What are the four common methods that decorators charge?
1) Retail
2) Pre-fixed Fee
3) Hourly Rate
4) Percentage Above Cost
Define: Retail Pricing Strategy
When you buy furniture at a wholesale price but charge the client what it would cost at retail and your profit is the difference between the two.
What are the disadvantages to Retail Pricing?
-If a retailer only works with designers, and there is no retail price, you have to determine the markup yourself.
-Conflict of interest w/ clients (different pricing everywhere
-The client may be able to purchase the same item at a lower price.
- Sometimes it makes clients feel like they are paying more than they should.
Define: Pre-fixed fee pricing strategy
You estimate a charge for all of your services for a job and enter into a contract to provide these services. Doesn't include cost of goods and other services that go into a job.
Typically client pays % at beginning, middle, and end of job.
Pre-fixed fee pricing strategy disadvantage, especially for residential jobs?
Hard to estimate fee accurately at beginning.
Define the Hourly Rate Pricing Strategy?
Quote an hourly rate and charge for actual # of hours you work.
Disadvantage to Hourly Rate Pricing Strategy?
Hard for interior designers to charge large sums and to allocate times for all clients. (ex: shopping for one client and get distracted for another client job.)
Define the Percentage-Above-Cost Pricing Strategy?
Base charges on actual cost plus a pre-agreed percentage above cost. Like being paid a commission on all goods and services you buy. Also called "Net Plus A Percentage"
*Most widely used method of charging.
*Common agreement is net plus 25%
What are the benefits of the Percentage Above Cost Pricing Method?
1) You seek lowest possible cost and client shares in that low cost
2) Are prices are open and above board. You never have to hide costs from clients
3) You never have to create artificial price based on your needs to the marketplace to a hypothetical retail.
4) Client typically gets merch at price below retail and feel like they are getting a bargain
5) You mark up labor costs as well as merchandise to you make money on everything you sell.
When do you charge for your design services? What type of pricing methods (2) can you use?
For example: When hired as a consultant only to make recommendations. Use either pre-fixed fee or hourly fee.