Unit B2-11
Floriculture
Horticulture CD
Problem Area 2
Floral Design
Lesson 11
Pricing Floral Design Work
Interest Approach
Suppose you were to
buy this arrangement
at a local florist. What
do you think it would
cost? What if you
were to make if
yourself. Would it
cost just as much?
Why or why not?
Courtesy of Delmar Publishing
Student Objectives
 1. Explain the importance of effective
buying.
 2. Explain how to determine the costs for
floral arrangements.
 3. Describe typical pricing strategies.
Vocabulary
 Broker
 Net profit
 Combined pricing
 Odd end pricing
 Cost of goods
 Operating expenses
 Gross sales
 Percentage mark-up
 Hard goods
 Pricing strategies
 Labor
 Ratio mark-up
 Leader pricing
 Retail price
 Multiple price points
 Tie-in pricing
 Multiple unit pricing
 Unit cost of goods
 Nested baskets
 Variable ratio mark-up
Vocabulary Continued
 Wholesale cost of goods or wholesale
price
 Wholesale florist
From Whom Do Florists Buy
Goods and Supplies?
 Effective buying requires knowledge,
organization, planning and a degree of
flexibility
 Retail florists must consider several factors
in regards to suppliers and their products:
– 1. A wholesale florist is a link in the
marketing chain between the grower and
the retail florist
• Often referred to as wholesalers
• Wholesalers may only provide fresh flowers;
Or they could supply fresh flowers, supplies
and houseplants
• In order to deal with a wholesaler, you must
have a sales tax number or be tax exempt
• Retail florists may use more than one
wholesaler due to delivery times, product
availability, customer service and getting the
best price
– 2. Growers are the production end of the
florist industry; Can be domestic or foreign
• They will sell direct to retail florists if quantities
ordered are large enough
– For example, a florist may purchase roses for
Valentine's Day direct from the grower because
it is cheaper
– 3. Flower markets exist in some large
cities
• All wholesalers will be represented at this
market
• Florists are able to compare and buy a wider
variety of materials
– 4. A broker is an agent who buys flowers
and sells them to wholesalers and retailers
• May purchase flowers at auction or from the
growers
• They usually never physically handle the
flowers
– 5. Other factors to be considered when
buying flowers include:
– A) knowing who can provide the best
quality and price of flowers is valuable to
the retail florist
• Retailers need to inspect each shipment and let
the suppliers know when satisfaction is not met
• Being cooperative and honest will allow for a
successful relationship with the supplier;
Paying bills on time also builds trust in the
relationship
– B) buyers need to know bunch sizes for
typical flowers
• Sizes are usually 10, 25, if not a single stem
• Buying in larger quantities may reduce the unit
cost of an item
– Ex. Gerbera daisies sold by the stem
may be $1.00; If you buy 40, they may
cut the price to $0.85
• By planning ahead, a florist may save
money
– C) the florist needs to determine the
unit cost of goods
• The unit cost of goods is the price of
a single item determined by dividing the
overall bunch or case price by the
number of items in the bunch or case
– Used in determining the cost of an
arrangement
Determining the Unit Cost of
Goods of an Item
Small design vase:
$18.00 per case  36 (vases per case)
= $0.50 per vase
Tulips:
$7.50 per bunch  (tulips per bunch)
= $0.75 per tulip
Courtesy of Interstate Publishing
• Hard goods, which are supplies such as ribbon
and floral foam, also have unit cost
• The unit cost of goods is a wholesale cost not a
retail cost
– The retail cost is the florist’s selling price, which
is determined by marking up the wholesale cost
of goods
• Another method used is combined pricing, a
method of adding the total cost of supplies used
in a typical arrangement to the cost of the fresh
flowers
– This method saves time on frequent purchases
Example of Combined Prices
6” Plant
Costs
9” Bud Vase
Foil
Bud vase
#9 ribbon
Floral preservative
Card, envelop,
cardette
Care tag
Card, envelop, cardette
Wrapping supplies:
Wax tissue
Cellophane
Ribbon
Wrapping supplies:
Wax tissue
Cellophane
Ribbon
Totals:
Totals:
Costs
Care tag
Courtesy of Interstate Publishing
How Is the Price of an Arrangement
Determined?
