Have you been following my previous article where I shared the 3 steps to start your home chef journey? In this post, I will be going through another topic on strategies to set prices for the food you want to sell (STEP4). If you miss PART1 of my post, not to worry, you can go through any part first without precedence.
Pricing Strategy
Pricing right is one of the most important pillars for success.
I’m sure all of you have noticed meal prices can vary significantly especially in Singapore where we have a vast variety of food from hawkers, food courts to café and fine-dining restaurants.
While you can fill your stomach with just $3 when you patronize hawker stalls, you can also spend $100 on a meal in a fine dining restaurant.
Your pricing strategy will determine the type of customers you intend to attract.
The first factor in deciding how to price your food is to do some research on the number of competitors selling the same food and who are your target customers.
In general, customers can be divided into 2 categories, price-sensitive customers and value-oriented customers.
The price-sensitive customers expect low prices for the food. They have lower expectations of the quality of food as long as it fills their stomach. Therefore, if you are selling a commodity like chicken rice that has high competition, you may be competing with your competitors in terms of the price by giving discount or lowering your price is one of the strategies.
On the other hand, the value-oriented customers are more concerned with the taste, presentation and prefer premium ingredients. You can command a higher price and customers who buy from you are likely fond or have strong cravings for the taste of your food.
While there is no right and wrong strategy, as a beginner home chef, I would recommend starting from a low to medium price range and as your culinary skills refined or if you are a seasoned chef and you are confident of public acceptance of your food, you should price your food in the range of medium to high.
Over the years, as the standard of living increases, the demand for higher quality food has increased in tandem. Hence, my personal preference is not to compete in price because your customers may leave you for cheaper food available and if you get into a price war, it will be a lose-lose situation where you will need to cut your profit to gain customers.
I would prefer the strategy of slightly more premium price range by offering matching value which I can deliver in terms of taste, presentation, consistency and quality to my customers so they will repeatedly come back to me.
However, to get into this price range, one more consideration is your food must be niche and sought after or you must already have a lot of reviews and recognitions otherwise you will not be able to attract new customers.
In other words, just like mastering any other skills, culinary is an art that requires hard work, patience and time to build and refine. Your price range should be adjusted up as your work of art is refined and like the food you prepared gain positive reviews and validation from your customers.
Ingredient cost
The pricing of your food also has a significant correlation with the cost of ingredients.
Below is a breakdown of monthly components for the hawker stall. The cost of ingredients is by far the most significant cost for hawker stalls.
It is therefore important to understand how to calculate the cost of the food you are going to sell.
An example here is Garlic Scallops Pasta. In this example, I am using ingredients bought from NTUC Fairprice supermarket. In order to reduce cost and increase profit, it is important to scout for cheaper sources or buy ingredients in bulk.
In this example, the cost of ingredients is 40% of the sales price. My recommendation is to have a minimum 25% net profit for a sustainable business. By doing this calculation below, you can calculate what is a feasible sales price for the food that you are selling. Then you can cross-check and see if your price is similar to restaurants, hawkers and food courts.
In a separate post, I will be writing an explanation of the calculation and the ingredients used in this calculation. At the same time I will be sharing a list of over 40 suppliers for raw ingredients in Singapore that you can buy from directly.
Do Like our page to follow us and I will keep you updated when the next blog on cost calculator is released.
General and average price for the dish
Another consideration is to do some research on what is the average price for the dish in your area. The most basic chicken rice for example is sold between $2 to $5.
Singapore is food heaven, almost all food around the world can be found here. You can do some research to find out how much are others selling similar food and this is a good guide for you to start.
You can work backwards and calculate your ingredient cost to see if the sales price for your dish make sense.
Summary
To summarize, if this is the start of your journey as a home chef and you do not have much public validation for your food, I would recommend a pricing strategy within the economy and medium range.
To be sustainable even if you are doing this for a passion, we recommend a minimum 25% profit margin. Pricing is an art, please do your own judgement on what is a reasonable price that is acceptable to people as the food that you plan to sell may be unique.
Thanks for reading as always. We welcome your input, suggestions or comments below. Let me know if the considerations in this blog are beneficial for planning your home chef business and you would like to know more about a specific meal or dish that you are planning to sell.
You can contact us at whatsapps for discussion. Whatever your strategy is, hommyliciouz is in this journey with you and will help you market your food for success.
About Author
I grew up with my grandma and one of my favourite times when I was young was in the early morning. I could get out of the house with my grandma patronizing the wet market. She would buy fresh ingredients which she would cook for the day. Her love for her family is poured into the food she prepared daily and can be felt by every generation she cooked for. Now with my own kids, I hope they can grow up being able to enjoy healthy home cook food too. As much as I enjoy cooking for my family, I find it a difficult juggle between my 9 to 5 job and preparing meals for my family. At the same time, at the weekend, I could spend more time cooking and I wish I can share my speciality for other people to enjoy.
I knew that in this digital world that we lived in, there has to be a better way and that’s the motivation for me to start Hommyliciouz.
The objective behind Hommyliciouz is to create a connection among people within communities where the passionate chef could provide fresh, home cook meals that are healthy and affordable.
We truly hope that you can enjoy this platform sharing love through cooking.
CEO of Hommyliciouz
Here are some of the articles that you may be interested in:
