David Geller: Pingpong Pricing
Know your costs before pricing repairs
BY DAVID GELLER
Published in the October 2013 issue.
If your jeweler gives you his suggested repair price list, toss it out!
Wouldn’t you like to know your cost of doing a repair before installing a price list from someone who doesn’t know your costs?
First off, you shouldn’t have a price list for anything without knowing your costs. Would you buy any inventory items if you didn’t know your costs? There are several costs in repairs and custom, and your jeweler is not privy to most of them — nor is he aware of your profit goals.
I recently spoke to a store that charged between $50 and $75 to make a gold ring smaller. Great! But they charged less than $150 for a half shank as the jeweler thought “over $200 is too much money.”
Go back to the bench jeweler telling you “No one will pay those prices,” and tell him, “Poppycock!” Repairs are not price-sensitive, they are trust-sensitive.
I have spoken with thousands of jewelers about their successes and failures in charging for repairs and custom design.
Failures? Few. No matter what you charge, you’ll have about a 90 percent closing ratio. A few jewelers have mentioned that repair traffic has fallen off somewhat. It’s not what you’re charging, it’s that most of America has melted the old broken items that were lying around for years!
Successes? Lots. Over 90 percent of jewelers I talk to say that raising their repair prices increased profits and cash with virtually no drop off in customers saying, “Yes, please fix it.”
In most cases, whatever number you say, customers will pay. Don’t believe me? Try this: Take some pingpong balls and write a number from $10 to $100 in $10 increments. Pull out one each day and charge that amount to size a ring smaller. Up to $70, you’ll easily still have a 90 percent closing ratio.
Now, about that shank installation price your jeweler was complaining about: If you size a ring smaller for $39, isn’t installing a shank 2.5 times the work of sizing a ring? So labor to install a shank would be $98.
If you had a piece of jewelry in your case that cost you $50, what would you charge? Triple key!
A half shank easily costs $50 and should thus also sell for $150. Add $98 to install it, and a complete half shank job should be priced at $248. If you charged $150 per your bench jeweler, you would be selling the gold profitably but installing it for free.
If you have a busy jeweler who is paid $45,000-$55,000 a year and you’re buying about $1,000 a month from suppliers and expecting a three-time markup from the shop, then your shop sales should be between $185,000 and $250,000 a year!
If you’re not producing in that range give back your jeweler the price list and charge what you need to charge to make these numbers.
You won’t run customers off. You’ll just need to train your staff how to charge for a repair and explain the costs to the few customers who ask.