Full Version: Wall Plaque / Define Customer Gouging
From: Harvey only (HARVEY-ONLY) [#1]
12 Apr 2005
To: ALL
A customer brought in a science award, tiny thing, that was won in 1944. It was quite tarnished in areas but could not be cleaned. He wanted a wall plaque made of only the medal, (true plaque was not right), about 12" tall.
I scanned the medal and sent it to Pete Betrand. Vector arrived and I set it up for cutting, real fast to do. Cut out a backing and the front piece from 1/8" baltic birch plywood. Painted the backing board blue to match the ribbon, as requested. Used the Crylon shiny gold paint on the front. After a test, I sprayed the gold directly on the raw wood and it came out great. Looked like an expensive frame with gold leaf, (almost, it had a matt shine). Glued together and it was finished. Customer said that $100-$200 was OK. $90 per hour laser time, $50 per hour for all layout, painting, and assembly, $25 for digitising. Final price $57.78.
The attached is a vector rendition rather than a scan, it will not fit in the scanner.
From: John (JOHNRMONTG) [#2]
12 Apr 2005
To: Harvey only (HARVEY-ONLY) [#1] 12 Apr 2005
From: Harvey only (HARVEY-ONLY) [#3]
12 Apr 2005
To: John (JOHNRMONTG) [#2] 13 Apr 2005
Wifey is positively disgruntled at the below estimate price. We will not pad it just because he left a bigger than cost deposit and was willing to pay three times the price.
Maybe that is wrong, but it just feels ethically correct. I will get what I price my items at, at reasonable shop rates. I know that the skills needed to come up with a concept that fit properly with the customer's wishes are worth something, but that five minutes were charged for also. I guess I'll die happy in the poorhouse.
From: precisionlaser [#4]
12 Apr 2005
To: Harvey only (HARVEY-ONLY) [#3] 12 Apr 2005
Harvey,
You were not wrong to charge the fair price. I'm a big believer in "what goes around comes around". This guy will spread it around that you treated him well and fairly, and you'll get three times as much business from referrals than you would have otherwise. You did the right thing and so few people would have done it that way. BRAVO!
Mark
From: Doug (JDOUG5170) [#5]
16 Apr 2005
To: Harvey only (HARVEY-ONLY) [#3] 16 Apr 2005
Harvey...I tip my hat to you! It is so good to see a posting about fair and realistic pricing on this forum. We see so much "I get everything the market will bear", "only 400% margin on this job", or "$600 per hour" that it makes me for one to never want to use anyone on this forum for any side work I may have.
I admire you for setting reasonable values on your time and sticking to them despite the opportunites to gouge your customer.
Doug
From: Engravin' Dave (DATAKES) [#6]
16 Apr 2005
To: Doug (JDOUG5170) [#5] 16 Apr 2005
Doug,
Can you give me your definition of "gouging" a customer? I am sure this definition will be all over the place with people on this forum.
I just completed a job yesterday that brought in $4,347.75. My material cost was $1,710.72, leaving a profit of $2,637.03. I projected that the job would take about 16 hours to complete. I got on a roll and was able to complete the job in 12. That calculates to a profit of $220.00 per hour. The hourly shop rate I try to shoot for is $70 per hour, so did I gouge this customer? This is the fifth consecutive year I have done this job. My customer is thrilled every year and brings all of his other projects to us now.
I can tell you that we have all had plenty of jobs that would calculate out to $600 per hour if we ran the multiples. We just don't think of it in those tems.
I don't ever want a customer leaving my shop feeling like they were gouged. On some jobs I can make a 400% profit and also feel confident that the customer is walking out the door with a fair value in today's market.
I want every customer to be a repeat customer so I often use the concept of perceived value as my guide.
From: Doug (JDOUG5170) [#7]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#6] 16 Apr 2005
Well, I suppose I've opened a can of worms here..but here goes. Remember, this is my opinion....
Yes, I think you are gouging that customer. If you have a target of $70 per hour in your shop and you have based that number on a reasonable profitability that you can live with...why do you have to charge $220 a hour for this one job...just because of precieved value??
