May 28, 2024

When it comes to creating a profitable balloon business, whether retail or ecommerce, pricing is a major component. I’ve created a list of important points for you to consider when creating your pricing strategy. 

Before I begin, I want to explain some terms:

Cost – what you have going into the product or service you sell.  Costs include material or product costs and the direct labor involved in making and/or selling that item.  You should know the cost of everything you sell in your business.  

Price – what the customer pays.  Price will not only cover the cost, but should also cover a portion of your overhead and profit.  

Overhead – the fixed costs in your business that you have to pay regardless if you sell anything.  Rent, utilities, insurance, subscriptions are examples.  Your salary as an owner might be Overhead, or it might fall under Cost if you are the sole or main person working in your business.

Profit – what’s left over after you cover your costs and overhead.  This can be tricky to calculate per item, but it can be done.  Typically one looks at profit on a monthly, quarterly or annual basis.  Profit is an important number to track, and one that shouldn’t produce shame.  Profits are not bad, especially for the small business owner who is investing money and time into their business.  Profit is your return on your investment into the business.  Still feeling uneasy?  Then think of Profit as the pocket where your bonus for doing a great job comes from.  The more profit you make, the bigger the bonus checks can be to not only yourself but to your employees if you choose.  

Still not feeling good about it?  Think about the fringe benefits at a corporate job like a 401(k) or other retirement provided.  Think of your profit as your contribution to your retirement. 

Margin – the difference between Price and Cost.  If a product costs you $5 and you sell it for $10, the margin is $5.  If you sell it for $15 – a 33% increase in price, your margin goes up 50% to $10.  I found thinking in terms of margin instead of sales or revenue made me more profitable.  A high margin is where the cost is low and the price is high.  If you buy or make a thing for $1 and sell it for $10, that is a very high margin.  If you buy or make a thing for $8 and sell it for $10, that is a very low margin.  You want high margin, as long as the value is there for the customer.


Now that we are talking the same language, let’s jump into the tips.

  1. Different Pricing Models Attract Different Customers

Balloon artists understand that there’s no “one size fits all” when it comes to balloon décor or deliveries. The same thing is true when it comes to pricing: Different pricing models appeal to different customers.  Strategic use of pricing can both attract and repel customers, so understanding how pricing works is an essential skill.

Let’s jump right in and talk about the pricing strategy that often evokes a visceral response in balloon artists -the discount model.  Basically,I am talking about any pricing strategy based on drawing customers in by lowering the price in some way.  It’s a valid strategy, but is it right for you?  Let’s take a look.

Discounts are often used to draw in new customers by offering a % off for first time purchases.  Basically, letting them sample your products or services at a reduced price.  It works – I see it used across many industries.  If you offer balloon deliveries, maybe you offer free delivery for the first purchase.  

Another way to use a discount may be to offer free delivery within a 5 mile service area to encourage local customers, but continue charging for deliveries farther out.  

It may be the customers you want are seeking to get something free, and offering free delivery or a small gift with their order is enough for them to choose you over your competition.  If you’re struggling with the idea of giving something away for free, consider items that have a high margin, or the free gift applies after the customer reaches a spending threshold.  Spend $100 and get a free microfoil message balloon.  Spend $250 and get free delivery within x miles, for example.  Whatever your “free” offer is, make sure you are still making money.

In my experience, a discount generally attracts people who are more price conscious.  Higher prices tend to attract a more affluent client who associates high prices with better quality.  These are tendencies and not hard and fast rules.  I have found that people shopping at lower price points tend to buy more often, hence the “I’ll make it up in volume” justification for pricing aggressively. 

Also understand by pricing with discounts, there are people out there who will only shop discounts and sales.  Don’t believe me?  I have well to do friends that take great pride in getting the best deal for groceries, driving to 3 or 4 different supermarkets to get the best price on eggs or bread.  While I admire being wise with one’s money, are they considering the cost of gas and their time?  I don’t think so.  The point here is, once you drop that discount, they are likely to go somewhere else unless they are completely sold on what you are offering and are willing to pay for consistent quality and excellent customer service.  Not everyone values those things.

