The 2006 edition of the Greenhouse Alert

Erik Runkle
Horticulture

Welcome to the sixth year of the Greenhouse Alert e-newsletter from the Ornamental Area of Expertise (AoE) Team at Michigan State University. Faculty and district Extension educators with floriculture expertise will post short articles every second and fourth week of the month until mid-May. These articles focus on cultural practices and pest management strategies for growing greenhouse crops. Previous issues can be accessed via the Internet at: http://www.ipm.msu.edu/greenhouseAlert.htm

Special edition on energy

In case you missed it, in late October we released a special edition of the Greenhouse Alert on greenhouse energy. That issue contains seven articles discussing temperature effects on greenhouse crops and pests, implications on energy consumption, and energy-saving tips. Visit that issue at http://www.ipm.msu.edu/grnhouse05/G10-11-05.htm

Send up topics

We welcome your participation by sending us suggestions for article topics. Please send your comments by email to: catalert@msu.edu. For more information on other floriculture programs and services coordinated by the MSU floriculture group, and for contact information, visit: http://www.hrt.msu.edu/florAoE/

Pricing greenhouse crops

Bridget Behe
Horticulture

Pricing issues become more important as costs creep up and margins decline. How do you know how to price products to maintain some profitability? In addition to realistically calculating your costs of production, two pricing concepts can help you achieve your profit goals. Understand what signpost or benchmark products are (and how they are priced) and know what number prices should end with.

Signpost products are those items that consumers use as reference points or benchmarks. For example, most of us know to the penny what a gallon of gasoline costs, so we know where we can get a good deal. In the supermarket, a signpost item may be a gallon of milk or a loaf of bread. If these items are priced high relative to our perception of what they should be, we assume that other prices are high. If these signpost items are priced low compared to what we think they should be, we assume other products may be lower priced as well.

What are signpost or benchmark prices for your wholesale or retail business? They are the products that people use to price compare. If you get a lot of telephone calls about the price of your flats or four-inch material, you know right away these are signpost items. Your signpost items should be priced competitively but be very aware of the signal that price sends to your customers. If you are too high on signpost items, they will assume you are high on other items as well.

If you want out of the price wars, don’t grow or merchandise signpost items. One way to differentiate your products is to put them in larger or smaller container sizes so that consumer’s can’t call and make price comparisons. If that isn’t an option, also be aware that an increase of 10% in price may cause more than a 10% decrease in units sold. There may also be some carry-over to a loss of sales in other non-signpost items.

What should prices end with? Research shows that prices that end in 9 are considered less expensive than prices that end in 0 or 5. Key price points under $5 are $0.50 increments. If you want to raise the price of an item from $3.49 go to $3.99 right away. Consumers will probably buy as many units at $3.79 as $3.99 because there isn’t a $0.50 increment to make them psychologically see the increase. Not every consumer will react this way, but the research shows that most will. For prices above $10, use $1 increments. If you need to raise the price of something from $17.99 it is as easy to go to $18.99 as it is to $18.49. For prices above $20, use $5 increments.

Greenhouse Energy web site

Erik Runkle
Horticulture

One of the topics on every greenhouse grower’s mind is the staggering increase in the cost of energy to heat greenhouses. Growers are responding by changing their growing strategies, such as growing their crops cooler, starting production later, or using larger plug sizes so that time in the finish container is reduced. Some growers are interested in alternative sources of energy, such as harnessing the power of wind, anaerobic digestion, and burning biofuels such as wood or corn.

We have developed a web site that contains some of the best information on greenhouse energy. This web site includes two presentations delivered at the Michigan Greenhouse Growers Expo in November 2005 that discuss alternative fuels, energy efficiency, and alternative energy funding resources for greenhouses. Links are provided to web sites that discuss greenhouse energy conservation tips developed by experts in the Midwest and Northeastern United States. In addition, we have listed resources (books and meetings) for more information. Visit our Greenhouse Energy web site at: http://www.hrt.msu.edu/floraoe/GreenhouseEnergy.htm.