Off the Cuff: Inclusive Stitchcount Pricing

Having a standard inclusive price means the stitching aspect of price quoting is accomplished in an instant, with no inconvenience to the buyer.
Sept 10, 2007

By Mark L. Venit, MBA

When teaching seminars on pricing at trade shows, I demonstrate a system of over-the-phone quoting of embroidered garments that doesn't require the seller to see the design before quoting. My contention is that when a prospective buyer calls for a price, he wants — and expects — a price, even if it's just a ballpark figure. And I can always count on a bewildered embroiderer-attendee (We'll call her "Maureen") to ask, "How can you possibly give a price without seeing the design?"

Maureen's concern is twofold: getting a good handle on the potential stitchcount and quoting too high or too low. A five-year industry veteran, she will explain, "It's our company's policy never to quote on an order until stitchcount — at least a solid guesstimate of it — has been done," adding, "I've been burned 'too many times' giving quotes without having first seen the design."

Quoting Schemes
I advise that keeping to her policy is essentially overkill, since almost every company has the data to establish its own standard stitchcount range for left chest and full front/back designs from actual orders over time. Most of the largest and most successful companies, however, quote embroidery with an "up-to" price — up to 5,000, 8,000 or however-many stitches — for the design. If the stitchcounts goes well over the stated inclusive price, then additional charges might well be in order.

Precision to-the-penny pricing isn't critical to most buyers at the "shopping" stages of a legitimate quote, and in the grand scheme of things, the designs that come in at 1,055 stitches above the average will be balanced by designs that come in at 1,055 stitches below it. Having a standard inclusive price means the stitching aspect in quoting any price is accomplished in an instant, with no inconvenience to or effort on the part of the buyer, and with finality. For those worried about — God forbid! — overcounting/overquoting or undercounting/underquoting 711 stitches, you can always state that "the price includes up to," say, 7,000 stitches, and that "any additional embroidery is priced at X per thousand stitches."

Except for very large orders, quoting the old fashioned way opens the door to a competitor who quotes quickly and then moves to close the sale before your prospect even submits a design for your stitchcount review or before you get back to her with an answer.

Cases For and Against
The case for quoting the old fashion way comes down to the following:
a.    "I might lose orders by quoting too high."
b.    "I might cheat myself out of revenue I could be getting by not properly covering all my costs on every order by quoting too low."
c.    "Orders with lower stitchcounts shouldn't subsidize orders with higher stitchcounts."
d.    "It's worth my time to do a thorough job quoting as accurately as possible."

The counterarguments view the practice of inclusive pricing from both the customer's needs — expectations! — for a) fast answers, b) fewer hassles and c) quicker turnaround as well as the seller's costs to investigate everything upfront and do the back-and-forth of what is thought to be unnecessary effort in most cases. The right answer?

That varies based on the seller's industry experience, the size of the operation and whether one views selling as a customer-service function or an administrative process.

If it helps you change your thinking from continuing to do time-consuming, albeit more precise, quotes to giving quotes with a pre-determined stitchcount range, consider that among the industry's top players in size, profitability and growth, the vast majority quote embroidery orders using inclusive pricing.

The Verdict
When people looking for a price call Maureen, I'm sure she'll continue explaining to them how to go about getting one from her. Meanwhile, her more customer-friendly competitors simply give the callers a quick, reliable, bankable price – and frequently win the sale right then and there.

Seen as part of the journey in building a business and in the context of the value of a customer over the life of the account, the cost of a few thousand stitches plus or minus doesn't amount to a hill of beans for a smart marketer. For the price-fixated seller, though, the cost amounts to a mountain of lost opportunities.

Mark L. Venit, MBA, is president of Apparel Graphics Institute Ltd., Ocean Pines , Md., which provides management and marketing consulting and proprietary research to apparel graphics companies throughout the Americas and Europe. He is also the chairman of ShopWorks Software LLC, a provider of industry-specific business software. Venit teaches pricing, strategic marketing, salesmanship and other business management topics at the Imprinted Sportswear Shows. You can reach him at markvenit@cs.com.

Author's note: In trend surveys the Apparel Graphics Institute has conducted bi-annually for the past 26 years of companies doing $500,000 to $2.5 million in annual sales, average stitchcount for a left-chest design has increased from 3,500 to 4,000 stitches in 1982 to 6,000 to 6,500 stitches in 2006. The trend has NEVER seen a decline in stitchcount from one survey to the next.

Off the Cuff: How to Charge for Rush Service
Charging for rush service is justifiable, but be sure to outline  policies upfront and inform your customers.
The issues of whether and what to charge for rush service are common in the decorated apparel industry and there are valid arguments on all sides. Most companies feel they’re entitled to some degree of additional compensation for going our of their way to accommodate a rush order, for bumping other customers a notch or two back in the production line and for having to deal with the potential hazards of doing something faster than necessary. Oh, and the more sanguine reason: you can, if you choose, stick it to ’em when they’re on the ropes.
August 29, 2008

How to Profit from the Tax Write-Off for Conventions and Trade Shows
Thanks to Uncle Sam, you can deduct certain trade show and conference expenses from your income tax filing. Learn what’s deductible — and what’s not.
Imagine an enjoyable — and educational — vacation with Uncle Sam picking up part of the tab. That's right, every decorated apparel business, the owner and employees of that business (even someone who is a shareholder/employee), can legitimately claim an income tax deduction for the expenses paid or incurred in attending trade shows, conventions and meetings.
August 18, 2008

Tax Breaks for Education — What Every Decorated Apparel Business Owner Needs to Know
Embroiderers, screen printers and promotional products distributors can profit from breaks in the tax code to educate their employees and themselves.
Finding, hiring, training and retaining “smart” workers have long been key factors in the success of small businesses, including decorated apparel companies. Lawmakers have also recognized the importance of a smarter workforce and created a number of educational and training-related tax breaks and incentives. Those tax benefits allow every commercial embroidery, screen printing and promotional products business, large or small, to offer training and education as a “fringe benefit.”
August 04, 2008

Economic Stimulus Package Offers Tax Break for Equipment Buying
Decorators interested in expanding their business or replacing old equipment can rejoice in the new round of government incentives designed to help small business owners.
Earlier this year, Congress passed, and the President signed, the Economic Stimulus Package of 2008, a $168 billion economic “rescue” package that included rebates for taxpayers and tax breaks for businesses. In addition to those tax rebates, the heart of the package, there also were tax breaks for businesses such as decorated apparel operations — breaks retroactive to the beginning of 2008!
July 21, 2008

Off the Cuff: 8 Steps to Cure the Cash Flow Blues, Part 2
Recognizing the source of cash flow problems in your screen printing or embroidery business is one thing, doing something about them is another. Here's how.
In Part I, "Cash Flow Blues," we looked at how screen printing and embroidery businesses get into cash flow ruts and introduced you to the evil Cash Flow Monster. Now we'll explore eight specific steps to learn how to gain the favor and blessings of the Positive Cash Flow (PCF) Fairy.
July 07, 2008