 The three most common methods of
pricing design work are ratio mark-up,
variable ratio mark-up and percentage
mark-up
– The method used varies from shop to shop
– Depends on type of shop and the profit
strategy
 A. Ratio mark-up is a method of pricing
based on a predetermined increase from
the wholesale cost of goods
– The selling price is called the retail price
– Ratio for hard goods is 2:1; Ratio for
perishable items is 3:1
• In other words, multiply foam by 2 and fresh
flowers by 3
– Ratios vary from store to store; Will often
be higher for more labor intensive work
Ratio Pricing Using Two Methods
Typical ratio mark-up
Perishables
Carnations
10@$.30=$3.00 x3 = $9.00
Leatherleaf
10@$.10=$1.00 x3 = $3.00
Hard goods Vase
1@$.90=$0.90 x2 = $1.80
Floral preserve 1@$.05=$0.05 =
$0.10
Total: $13.90
Across the board 3:1 pricing ratio
Perishables Carnations
10@$.30=$3.00 x3 = $9.00
Leatherleaf
10@$.10=$1.00 x3 = $3.00
Hard goods Vase
1@$.90= $0.90 x3 = $2.70
Floral preserve 1@$.05=$0.05 x3 = $0.15
Total: $14.85
Courtesy of Interstate Publishing
– A major draw back to this system is that no
net profit is planned and no overhead costs
are incorporated into the calculations
• Labor may be added based on an hourly wage,
but benefits may be added as well
– For example: the labor wage may be $8.00 an
hour, but with benefits added, the cost of labor
might actually be $12.00
– Another method is to add a flat 10 to 20%
charge to the final price to cover labor and
overhead expenses
Hourly Wages Concept Chart
Amount to be added to Price of Arrangement
Time Spent
Wage
Wage with Benefits
(Hours)
1/4
1/2
3/4
1
(Assume $8/hr)
$2
$4
$6
$8
Vase arrangement Cost
Hours to Complete 1/2Wages including benefits
Total Price
(Wage rate + 50%)
$3
$6
$9
$12
$15.00
$6.00
$21.00
 B. Variable ratio mark-up has different
mark-ups depending upon two factors:
type of design/type of flower and labor
required to make it
– Advantage is that the labor is included in
the calculations
– Disadvantage is that net profit is still a
guess; May cause confusion with
employees
Examples of Variable Mark-up
Type of Design
Mark-up
Basic arrangements, bud
vases, boxed flowers,
decorated plants
3:1
Creative designs, corsages
4:1
Wedding flowers, party
flowers, special designs
requiring time and attention,
funerals
5:1
Courtesy of Interstate Publishing
Variable Mark-up
Type of Flowers Labor Required
Form flowers
(orchids, lilies,
tropicals)
Average flowers
(carnations, roses,
gladiolus)
Filler flowers (spray
mums, baby’s
breath, statice)
Mark-up
Low
2 ½ :1
Medium
3 ½ :1
High
4:1
Courtesy of Interstate Publishing
Mark-up Comparisons
Ratio Mark-up
Variable Ratio
Mark-up
Standard carnation
$0.24/stem
$0.72
$0.84
Orchid
$1.20/flower
$3.60
$3.00
Pompon spray
mums $0.60/stem
$1.80
$2.40 (5-7
placements)
Courtesy of Interstate Publishing
Pricing Strategies Continued
 C. Percentage mark-up is a pricing
method that plans for profit
– Uses the wholesale cost of goods divided
by the cost of goods percentage as
reflected in the shop’s financial statement
• Requires the florist to analyze the business’
financial statement to determine the
percentages of the major factors of gross sales:
– 1. Gross sales = total dollar amount that a
florist shop sells
– 2. Operating expenses = the costs of running
the business
– 3. Labor = operating expenses, which involve
people and time it takes them to produce the
products
– 4. Cost of goods = the cost of merchandise
and supplies
– 5. Net profit = the return on a florist’s
investment
Determining the Price of an Arrangement
Using Percentage Mark-up
Wholesale cost of goods = $6.00
Cost of Goods Percentage = 30%
$6.00  .30 = $18.00
Retail cost = $18.00
If the consumer wants to spend $30.00, then calculate
the wholesale cost of goods to use:
$30.00 x 30% = $10.00
Wholesale cost of goods = $10.00
Courtesy of Interstate Publishing
What Are Pricing Strategies?
 Pricing strategies are well-planned
methods and practices of pricing intended
to attract customers to the floral shop and
motivate them to buy
– Successful strategies can increase sales
volume and gross sales
 Strategies to attract customers - good
retailers are always looking for ways to
entice the consumer into their shops
– Advertising and window displays are
effective methods, along with open houses
at various times throughout the year
• 1. Leader pricing is a method of offering
commonly purchased and recognizable items
at a significantly reduced price compared to the
competition
– This will suggest to the consumer that all other
items are reasonably priced
– Key is to negotiate good buys from the
wholesaler
• 2. Multiple unit pricing is a strategy to
encourage the customer to come into the shop
and then buy more by offering price breaks for
purchasing additional items
– For example: one rose for $2.00 or three for
$5.00
– Bouquet specials and buy-one-get-one-free
offers are other examples
 Strategies to motivate more buys -
everything in a store should be priced so
that the consumer knows exactly what it
costs
– Various stickers and tags can effectively
do this
– Signs can be created to make
consumers aware of specials
– Rounding odd prices up make prices
easier to understand
– Types of pricing:
• 1. Odd end pricing = is rounding a
product’s price downward
– For example: round $13.00 to
$12.99
– This product will then seem less
expensive
• 2. Multiple price points = a method of pricing
and displaying several related designs or
products in varying sizes and varying prices to
provide customer choice
• 3. Nested baskets = are a multiple price point
concept, using three baskets that fit inside one
another and varying the price of each so that
the consumer will have more choices
• 4. Tie-in pricing = a method to encourage
customers to buy related items by offering
special discounted prices when the products
are purchased at the same time
– Ex. Candles and centerpieces
Summary
 How is wholesaler florist different from a retail
florist?
 What is the job of a broker?
 What is the unit cost of goods used for?
 How is gross sales different from net profit?
 Explain leader pricing.
 Give an example of multiple unit pricing.
 Why is odd end pricing so effective?
 How would tie-in pricing increase profits?