Do You Price Your Showroom?

It may be hard to argue that there is a better feeling than being surprised with a magical proposal, the perfect unexpected gift from your closest friend, an awesome car on your 16th birthday, or the moment you find out you are going to have a child.  The element of surprise is a wonderful thing when the outcome is one that brings satisfaction to both parties.  But is it really such a wonderful surprise to find out what something costs only after you show interest and get excited about the possibility of having the perfect hand-scraped wood floor and the sales associate has to either look it up in a book or shoot from the hip?  Better yet, you then find out that what you fell in love with was so far out of your price range that the only immediate purchase you have in mind is a bottle of water to wash down the bitter taste. 

The practice of not pricing your retail floor is sure to disappoint and surprisingly is still practiced by many flooring retailers.  Imagine finally sitting down at the new restaurant you have been dying to try, only to find out there are no prices on the menu.  Wouldn’t that be a bit uncomfortable and confusing?  Would you like having to ask the server how much each item costs and the possible embarrassment of not being able to afford what you really want to eat?  Even if the prices provided a value, what is the likelihood you would come back?  Slim to none?  How long do you think that restaurant would be open?  Two or three months?  If this practice would never work for a “standard” casual dining restaurant, what would make one believe it would work in the flooring industry with a purchase that will most likely be the third largest a consumer will ever make?

With all of those questions there must be answers.  According to a substantiated survey conducted by Benchmarkinc in which several hundred flooring owners participated over a three-year period ending 2013 independent flooring stores that have their showrooms priced versus those who did not have their showrooms priced:

  • Were nearly twice as large; $3.7 million versus $1.9 million
  • Had a higher gross profit; 35.8% versus 34.6%
  • Generated a higher average ticket; $2,254 versus $2,142
  • Each sales associates generated nearly $66,000 more per year
  • Owners earned just over $39,000 more in annual income
  • Close rates were identical; 45% respectively

That data provides proof to the hypothesis that the lack of pricing on your showroom floor is not a positive thing for retail customers or for your business.  When it comes to pricing for new construction and commercial having price tags is not only counterproductive it is nearly impossible as both segments involve a ton of moving parts related to base grade, upgrades, architectural specifications, completion bonuses, and too many more factors to mention.

When it comes to pricing here are some variables to consider:  It is best to price by the square foot and not the square yard.  Only you know how the product is ordered so only you should speak in square footage language.  I highly doubt anyone reading this article even knows the square yardage of their house without using a calculator and dividing the footage by nine. 

The second thing to consider is pricing material only or installed.  The most common practice is material only pricing but the method that generates the highest overall gross profit on jobs requiring labor is installed.  Many stores have even figured out how to account for upgrades in various install package levels and have figured out how to provide install pricing for hard surfaces as well as carpet. 

Some retailers have also adopted the concept of “compare at” pricing where their prices are compared to a suggested retail price or to their competitors.  This strategy allows the sales associate a platform to highlight the inherent value of shopping at their store versus the competition.  At the same time it provides an imprint in the mind of the consumer that the store is value focused.  This is the practice used at the flooring department at Nebraska Furniture Mart and one would have to believe that if this is a strategy used by Berkshire Hathaway and Warren Buffett then it would lean more to the direction of being effective.

I am all about the element of surprise except for when it involves what I am required to pay for something and although I may believe I am unique in many ways, I feel like I am in the majority related to pricing transparency.  If someone is not confident enough to put their prices on their products why would I want to buy from them?  The number one driver in the mind of a consumer as to or not to purchase is whether or not they trust and/or like you.  Not having pricing on your products can damage trust with that customer and starting off on the wrong foot may require some magical footwork never before seen on Dancing With the Stars.