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Growing Your Niche Business

(February 2010) posted on Mon Jan 25, 2010

Finely targeting your marketing efforts is an effective way to start digging out of last year’s financial woes. This article offers tips to help you on your way.


By Mark Coudray

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Complementary sales are products that are used together with the original items. In apparel the natural extensions are sweatshirts with T-shirts or hats with T-shirts or both. In this case, I would create bundle offers. Bundles are easy to create—after all, the cost is in the setup and the actual time it takes to print more goods is next to nothing once we’re up and running.

Here’s an example of an approach to take. Say the price per unit for a printed T-shirt at 36 pieces is $6.00 and your cost for the garment (including freight in) is $2.75. Your margin is $3.25. Now the cost of a hooded sweatshirt is $12.00 and you would normally sell it printed for $22.00. You could create a hoodie/tee bundle for $24.00. Your total cost would be $14.75 and your margin would be $9.25. You’re printing twice as many units, but your margin is greater.

You can also mix and match. You can upsell the offer, meaning that this bundle is available only with orders of 72 T-shirts. At 72 pieces you can have as many as 36 T-shirt/hoodie bundles. So you sell 36 shirts at normal margin and 36 bundles at the bundle margin. If the customer normally orders 36 pieces, your sales would be $216 with $117 in margin. With the bundle your sales would be $216 + $864 = $1080. You margin would be $450. This is a conservative model. You’ve increased sales 500% and increased margin 384% while increasing the amount of time to print the order by just a few minutes (if you have an automatic press.)

Bundling is a beautiful thing. It makes picking your pricing apart really difficult, and it really irritates your competitors because they think you’re low-balling and that you couldn’t be making a profit with those prices. You really aren’t. You’re increasing your utilization in an intelligent way. It comes down to understanding what your costs are and allocating them based on how long it takes you to do the work. We know we’re generating margin when the presses are printing. When they aren’t, such as during changeovers, we’re subtracting from what we just generated. We all want larger runs. This is the fastest and easiest way to get them. The incremental-margin approach to sales is very powerful if you plan carefully.


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Comments

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