At the other extreme is pricing really high.  Being at the top of your market.  Not everyone purchases the cheapest house, car, or clothes available.  Many think price is the driving factor, I argue that it isn’t price, but value, and more specifically perceived value..  If someone is going to pay $500 for a double door spiral arch, what makes your arch better than the startup 5 miles away selling basically the same thing for half that price?  How about showing up on time, being professional and prompt and clear in all communications?  Offering more than PayPal as a payment method?  Can you set the arch up in 5 minutes, or are you inflating and building on site, taking an hour or more?  Do you know how outdoor conditions affect balloons and framing? Do you offer 10 colors, 50 colors, unlimited balloon colors? Do you offer upgrades?   All of these factors can and should affect what you charge, as they all affect the quality of not only the purchase but the overall experience.

Be sure to track which method generates the results you want.  I often hear increased revenue as a desired result.  I encourage you to consider instead, or also, your profit margin.  If you simply want higher revenue, simply lower your prices.  You’ll get a lot more sales, but your margins will be lower.  In other words, if you buy a product for $50 and sell it for $150, your margin is $100 per unit.  That $100 goes towards rent, insurance, utilities, and paying you and your staff.  You can lower your price to $100 and sell a lot more, but the margin on each one is now only $50.  By lowering your price by a third, you now have to sell twice as many units to have the same margin as when you were selling the same item for $150.

Next time you shop, pay attention to what draws you.  Is it solely price? Are you looking to buy the cheapest jeans, car, house, food?  Or are you looking to buy the best quality you can afford?  How are you determining quality? By price?  Popularity? Google reviews? Habit?  Pause a moment and think about why you choose to pay what you pay for the products you purchase.  

  1. Use Psychological Pricing to Increase Sales

Psychological pricing is the practice of ending a price with an odd number, most often the number “9”. Also known as charm pricing, it has been an industry standard for decades. Why? Because it works. Study after study has shown that such prices create more sales.  Think of Walmart and how their prices end in .97.  They have discovered that ending in 7 is consistently more effective than ending in a 9.  I even see this strategy used within the balloon industry with memberships and courses.  Why $97 a month instead of $99 or an even $100?  Is saving $2 or $3 going to cause one to take action?  Apparently it does.

At the other end of this spectrum is pricing for the higher perceived value, or the more distinguished or selective customer.  If a customer is looking for high quality, round pricing tends to work better.  Maybe the perception amongst the affluent is that pennies don’t matter.  I had a friend tell me once, “if it ain’t folding money it ain’t holding money.”   So if your brand is based on being the highest quality balloon company in your area, consider using round pricing. Depending on what you are selling, rounding to the nearest $10 or $100 will affect how customers perceive what you offer.  Think of the most expensive restaurants in your area.  The prices are listed simply – 185.  Not $184.  Not $183.99.  Compare that to Walmart’s pricing strategy where everything ends in .97.  $19.97, $12.97, and so on.

In my opinion, the epitome of psychological pricing happens at the gas pump.  For decades, gas has had a displayed price of $x.xx and 9/10.  Why price gas at $4.25 and 9/10ths of a cent?  Why not call it $4.26?  It’s one tenth of a penny difference.  Has that pricing strategy stood the test of time because it is effective? I tend to think not. I think it’s more habit at this point.  Gas station owners will tell you $4.25 9/10 is seen as $4.25 and not $4.26, and that the  penny matters.  People will go down the street to save a penny a gallon.  But, do keep in mind that most people rely on gas to get around so it’s a necessity, and there is a LOT of competition.  I’ve seen the price differ as much as $.76 per gallon within a mile.  Some spend more because they don’t care, it’s convenient. Some think the expensive gas is better for their vehicle. Some get rewards at a supermarket or credit card.  What other reasons can you think of why someone would spend that much extra for fuel, when there are so many other choices nearby that are considerably cheaper?

Now that you are aware of psychological pricing, you’ll notice it when you shop.  How does it make you feel about the value of the product?  Do you feel more or less inclined to purchase a product ending in 9, or 5, or 7?  Does it change how you perceive the value?

  1. Less is More when Communicating Prices

When you’re expressing prices to your customers, either in writing or verbally, less can be more. It’s more palatable to a customer to read $49 than $49.99. Also, the “.99” at the end of a price tends to communicate a lower value when a customer sees it in writing.