I believe that we have a right to charge a reasonable price for our efforts, our skills, and yes...our profitability.
I hope that this customer never finds out about the guy down the road, maybe a Harvey...that charges what the job actually costs (Ok, maybe I do hope Harvey finds him!)...sure hope you remember that you made enuf off of him over the last few years that you can afford to not do his work for awhile!
Doug
Edited to add: I reread your post...and while I still believe you are gouging in this case...it is not as bad as you make it out to be...I don't see where you allowed any markup for the materials used...I feel this is a different issue than your hourly rate....and if I use the forumula that I used when I was doing sublimation...your hourly rate was only $146 per hour...not as gougy as you depicted.
EDITED: 16 Apr 2005 by JDOUG5170
From: Harvey only (HARVEY-ONLY) [#8]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#6] 16 Apr 2005
You quoted the job on a reasonable time expectation, and it was accepted. You figured out how to get on a roll. Your ingenuity deserves the bonus of the extra pay. If you did not think of how to do it faster you would have done it in the estimated time, like any other shop. They would have paid that to the other shop.
If my customer wanted multiples, the price would only have included volume discounts. My feeling is that I really did not leave money on the table, I bought dynamite advertising.
From: Doug (JDOUG5170) [#9]
16 Apr 2005
To: Harvey only (HARVEY-ONLY) [#8] 16 Apr 2005
Harvey...I could agree with you, if, the estiimated charge of 16 hours at $70 an hour, being $1120. was the the labor charged...or $93.33 per hour...perhaps it is just the way that David presented the $220 per hour number...not really reflective in how he arrives at his pricing...
Doug
From: Noel (NOELF) [#10]
16 Apr 2005
To: Doug (JDOUG5170) [#9] 16 Apr 2005
I would have to disagree with the argument that he gouged his customer.
He was able to come out with a higher price per hour on the labor which is a wonderful thing to see. But that could have just as easily gone the other way, something could have slowed down the process and his price per hour could have plummeted.
The other issue would be, he had a good run as he stated. Things were in the groove. So he gives the customer a discount. Next year they want the same price, so he gives it to him, and an issue occurs that slows things down even further. Now his price per hour is even lower than he had hoped for.
My feeling is, a price was agreed on. The customer was happy with the product that was given. That should always be the goal.
If someone finds a way to speed up the process, that is good news for his profits. Profit isn't a dirty word, it is the reason to be in business.
But I think a good way to go out of business is to always worry about "only" charging a small margin over your costs.
- Noel
From: Engravin' Dave (DATAKES) [#11]
16 Apr 2005
To: Doug (JDOUG5170) [#7] 16 Apr 2005
Doug,
This is a good discussion, I appreciate you bringing up a worthy subject.
You are correct in that I should have figured in some material markup into my profit figure, but I wanted to show the gross profit figure.
I feel we all need to know what our minimum hourly wage needs to be. I know for me it is a $70 per hour "minimum". Do we go through life striving for a "minimum" goal? I don't!
In my heart I feel we deserve the same wage as many other professionals. The market doesn't allow that to happen in all cases.
I offer quality products and/or services for a competitive price which sometimes results in an excellent profit. If I am charging an unacceptable price, the bottom line of my income statement will indicate that loud and clear.
EDITED: 16 Apr 2005 by DATAKES
From: Engravin' Dave (DATAKES) [#12]
16 Apr 2005
To: Noel (NOELF) [#10] 16 Apr 2005
Noel,
To add to your comments, my price on this job has always been in line with the competition, so we all must be gouging.
From: Doug (JDOUG5170) [#13]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#11] 16 Apr 2005
David...
You are right..you should have showed a markup for the materials used...my fear is that a newbie would look at your post and decide that he should be able to make $220 per hour, take a job with $1700 material cost and 2 hours to make it up...and he will actually lose money at this point....
We all establish our methods of pricing out our products, our overheads will vary a great deal across the country.
We must establish a hourly rate based on our respective overhead and whatever wage we wish to establish for our labors...and a value should be based on our knowledge of where to source a product, the time to bring it in, the freight costs, packaging, returns of defective....you know the drill.
