doing this on my own for a year. I don't advertise (I did google ads for a month and need to re-start it), I don't have a store front or open kitchen.... I don't have a lot of friends (only a couple close ones), I don't have children so I don't engage with people needing cakes. Sometimes I think my website scares off my average perspective client.....they think I'll be so expensive they are scared to ask me about pricing. Can that be? It's not a great site or great work.........it's just not as cheap and tacky looking as my competitors.
I've definitely got to work harder than most at advertising to get my name out. But what's the point it no one is willing to pay a reasonable price? I NEED to pay bills doing this and I'm not going to find something else to do.
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I do also wish people knew just how much a profitable bakery makes. Sure there are some people who do very, very well. This is NOT a get rich industry. Really it's not.
I'm sure when people see that I charged $1300 for a cake they think I am rich. Not. This is my second year and I just started finally making a profit. That is why so many of the celebrity artists also offer classes or tools.
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In the Chicago area I promise you that is not a stereotype, it is the reality. It's not something I've read, it's something I've lived.
my son is a former fine dining chef--oh yes the newly arrived here will gladly work for very low wages--whatever the nationality --thee finest restaurants in the world employ not the brightest students from culinary school but the cheapest labor they can get -- it's economics --it's a$$ breaking work--long hot hours -- and he has worked all over the country -- think about it--why would an owner hire someone for $12.00 an hour and give them raises and perks and srtokes and benefits when they have a host of people to choose from happy to get $10/hr and do a great job or there's ten peeps ready to step in and take their job--not that the owners are mean or anything--it's just business--
i'm sure stitches didn't mean for it to sound anything but true 'cause it is
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Ok I have a question. I have never experienced any pushback or realized any destroying of the market from home bakers. I'm a baker under the cottage food law, and the laws in my state are probably the least restrictive in the country.
There are 2 custom cake places in my area about 10 minutes are apart both have been open a while. I know of a few home bakers in my area. Maybe 5. We all seem to be getting business.
My question is how does people underpricing affect what you are doing? It would stand to reason that those people would just go out of business. Just wait them out....am I missing something?
I know that's not exactly what this thread intended to discuss but I've had that question for a while
My only issue is when they severally undercharge & leave other people thinking that I am severely overcharging. Someone calls craigslist caker & is quoted $50 then calls me & I quote $200. They are left thinking I am price gouging.
I would charge about $550 for that cake.
I live in a wealthy area of MA and it is true, it's far easier to charge appropriately when people have more to spend. I don't even try to let people in the next town over know about my cakes, as they are not as well to do and would not be interested in my cakes.
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What I mean is that a market will react to what it can bare. If I tried to sell that same cake in upstate SC, I would not be able to get the same price for it. I know this because I have discussed it during an ICES meeting with ladies from all over SC. I charge $4.50. Upstaters charge $2-2.50. That is all the market will bare in that particular area. It also happens that housing and some other costs of living are slightly lower. It is important to know not only your costs but also what people will be willing to pay.
I'd also like to say that getting this wound up does no good. When people start typing irrationally, others stop listening.
It doesn't have to be all or nothing. In Charleston, prices range $3.00-8.00 per serving. The lady who charges $3.00 is fairly new to the industry. Her skills aren't perfect but she does produce a nice cake. She doesn't use some of the fancy ingredients I use. She is able to gain the share of the market looking for less expensive cakes. At $4.50, I'm in the middle, and I have a fair share of the market. At $8.00 Jim Smeal delivers true works of art. His clients are mostly from IOP or Mt. Pleasant or out of town celebrities.
Ah.....I'm not wound up at all.
How can we discuss prices when everyone's market is completely different? Not only is the market different but our values are too. I wouldn't pay more money for a cake than I would my mortgage.
People charge whatever they want and rarely is skill and quality truly matched up to pricing in the cake business. Fancy ingredients = ah, nothing.
Business is competitive. Why does everyone want to teach the next guy how to price better, so they aren't competing/under pricing the next guy? It's like wanting to price fix the market so we all make a decent living. We should all preach to Wal-Mart and Costco........ I'm sorry......this is all too silly......
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Original message sent by Stitches
How can we discuss prices when everyone's market is completely different? Not only is the market different but our values are too. I wouldn't pay more money for a cake than I would my mortgage.
The specifics of each market are different, but the economic fundamentals are the same. Every market has a variety of different potential target demographics, but it's up to each individual to do the research on how much of their target market exists in their area, and tailor their business plan to the results.
Business is competitive. Why does everyone want to teach the next guy how to price better, so they aren't competing/under pricing the next guy? It's like wanting to price fix the market so we all make a decent living. We should all preach to Wal-Mart and Costco........ I'm sorry......this is all too silly......
As mentioned above, pricing below market value at a given quality level can hurt everyone serving that market, which is why we are trying to spread this information.
Giving general business advice to competitors is not the same thing as price fixing.
And we don't have to teach Walmart and Costco how to price appropriately...they are already experts at it, since they serve the low end of the market and are still quite profitable (directly or indirectly). One would hope that your target market does not intersect with people who buy cakes at Walmart.
Hi Everyone! I just wanted to give my two cents on the second three tiered cake. I've been decorating for three years, business has been open for two, and I live in San Diego County, California:
I would normally do a 4" tall tier, and have calculated it to be 88 servings
88 servings x $5.50 / serving = $484.00
Not sure what the smash cake looked like, but if it was basic, it would be $4.50 / serving (12 servings for 6") = $54.00
Delivery is $.55 per mile, round trip
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Ah.....I'm not wound up at all.
How can we discuss prices when everyone's market is completely different? Not only is the market different but our values are too. I wouldn't pay more money for a cake than I would my mortgage.
People charge whatever they want and rarely is skill and quality truly matched up to pricing in the cake business. Fancy ingredients = ah, nothing.
Business is competitive. Why does everyone want to teach the next guy how to price better, so they aren't competing/under pricing the next guy? It's like wanting to price fix the market so we all make a decent living. We should all preach to Wal-Mart and Costco........ I'm sorry......this is all too silly......
Now that statement could be taken that you think someone charging more than your mortgage has no values. What I think you mean is that you don't find a cake valuable enough to spend more than your mortgage.
YOU are not my target client. At least if you are having more than 100 guests you are not my target client.
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Ah.....I'm not wound up at all.
How can we discuss prices when everyone's market is completely different? Not only is the market different but our values are too. I wouldn't pay more money for a cake than I would my mortgage.
People charge whatever they want and rarely is skill and quality truly matched up to pricing in the cake business. Fancy ingredients = ah, nothing.
Business is competitive. Why does everyone want to teach the next guy how to price better, so they aren't competing/under pricing the next guy? It's like wanting to price fix the market so we all make a decent living. We should all preach to Wal-Mart and Costco........ I'm sorry......this is all too silly......
Really. Cause ya said some rather inflammatory things and started throwing out some very obscure analogies that weren't at all comparable.
That may be true. In my corner of the world, it is not. Haven't ever been witness to it.
Just wow. Really? They cost me more and are usually more time consuming. People who don't want them/or don't want to pay for them are welcome to the less expensive ones.
Stitches,
I think you should charge whatever number makes you money. I may be misunderstanding...are you trying to get what some people on here get for cakes? Or are you just simply trying to charge what it would take to make you money? I feel like your original question is getting lost in the sauce.
& thanks for the explanation about under pricing guys.
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