There’s another concept here as well: When quoting prices over the phone to a customer, which sounds better? “One-hundred-and-forty-nine-dollars-and-ninety-nine-cents” or “One-forty-nine-ninety-nine”? The fewer syllables, the easier it is for customers to process.  How about just saying “One fifty”?  To me, that seems clearer, and if considering multiple items, it’s easier for me to do math in my head so I can keep ordering until I hit my budget.  But maybe that’s just me.  If you’re texting or emailing, many of us now use voice to text apps.  By saying “that will cost one hundred and fifty dollars” the app has a higher likelihood of getting it right.  If you say “that will cost One forty nine ninety nine”, what will the app type out?  149 99? 

I think it’s important to understand our industry is not necessary.  Please don’t be offended!  What I mean is, it’s not healthcare, or food, or fuel or housing. It’s a feel-good purchase.  It’s a “let’s make happy memories”, and “I am thinking about you” purchase.  It’s a “we are celebrating something” big purchase.  Keeping that in mind, the focus shouldn’t be on counting pennies, but on the effect or results of the purchase.  Which will increase value. 

One sure way to move the focus away from price is to talk about the emotional effect of the balloons.  Instead of saying, “the backdrop is $800, the entrance arch is $500 and the cake table garland is $300, for a total of $1600 plus tax and delivery”, you could paint the picture a bit and say, “The entrance arch will guide guests to the back yard where they will easily spot the backdrop for taking Insta-worthy pictures, and the garland over the cake table will let everyone know where to gather when it’s time to sing happy birthday. All this delivered and set up, and taken down for only $1900 plus tax.  Sounds like it’s going to be a fun party!”   Instead of commoditizing the balloon decor and helping the customer be able to shop around for better pricing, you’ve created a scene in their mind, and validated their choice to use balloons.  They do make parties more fun!  And, you’ve removed the hassle factor for the client. What is the price for that?

  1. Let Your Customers Spend More

Sure, there are lots of customers who are focused on price, but there are also plenty of customers who want to spend more on something that they consider high quality, or they are going for the big, impressive party. Maybe the event is highly emotional and they want to “do it right”.  So give them that opportunity.

Many people prefer to pay more for something because to them, a higher price means a better value or higher quality, or better customer service.. In fact, there are customers that will seek out the higher-priced option and go to that shop, thinking that their experience will be much better for no other reason than it’s pricier.  Yes, I haven’t lost sight that we are still talking about balloon decorations.  But that’s not the point here. The point is what the customer thinks, what they percieve as “better”.

Don’t lose those customers! Always offer more expensive options in your shop, and show them to every customer. Maybe they won’t purchase the most expensive option, but you’ll have shown them that your items are high quality—making the item they eventually purchase an even greater value to them.  When they see that your balloon garlands average $750 and you have options that are only $500, that’s a great deal at your prestigious store.  

If you listen carefully to why they want the balloon decor and understand what the party is for, you can tune into their emotions and help them fulfill their dreams.  Let’s be clear – I am not suggesting you manipulate or milk them on their emotions, that is not a sustainable business practice, nor is it kind.  I am simply talking about learning and caring enough about their event to make sure you are doing your best to meet or exceed their expectations. And properly charging them, of course.

Your competition may offer garlands starting at $250 or even less, and that’s ok!  Your job is to provide a much better experience to the customer, worthy of double or triple the prices down the street.  How do you do that?  Simply greeting people who come into your store with a smile, or smile before answering the phone.  Do you mostly do business via text, messenger or email?  Then answer promptly.  Use the auto-responder (in a friendly, conversational tone) to get the conversation started.  If you are too busy to respond quickly, it may be time to hire a phone answering service to answer basic questions and to get the quote process started.  

It may help to reframe your customer service policies.  Think of how a concierge works, how they take care of customers’ needs and desires with as little fuss and with as few words as possible.  Can you do that?  Visit a swanky hotel and loiter long enough to see how guests are interacted with.  Customer service is the #1 thing you are fully in control of, that can make or break your business, and can justify the highest prices in your area.  Be the problem solver, figure out how to deliver what the client needs, solve last minute problems as best you can, and make their experience smooth and easy.  That’s what they are paying for; not just balloons.

