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Pricing Premium Products for Sales and Profit

By Ken Baur, Industry Expert

In one of my recent posts, “Growing Average Ticket By Design”, on this blog, I talked about design-driven sales incorporating premium products as a way to increase profitability. One of the issues I encounter with clients who are having a hard time selling upgraded materials is that their pricing isn’t right.



Don’t miss lost opportunities


The tendency for some shop owners is to apply the same markup to the premium version as they do for the standard version of a product. Unfortunately, this can result in a price that is prohibitively high, which means the business will sell much less of the product. This tactic is a lost opportunity for both the business owner, who forgoes the potential for a more profitable sale and the customer, who misses out on the product benefits.



The good news is you do not need to use the same multiplier or percentage markup on premium products as you do standard products to make a profit. In fact, you can make even more profit on a premium product by reducing the percentage markup.



For example, when Museum Glass® first came out, I found that some custom frame shop owners were applying the same percentage markup to it as they were to Conservation Clear®. A method which made it more difficult to sell Museum Glass, though the product offered sought-after benefits.



The Rule of three


When pricing a premium product, I suggest my clients use what I call the Rule of Three. In this case, a shop owner will calculate the profit made on the standard product and multiply that amount by three. Then, add the resulting amount to the list cost of the premium product.


P Sell Price


Sometimes adjustments to this formula can be made when a premium product is in relatively high demand. When Tru Vue introduced Optium Museum Acrylic® to the custom framing market, they brought to the industry an excellent product that provided the same UV protection and clarity of Museum Glass in a shatter-resistant, scratch-resistant, anti-static acrylic product.



In some markets, Optium Museum Acrylic fills a pressing need. Custom frame shop owners in places like New York City, where most pieces are quite often subject to the rigors of delivery, were already using acrylic on many of the pieces they sold, due to its light weight and durability. Markets in the earthquake zone of the West Coast and hurricane-prone climates in the Southeast and Gulf Coast also tend to sell more acrylic. Shop owners in these markets can use higher margins in response to the level of demand.



In areas where the use of acrylic is more limited than New York City or the West Coast, Optium Museum Acrylic is a premium product that, while offering important benefits, is less in demand. A low-demand premium product presents some challenges in pricing, but by using the rule of three, it can be a valuable addition to the mix of products you sell.



The next post will go into more depth on how to apply this strategy to Optium Museum Acrylic with specific examples on how to apply the Rule of Three formula. For more information on Optium Museum Acrylic, click here.


This article is intended for educational purposes only and does not replace independent professional judgment. Statements of fact and opinions expressed are those of the author(s) individually and, unless expressly stated to the contrary, are not the opinion or position of Tru Vue or its employees. Tru Vue does not endorse or approve, and assumes no responsibility for, the content, accuracy or completeness of the information presented.

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