To take this in another direction cuz we don't disagree on the issue...just have different ways of viewing it....how much effort do you put into purchasing American made product for whatever it is you're making....I would think that at least on this job...you had the margins to pay a little more for supporting American made product...
Doug
From: Doug (JDOUG5170) [#14]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#11] 16 Apr 2005
You have made me curious now....
You say that $70 per hour is your minimum hourly wage....do you mean to say this is just your straight labor charge, that it does not include any of your overhead charges such as rent, insurance.....
If so...let it be known that as of today...I'm closing my shop and becoming an engraver since the over 80 grand of equipment investment I have,the over 25 years in the field are certainly not returning me $70 a hour wage....
Now...as a newbie...how do I engrave, and what equipment to you recommend I begin with....I need to fast track this so I thought I'd ask you experts rather than learn it the way ya'll did! <GRIN>
Doug
From: Engravin' Dave (DATAKES) [#15]
16 Apr 2005
To: Doug (JDOUG5170) [#13] 16 Apr 2005
Doug,
Buying domestic products is becoming less of an option for U.S. citizens every day. I know you are one supplier that is keeping our hopes alive.
On the project described above, I purchase from a U.S. company who originally manufactured the product domestically. The past two years they have come with "Made in China" stickers on the bottom. I questioned my supplier on this issue last year when they raised their unit price a couple bucks but began outsourcing the manufacturing. With no hesitation, they said no one can remain competitive in today's market without outsourcing overseas.
I have a 2" x 12" jade glass nameplate that I sell a great deal of throughout the year. My inventory was getting low so I got a couple quotes from the domestic suppliers I used in the past. Their pricing seemed to be increasing a bit aggressively, so I did a little exploring into the importing process. To make a long story short, I have a quote from a reputable manufacturer in China that can produce this same piece for $4, plus it will be in K9 optical crystal as opposed to jade glass. My best domestically produced price for a jade glass piece was $15 per unit on a quantity of 200. I know there are shipping costs and duties to pay, but it makes the decision to keep things domestic very difficult.
EDITED: 16 Apr 2005 by DATAKES
From: Engravin' Dave (DATAKES) [#16]
16 Apr 2005
To: Doug (JDOUG5170) [#14] 16 Apr 2005
Doug,
I really need to critique my terminology. What I should have said is that I have a $70 per hour charge, not wage. That amount is intended cover my overhead and salary.
From: Doug (JDOUG5170) [#17]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#15] 16 Apr 2005
I hear ya David...I don't know that we are not so far gone in our importation role in the world that we will ever recover from it....until of course...the tide changes and the import product is costing more than it could be made state side...unfortunately by then, the production equip and knowledge will be gone.
I fear for this country and our children (grandchildren). So few are being trained in the trades, know how to make anything. And now with so many computer related jobs going offshore, what are these young folks going to do to make a living??
I do believe that we are all responsible to make whatever difference we can, even if just one item out of 10 today...maybe tomorrow it can be 2 out of 10 and so on and so on!
Sometimes it is OK to put what is right before profits...especially if one is making $220 per hour (I would think).
Of course, now that I'm an engraver (I did spell that right, right?), I can change my song and dance and think more about how to bank the green!
Doug
From: Engravin' Dave (DATAKES) [#18]
16 Apr 2005
To: Doug (JDOUG5170) [#17] 16 Apr 2005
Doug,
Welcome aboard!
I might be interested in a used dust collector if you have one for sale now. :-)
From: Doug (JDOUG5170) [#19]
16 Apr 2005
To: Engravin' Dave (DATAKES) [#18] 16 Apr 2005
Used dust collection...where were you about two months ago...I finally got rid of the last 3 that I had available....had something like 10- four baggers avail at one time. I have gone to one 25hp central unit now....
Doug
From: Engravin' Dave (DATAKES) [#20]
16 Apr 2005
To: Doug (JDOUG5170) [#19] 16 Apr 2005
Doug,
Too little, too late.
Your new setup sounds great, I bet your loving it.
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