How meal kit company Finish & Feast prices its productsApr 27, 2022
Co-founder Ross McPhail explains how he figured out how much to charge for his products.
Finish & Feast launched in December 2020, and the big idea was to sell meal kits featuring a three-course, chef-designed menu, where customers could simply finish off the cooking at home.
“When we were designing our first menus, we had no cash,” says Ross. “So it was essential that we broke even on the first kits.”
The first kits were priced at around £80 a menu, and Ross says he followed the advice most founders do, and looked at all of his costs to make sure the price would at least cover those. As a company that straddles both the restaurant and e-commerce worlds, this meant accounting for everything from food and labour costs to Shopify fees and packaging. “The last thing I did was set a price to make sure I broke even,” he says.
When Finish & Feast later started letting customers build their own menus by mixing and matching individual chef-designed dishes, Ross says he applied the same approach to each individual dish. “When we go through a new menu development cycle, we take a lot of time to really understand what the margins are on each dish so there are no surprises later on,” he explains.
Price as you grow
Last year, Finish & Feast raised a £520,000 round of investment that has given it freedom to further experiment with pricing, Ross says. Now the company has been around for a while, it also has more data that it can use to inform its pricing strategy.
“We started off with the mindset that we had to make money on every single dish,” says Ross, explaining that every single item was expected to be as profitable as the other. Over time, Finish & Feast has taken a more flexible approach, setting an average profit margin target for each meal kit (which is made up of multiple dishes).
The benefit of doing this is that it allows Finish & Feast to offer better value to customers without having to lower prices, with dishes that have a bigger profit margin making up for those that are less profitable.
This approach requires careful monitoring, though. “You really want to avoid ingredients that cost more than customers expect,” explains Ross. “If I put a lobster on the menu, or a prime bit of beef, customers expect to pay a lot for that. But something like brill, a wild fish where the price can move massively, people expect it to be the same as cod. And then you’ve got a choice. Either you charge more, and the customer doesn’t feel they’re getting value for money, or you take the hit.”
To discount, or not to discount?
Ross has also been experimenting with discounting to get customers on board, with the idea that not making as much money on a first sale will be worth it if it results in a repeat customer.
Using repeat order rates and other data, Ross can extrapolate the average lifetime value of a potential customer. For example, if you know that your customers spend, on average, £90 per order, and that once they’re on board they typically order once per month, you can then figure out how much of your profit margin on that first sale (or maybe even the first few) you are willing to sacrifice to bring that customer on long-term. “If that customer has a good experience and comes back, then you’re making quite a bit of money post marketing spend.”
When doing this, Ross has two rules of thumb. First, Finish & Feast doesn’t like to offer percentage discounts — which could put customers off paying full price in future. Instead, it prefers to throw in extras such as a free bottled cocktail or charcuterie board.
Second, and perhaps most importantly, it still makes sure that the kits are still at least breaking even after marketing spend.
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