Be careful to not make the mistake of simply raising prices to give the appearance of higher quality.  What you offer should at least match the level of quality you’re communicating through your pricing strategy.  Otherwise, you risk ruining your reputation.

  1. Know Your Value to Customers

Understanding how customers value different attributes of your products can increase your profits. Is there something you offer in your balloon shop that makes you unique? Is it something you can charge for?  In marketing, it is known as the USP – the Unique Selling Proposition.  It is what sets you apart from your competition.

For example, you may have a well-known designer (Insta famous maybe?)  in your shop, or one who’s been featured in local media? Your customers may pay more for designs created by that designer. Or perhaps you offer customization, rentals, or maybe you’re a full service event company and your competition simply can’t offer everything you do.  Or, maybe at the other end of the spectrum, you do one thing, say balloon arches, and you are The Best bar none in your city or region.  If someone wants a balloon arch, there is nowhere else to go but to you.  Guaranteed on-time installation, balloon longevity, timely strike and cleanup, every color imaginable. Think about places you shop, especially for certain items.  I do the bulk of my grocery shopping at Costco, but there are certain things I will purchase elsewhere.  Why?  Habit? Perceived better quality?  Costco doesn’t carry it?  Yes.  At the same time, I have switched brands out of convenience too, choosing to get it at Costco.  It all depends on the item.  

  1. Battle Price-Sensitivity

“Price-sensitivity” is the degree to which pricing affects purchasing behavior. There’s the highly price-sensitive customer who’s motivated almost entirely by price, such as the bargain-hunter like my friend I mentioned earlier who drives around to several grocery stores to save on eggs or bread. Then there’s the less price-sensitive customer who may be purchasing products for emotional reasons, or who wants a higher quality product, or as another friend often tells me, “I don’t have time to find the cheapest price, I just need to get the shopping done!”.

It’s important to know the difference between these customers and to tailor your offerings to different types of shoppers. It’s also important to do things in your business that make people less sensitive to price and more willing to spend money on your product.  A couple of gentle questions will reveal what kind of customer you have, and allow you to best meet their needs.

One way to stand out is to offer something unique. Customers perceive this as higher value. Taking your own product photos and showing variations of the basic balloon design, or embellishments that are upgrades, can set you apart from all the other artists using generic photos and descriptions on their websites.  

Another strategy is to have unique names for your designs. Think about how often you do a Google image search for “balloon garland” and see thousands of pictures?  If you named your balloon garlands “balloon festoons” (look up the word festoon), when customers Google that phrase to see what other balloon artists in your area charge for them, they’ll come up with nothing, or at most very few options in which to compare prices.  

There’s also something called the “sunk cost effect”, where the price of a component of your offer is low relative to the total cost. Adding a cost to your enclosure card or adding a delivery charge at the end of the order process are examples of this: Customers don’t mind paying that little bit extra because they’ve already sunk enough time and money into placing the order.   It’s an easy way to sell add-ons. 

  1. Use Anchoring to Increase Value

“Anchoring” refers to the psychological bias that happens when a person relies too heavily on on the first piece of information (the “anchor”) when making decisions. Because it’s hard to really understand the value of most things, we tend to assign a lot of importance to the first piece of information we get and base all subsequent decisions on that. Think of the price tag on a sale item that shows both the regular price and the sale price: The regular price acts as the anchor, which makes the sale price more attractive.

Another way to look at it is to think of the center of a wheel and the spokes radiating out.  The center of the wheel is the anchor.  The spokes are all the other bits of information.  Unlike a spider web where the connections are from the center radiating out as well as laterally, the wheel and spoke analogy keeps the comparisions going back to the first piece of information.

How this may apply to a balloon sale.  If the customer calls and asks, “how much are your balloon garlands”, and you typically sell them for $350 to $650, everything else you talk about will be compared to those price points.  If you start asking questions and it turns out they are having a gala event, and you ballpark other decor at $1000, $2500 or more, many people will keep the $350 to $650 in the back of their minds as the starting point, the basis for valuing everything else.  So how to answer a pricing question?  I would say, “we have garlands in all price ranges. Can you tell me a bit about your event so I can narrow down options that best fit your event?”   Now, whether the event is a simple birthday party for $250 or a grand gala for $25,000 you can easily talk prices without having an anchor biasing the customer.

