Predatory Pricing

The cottage food industry is growing by leaps and bounds and home-based baking is taking the lead. Home bakeries are popping up across the U.S., UK, and Australia, however, there is causing a dark cloud looming over the industry. It’s called predatory pricing. The competition between cake bakers is fierce, and the idea that customers are scarce is a myth. Bakers think there isn’t enough business to go around and that’s not true.

“The competition between cake bakers is fierce, and the idea that customers are scarce is a myth. Bakers think there isn’t enough business to go around and that’s not true.”

Predatory pricing is the result of:

  • Low self-esteem and not knowing your worth
  • Lack of business education
  • Placing no value on talent or time
  • Suffering from a scarcity mindset
  • Focusing solely on the sale
  • Not understanding the difference between competing and comparing

If you’re a home-based baker asking, “How can I find customers willing to pay for my skills, knowledge, and cakes?” Let’s look at a few cold facts. First of all, no one wants to pay for your skills, knowledge or cakes. What customers want is for you to solve their problem. Think about how you answer your phone? “Jenny’s Custom Cakes, how can I help you today? People need help because they have a “problem.”

Customer’s response: “Good afternoon, my name is Mrs. Lewis and I need a Vegas themed cake for my husband. Please deliver the cake two weeks from today; I don’t want to spend more than $150. “Oh, yes, it must serve 30 people.”

Ask yourself: “Can I solve this problem? At this point, you begin to break down what you can do and at what price. At the end of the day, it is a yes or no question.”

Another Great Read:  Are You a Cheap Cake Lady?

Where does predatory pricing enter the picture? It only exists when bakers don’t understand one simple fact. The cost of producing a product must never be more than the price placed on the product. According to “predators” cash trumps cost.

“The cost of producing a product must never be more than the price placed on the product.” 

Predators don’t care about the price placed on their products because their purpose is to get cash in the hand. You are, unfortunately, supporting predatory business practices. Furthermore, this practice will never sustain you and despite your greatest efforts you will either change your practice or go out of business.

How do you counter these practices? Create a customer profile. You need a description of your perfect customer. This includes demographic, geographic, and psychographic characteristics. Examining customers from the past will probably give you insight into why customers selected your product. You aren’t focusing on customers attracted to pricing but those seeking quality.

Another Great Read:  Get Help Pricing Homemade Food Products

Predatory pricing is here to stay; therefore, it is best that you prepare yourself for dealing with it. Understanding the business of baking is an essential part of any bakery’s success. You must seek to solve the customer’s problem because keeping your focus on the customer is key. Predators are like an itch you can’t scratch, consequently it is up to you to ignore them, toss them to the wind.

How do you steer away from predatory pricing? Remember, that customer profile discussed earlier? Start developing it immediately. You will quickly notice the people you thought were ideal customers aren’t. Furthermore, it’s a waste of time to develop honest customer relationships with people who will never pay you what you’re worth.

“It’s a waste of time to develop honest customer relationships with people who will never pay you what you’re worth.” 

Start now operating a transparent, professional home-based bakery. This is the core business goal of any small business. When you are in business, remember it’s not about you or the predator, it’s all about the customer. The customer who is willing and able to pay you what you’re worth.

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