Product pricing for your dog bakery is both an art and a science; however the process is easy, when you know what to do!
Correct product pricing can mean the difference between success and failure!
Believe it or not, you can lose business (and money) if your products are priced too low. And you probably already know that you can also lose customers, if your products are priced too high!
Your dog treat pricing needs to be just right!
The best price for a product
is determined by using a pricing system.
To find the best price, you need to know the cost of ingredients, overhead, packaging, marketing, delivery and more…
Make sure you know exactly what your expenses are, so that you can calculate your costs accurately.
How Much Do Your Products Cost You?
There are several steps required for you to price your dog treats.
- First, determine the cost of the dog treat ingredients that you use. For example, let’s say that a 5 lb bag of unbleached white flour costs $3.50.
- Second, determine how many “units” your bag of flour contains. So, measure how many cups of flour in a 5 lb bag. You find that there are 3.5 cups per pound of flour, or 17.5 cups of flour in a 5 lb bag.
- Divide 17.5 (cups of flour in your 5 lb bag) into $3.50 (cost of your 5 lb bag of flour) to get $ .20 per cup – the cost per cup of flour.
- Lastly, determine the amount of flour that you usually use. And then determine how much that amount of the ingredient costs. For example, a cup of unbleached flour costs 20 cents. If you are only using ½ cup, that would cost 10 cents.
Do this for each of the dog treat ingredients that you use in your recipes. Then, make a chart that includes these items across the top:
- Ingredient – list (down the page on the left ) the name of each ingredient that you use.
- Unit – list the amounts that you use. For example, for “unbleached white flour”, you might list the following: 1 cup, ½ cup, ¼ cup.
- Cost – Determine what each of the listed amounts of flour would cost and list them next to the unit (1 cup, ½ cup, ¼ cup).
Example – Dog Treat Cost Chart
|Unbleached flour||1 cup||$ .20|
|Unbleached flour||1/2 cup||$ .10|
|Unbleached flour||1/4 cup||$ .05|
|Whole wheat flour||1 cup|
|Whole wheat flour||1/2 cup|
|Whole wheat flour||1/4 cup|
|Rye flour||1 cup|
Complete the table with every single dog treat ingredient that you use. Don’t forget ingredients like salt, baking powder, spices, etc.
I know this is a tedious process, but you will only have to do it once. You need to know exactly how much each product costs in order to keep an accurate accounting.
And keeping an accounting of your costs and expenses, is one of the most important steps in pricing products for your dog bakery.
When you have calculated the cost of all the dog treat ingredients that you use, don’t file it away and forget it. Keep it handy, so that you can check it regularly. Update the numbers when your costs for an item change.
Use your Dog Treat Cost Chart to Help with Product Pricing
Once you have completed your Ingredients Cost Chart, the rest is simple. You’re going to make another chart. This time you will need a chart for each recipe.
Again, you will only do this once, but I suggest that you keep the cost sheets for each dog treat that you sell, in a loose leaf notebook, so that they are handy. This chart will help you again and again when you are pricing, or adjusting the prices, of your dog treats.
Take one of the recipes that you plan to use. Let’s use Chicken Chompers as our example.
Here’s what you’ll need:
List the ingredients in the recipe and the cost for each. (You will get the cost for the ingredients from the list that you made above.)
Total the costs of the ingredients. This is your ingredients cost for 1 batch of Chicken Chompers.
Dog treats per recipe – How many Chicken Chompers do you get when you make a batch? Let’s say you get 3 dozen – 36 Chicken Chompers.
Cost for each dog treat – Let’s say that it cost you $2.50 to make a batch of Chicken Chompers. If you divide $2.50 by 36 (Chicken Chompers per batch), you get $.069 – your ingredient cost for 1 Chicken Chomper.
You’re not quite done yet…
Let’s say that you decide to package the Chicken Chompers in paw print cello bakery bags (cost, $ .40 each) and that you will sell the dog cookies by the half dozen. (With smaller dog treats, you might consider selling them by weight—a real time saver for you as it eliminates counting out dozens of small dog treats!)
So, 6 Chicken Chompers x $ .069 (cost of each Chicken Chomper) = $ .414 per half dozen dog cookies(your ingredients cost). Add $ .40 (cost of cello bakery bag) to that and you get $ .814 or (rounded up) 82 cents.
Figure some amount for labor and overhead expenses and add that to your $ .82 and you now have the cost of 6 Chicken Chompers. Let’s say that you end up with a cost of $2.00 for 6 Chicken Chompers.
Let Technology do the Work for You!
Give Yourself a Break!
Let your computer do the work to calculate your dog treat prices…
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Pricing Products using Market Research
This is where product pricing becomes more art than science. You now have a good idea of what your product costs you. You’ve decided how to package your dog treats. What do you charge?
Of course your price needs to be high enough that your customers value your dog treats. But it should also be low enough that they think your dog treats are a good value. So how do you do that?
Market Research! Become familiar with the pricing used by other dog bakeries and retailers, the prices that customers in your target market are willing to pay. And then keep your prices somewhere in the same range.
However, don’t assume that someone else is actually selling their products–just because they are in business. Make sure they are doing well by visiting their store or investigating in some other way. You need to make sure that the data that you are using, is good data.
The Final Step in Product Pricing
Let’s say that you learn that a plain (no dog treat icing) dog cookie, the size of a Chicken Chomper sells well at approximately $.75 each. You know that your cost to produce the dog cookies is well below that (because you did the exercise above to determine the cost).
You decide to price your Chicken Chompers at $ .75 each, so you will charge $4.50 for a bag of 6 Chicken Chompers. Adding up all the costs, you determine that 6 Chicken Chompers costs you $2.00 to produce and send out the door.
Your profit on 1 bag of Chicken Chompers is $2.50. Since you get 6 bags (6 Chicken Chompers per bag) from 1 batch, your profit on a batch of Chicken Chompers is $15.00.
So, as you can see, learning how to price a product for your dog bakery is not a 5 minute job. And you should not do it impulsively.
However, if you take the time to do this right, you will be using a business-like approach and you will make a healthy profit, based on actual facts and figures—not assumptions.
Even if you plan to start small, get into the habit of doing things right. Then, when your business grows, you will be able to expand your dog bakery gracefully, and move on to the next level…
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