High prices can also act as an anchor, by making lower prices look more appealing. sticking with the garland example, you can start with the most expensive version of garland you have, with lush add-ons tucked into it for $xxxx.  Follow that with, “do you need to hear other options in other price points?”  Then customers will see the lower-priced offerings and consider them a great value for the price.  I always let the customer know there are other designs and options at other price points.  

One important point here is to avoid asking a customer how much they want to spend or what their budget is. As soon as the customer says the price, the anchor has been set and will be hard to change.

  1. Compete to be the Most Expensive

There’s a lot of price competition out there, with companies vying to outdo each other on who has the lowest price. Here’s another option: Compete to have the highest price in your area. Prices send a strong message about the perceived quality of your product and services, as I have mentioned before. In fact, price is the single most powerful indicator of quality.

Some really interesting studies on pricing versus quality have shown this to be the case. In a series of studies with wine, testers have been shown to give lower quality wines higher ratings if told they’re expensive, and higher quality wines lower ratings when told they’re inexpensive.

Add a few higher-priced offerings in your shop and promote them. This provides an anchoring effect, as you read earlier, plus it gives customers the opportunity to spend more if they wish to. They also provide clear evidence that you’re indeed the best at what you do!

  1. Inexpensive Doesn’t Have to Mean Low-Margin

One of your goals should be to have a product for almost every customer, from the price-sensitive to the quality-obsessed. Of course, you need to have inexpensive products, but don’t assume that means lower margins.  How do you do that?  I’m sure you have designs that have lower labor costs.  Classic balloon decor often fits this as all the balloons are quickly sized the same with the correct equipment.  Less thinking involved, oftentimes fixed patterns are chosen.  With organic decor, balloon sizing and how the colors stack or blend together can be time consuming.   Did you know when the organic balloon decor trend first started, it was so time consuming the rule of thumb was to price it out at triple the balloons and triple the labor of classic decor?  How quickly did the price drop once the market became saturated.  Keep your labor costs in mind when pricing out your decor.  It is often a hidden cost, lowering the true margin of your offerings.

It’s important to realize that price-sensitive customers are focused on the bottom-line price, not on value. They’re looking for something cheap, but this doesn’t mean you have to offer them something that eats away at your profit margin.

Here’s an example of how to build good margins into your least expensive products: Single red balloons on Valentine’s Day. Say you offer a dozen balloons at $85, and a customer thinks that’s too expensive. How about offering a single balloon at $10? The customer will be happy with the lower price, and you’ll have increased your margin considerably.

I hope these tips help you change your thinking about pricing, value, and how customers think about both.  As I have learned being in business nearly 3 decades, there is no one-size-fits-all answer.  Everything is on a spectrum.  The key is being open to really hearing what the customer wants, what they find important or valuable, and you being flexible and adaptable to meet or exceed their expectations..  

Rachel Porter is the director of BizBrain, a team that accelerates business growth through coaching and business strategy consulting.

Frequently Asked Questions

How do you price balloon work?
Pricing balloon work involves considering several factors, including the cost of materials, direct labor, overhead expenses, and desired profit margin. It’s crucial to understand the difference between cost (what goes into creating the product or service) and price (what the customer pays). Remember to account for fixed costs like rent, utilities, and insurance, which fall under overhead. Finally, consider the perceived value of your offerings and the pricing strategies that resonate with your target market.
What is the profit margin for a balloon business?
The profit margin for a balloon business varies but can be determined by subtracting the cost of goods sold (including materials and direct labor) from the selling price. For example, if a product costs you $5 and you sell it for $10, the margin is $5. The actual percentage margin is calculated by dividing this difference by the selling price. It’s essential to track profit margins regularly to ensure business sustainability and growth. Keep in mind that aiming for higher margins by providing more value can be more profitable in the long run.
How do I make my balloon business successful?
To ensure your balloon business thrives, firstly establish a clear pricing strategy and couple it with standout designs. Moreover, emphasize stellar customer service, which not only boosts immediate sales but also fosters word-of-mouth recommendations. And employ smart pricing techniques to subtly influence purchases. As you navigate the business, stay adaptive to market shifts. Furthermore, contemplate diversifying with ventures like courses. Above all, consistently prioritize profitability while never compromising on delivering genuine value to your customers.