6 Pricing Strategies You Can Use When Pricing Your Baked Products

Bakers and Bakerettes; especially those just getting into the baking industry or looking to start seriously baking for business in order to earn some income; struggle with how to cost their products correctly.

In this post; I wanna share the various types of pricing methods, why you need them and factors to consider while you’re pricing. This will be helpful to you especially if you’ve been able to cost your baked products; but you’re unsure on how to price and what you should consider while doing so.

Premium Pricing

  • This refers to costing a product at a high price due to its high quality.
  • This strategy is used for luxury custom and/or wedding cakes that are usually packaged really well. Or other high quality and artisan baked products.
  • The target market is usually consumers looking for good quality, who aren’t worried about budget.
Chiffon cakes by Amari – this is our premium priced brand for cakes

Penetration Pricing

  • This refers to when you enter the market with a really low price that you will later increase.
  • It’s a good strategy when you’re new in the baking industry and want to penetrate the market quickly.
  • You need to make sure that you inform your customers – that the price you’re selling at is a discount or sale price and that it’s going to increase later.

Economy Pricing

  • This strategy is used for low-budget, fast-moving products like breads, cookies and commercial cupcakes/queen-cakes.
  • If your target market is low-budget, you can offer them fast-moving products at a low price.
  • In order to make a profit, you have to mass produce, keep your costs low and make a lot of daily sales.

Price Skimming

  • This is when you’re introducing a new product (or technique) into the industry; pricing it really, really high and then as it gets saturated in the market, your price comes down.
  • This strategy is used for products that the industry has never heard or seen, which is rare in the baking industry. Though it works very well on new decoration techniques and styles/designs in the cake decorating industry.
New designs or techniques can use the Price Skimming method

Bonus pricing strategies  that should be used in conjunction with the above:

Psychological Pricing

  • Refers to using numbers to psychologically affect your client’s decision to purchase e.g. Ksh.999 instead of Ksh.1000.
  • The aim is to attract customers by making it look as if that product is actually cheaper than it really is.

Promotional Pricing

  • This is when you offer discount pricing during a certain season, such as Valentine’s Day and other holidays, or for specific products, such as BOGO (Buy One, Get One half off).
  • This strategy should be used often in your business, at different times of the year.

Importance of Choosing the Right Pricing Strategy

  1. You’re able to price well for your target market
  2. Attracting the right clients in the right niche will help you make sales. Examples: Using the economy pricing strategy for your luxury cakes will make your target market wonder why they’re so cheap. The premium pricing strategy can’t work for a low-budget target market that can’t afford highly priced products.
  3. Ensures you’re pricing for profit – you’ll have a profitable business.
  4. Using the wrong pricing strategy means you might not be making any profit.
  5. It ensures that you know your niche; this enables you to choose the right pricing strategy and price your products in a way that helps you make a profit.
Factors to Consider When Choosing a Pricing Strategy
  • What type of business do you have? e.g. Do you only bake when you have an order?
  • Are you a luxury brand? Do you offer custom cakes that are really high quality?
  • Are you a high volume bakery? Do you bake a lot of products/Pastries daily and sell to people?

You need to know what kind of bakery business set-up you have, in order to know how you will price.

I hope the above information has been helpful to you. If you struggle with costing and pricing, please reach out to us. We offer free online costing classes and we also have a Pricing E-book you can purchase.

So I’m curious , are you a baker who’s doing business? Have you priced and costed your products? Are you struggling with pricing? Please share below.

Published by Maureen Kamari

Amari Baking Center offers baking classes to those who want to learn how to bake. We train our students using Cookswell original charcoal ovens. We also offer basic business start-up training for those who want to start small baking businesses. We do groups vocational training anywhere in East Africa as well. We hold classes in our home-based bakery workshop located on Ndwaru road in Riruta, Nairobi; off Naivasha road, next to Pelida School. We use original Cookswell charcoal ovens to bake and train our students due to their efficiency, effectiveness and economy. They are the best option for anyone starting a small baking business on a budget.

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