How Chalet Nursery Hits The Perceived-Value Sweet Spot

Steve Bailey
Steve Bailey

Pricing strategies are a topic of conversation at each on-site visit I do. I’m sure they are for my fellow Garden Center Group Consultants Sid Raisch and Robert Hendrickson, as well. After all, pricing overlaps into all management areas of your garden center.

Pricing strategies differ in retail, usually determined by the mode of operation a particular retailer is operating within. Here are just a few pricing strategies that are employed.:

  • Markup to markdown
  • Using the manufacturer’s suggested retail price [MSRP]
  • Competitive commoditization pricing
  • Pricing below the competition
  • Keystone
  • Perceived value pricing

Whatever the pricing method used, the price a garden center assigns to their product goes a long way towards determining the number of margin dollars a center realizes from selling that product. And you all know why margin dollars are needed: To pay all of the expenses incurred by operating expenses, wage and wage benefits, and profit.

So the sweet spot in pricing, that proverbial ideal price for your center, is a tricky subject. Price it too high, and the units sold may drop. Price it too low, and you might not sell any more units than at a higher price. So the sweet spot that delivers the most margin dollars is what everyone strives for.

Always Start With The Perceived Value In Pricing

Knowing the landed cost (product plus freight) of an item almost always slants our perception of what an item should sell for. Using a standard margin percentage for every category or every item within a category could mean leaving margin dollars on the table. And that means less profit on the bottom line.

To that end, what pricing strategy should you use? The best option for an independent garden center is usually a blend of several, maybe none of the above. But always using perceived value as a beginning.

Knowing what the customer is willing to pay can be an eye-opener, especially to owners or staff who are influenced by knowing the actual cost of an item. If you want to test perceived value pricing for yourself, ask three customers what they would pay for a new item you have just unpacked. Tell them the invoice hasn’t arrived yet, and you don’t know what the price will be, but would really like their opinion. If it’s an item that matches your margin identity, and their perception of what they want to buy from you, you will be surprised how many times they will price the item higher than the standard margin you would normally use.

Chalet employee with combo gardenChalet Nursery Excels At Perceived Value Pricing

A very good example of perceived-value pricing was found at Chalet Nursery in Wilmette, IL, during the recent IGC Garden Center Tour.

Before we talk about that example, however, a little background on Wilmette. Located along Lake Michigan to the north of Chicago, Wilmette is the perfect example of how we all imagine the neighborhood we would like to live in. Tree-lined streets. Big brick houses. The All-American neighborhood. Kind of like the neighborhood in Tom Cruise’s “Risky Business,” filmed in nearby Highland Park.

And before you ask: Yes, even an upper-end neighborhood can support higher perceived value pricing.

First, take a look at these two pictures:

Corn and sunflowers in containers at Chalet NurserySunflowers in containers at Chalet

A garden center selling corn and sunflowers is not unusual. And maybe even some of you sell corn and sunflower plants.

But probably not too many sell three stalks of corn plants in a container for $79.99, or potted sunflowers for $149.99! Delivery was an additional charge.

Talk about perceived-value pricing! That’s all it can be when the pricing margin hovers around 96%! And yes, they were selling well. That’s why the nursery staff person in the picture is grinning.

Chalet doesn’t disappoint their customers. Why not fulfill your customer’s expectation of your margin identity. Use perceived-value pricing to set a price that is what your customers expect to pay, not what you or your staff feel it should sell for.

As a result, you will maximize margin dollars, and that can only provide more profit on the bottom line.

This article is reprinted with permission from The Garden Center Group and Steve Bailey. Bailey is a service provider for The Garden Center Group and manages all Group financial sharing programs. 

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