Product pricing: Don’t compete on price

Features - NGBC

More nurseries are pushing the value of their products by adjusting the price tag.

Pricing was a hot topic at the Nursery Grower Business Coalition, and for good reason. Costs keep going up, but many nurseries continue to charge the same amount for plant material. The last time Hoffman Nursery raised its prices was six or seven years ago. But going into the 2014 season, that changed.

“We finally started to see the economy turn and we decided it was time to do it,” says John Hoffman, president and co-owner of Hoffman Nursery.

Hoffman increased prices by an average of 4 percent overall, across all products. “It was certainly time,” Hoffman says. “Every year, costs go up. We’ve got to keep an eye on it, especially with the competition out there.”

Not all items received an increase, and some were increased more than 4 percent. Hoffman Nursery decides whether or not an item’s price changes on a case by case basis. The nursery did not receive any complaints about the increases.

For 2015, the nursery is holding steady on most of its prices.

“After last year’s increase, we looked at the list, we felt we needed to stick to the prices we used last year,” Hoffman says. “We chose about 10 items and bumped them up, some items went down.”

There are several factors that go into the pricing process. Hoffman Nursery considers its costs, supply, difficulty of growing that particular plant and its competition.

“We’re always trying to balance that cost with what it is our customers in the market will bear,” says Shannon Currey, marketing director for Hoffman Nursery. “We feel we have one of the better values out there because we are providing something other than just a plant. There is a price to the plant and what it costs us, but we also provide services, support, and assistance to growers. We give them a set of tools to be successful in growing the grasses.”

That means Hoffman’s price may be higher on some items, but the nursery believes the value offered is solid for the market.

Plant quality is another reason to charge more than your competition – if you can back it up. If a plant is more disease resistant or grows more quickly, that’s a better value than a similar plant that needs to be nursed along. Jill Hoffman, co-owner and vice president of Hoffman Nursery, says the nursery lost customers during the recession who were shopping purely on price. Many of these customers have returned, and Hoffman hopes they’re back for good.

“It’s nice to have these customers come back and say, ‘I never should have switched, because I had to deal with disease problems,’ or ‘It took forever to grow,’” she says. “If there’s another downturn, we may not see as many people go for the cheapest plant because they understand what they’re getting.”
 

Communicate the value

What happened at Hoffman Nursery is part of a larger trend. There’s been a shift in the industry regarding pricing. A number of growers do not compete on price, which may be tough, but necessary for profits and a strong industry. Chris Uhland, CEO at Harmony Hill Nurseries in Downingtown, Pa., chose to market in part to landscape architects, a clientele that often understands the quality and the value of his product.

“My pricing absorbs the marketing to that particular clientele. And I explain my production processes, which are also represented in my prices. I’m buying from some of the best liner producers in the country, which right away has a higher price tag. Our other practices like using root stimulants and corrective pruning also help command a higher price,” Uhland says.

The types of trees he grows and sells also makes a difference with pricing.

“I look for cultivars that are superior to this area with better characteristics than the species, and the majority of what I grow are patented cultivars,” he adds.

No matter your customer base, creating a value proposition is key to better pricing, says Chris McCorkle, general manager at McCorkle Nurseries in Dearing, Ga.

“There’s value in plants and we as an industry need to do a better job relaying that message,” McCorkle says. “Some brands are doing a good job of that. The brands that are creating a minimum pricing structure and quality standards for their growers is helping. If we treat the brands correctly and don’t let them become commodities, there’s a good opportunity throughout the industry to increase value in all plants. Like the saying goes, a rising tide floats all ships.”
 

Know your market

Value often comes from other services a grower can provide. Pieter Joubert, the vice president of nursery operations of Georgetown, Ontario-based Sheridan Nurseries, may charge a customer more, but will offset that by giving them more tools to be successful. The tools he offers depend on the customer. For an independent garden center owner who knows plants, but not merchandising, Joubert will focus on branding strategies and plant presentation and grouping. Not every retailer understands the importance of staging, and as a grower that also operates eight retail garden centers, Sheridan can help.

“The moment your presentation takes a nose dive, your prices will too,” he says.

Joubert sets prices using what he calls “the inverted model.” That means that instead of starting the pricing discussion with his production needs, he starts at what the customer typically charges.

Sheridan Nurseries offers no discounts whatsoever on new introductions, and draws a hard line with popular sellers.

“The plant comes with a premium and you should sell it accordingly,” he says. “If we have a product that is going to be your doorbuster, we will only give it to you on one condition: that you will take x amount of it and sell it under these protocols. Otherwise we will not give it to you.”

When he’s scouting a potential customer, Joubert looks at the categories of plants for sale, the times of year they’re sold, how they handle discounts when there is 10 to 20 percent left on the floor, and how well they take care of the plants.

The grower doesn’t do business with retailers for whom price is the main item of concern. Price is one reason, but the other is plant management. If a retailer doesn’t take the appropriate steps, it will have to discount the plants sooner. This issue is even more important in Canada, where the weather makes every day valuable.

“We don’t believe in selling something we know they’re not going to look after,” Joubert says. “They have to have success the first two weeks. That’s a lot for us to depend upon to be profitable with them. A lot of that is outside our control anyway, because in our environment, weather is everything. Our window for sales is typically a lot shorter than it would be for (U.S. growers). If your selling window is four weeks, and you guys can stretch it to five or six, that’s a huge difference in the window for selling.”

Sheridan Nurseries aims for an elite clientele, and doesn’t hide it. Joubert sees it as a way to differentiate from Home Depot, Walmart and other retailers. Essentially, the people who are willing to take the time to understand why a plant might be more expensive are also willing to pay more for their plants.

“We don’t make excuses for being more expensive than other people,” Joubert says. “But we have a range of offerings, which makes it very interesting for other people to come and learn about the product before they buy it. We find that people in the higher income brackets tend to do their homework a little better, so we are making use of that phenomenon.”