Wednesday, May 12, 2010

Value Pricing for the Designer/Maker - something else to whine about on Wednesday

As makers we typically underprice ourselves. Several factors have converged on me lately that have forced me to relook at my pricing.

I did my taxes- ugh!

My online retail prices are forcing me into lower wholesale price points than I can work with as the wholesale percentage of my business grows.

And, I read an article about my work that said I "simply solder" a little eyehook to a car part with a soldering iron and visit a hardware store.

Now the writer of that article was talking about ingenuity and simplicity in form and function and meant no disrepect to me or my work, but it did make me realize that my price points and my own language about my process (I have never used a soldering iron in my life) reflected a certain value to her.

(it is totally up to me as a maker working with recycled and lower cost materials to educate people about the process that goes into each piece and the design behind the piece that adds to that value)

as well as the fact that "simple" design leaves the maker with no place to hide imperfections and isn't usually anywhere near as "simple" as it appears

Pricing our work is a complicated part of this handmade journey and a process for most of us.

Mistakes I've made with my pricing:

1. I did not think about wholesale pricing when I set my retail prices.

2. I set my prices based on my own pocketbook (which was likely empty at the time; it usually is)

and 3. Because I am related to a talented artist and could not see myself in the same way- I didn't understand my own skill set.

Bottom line- I didn't see my own value. And, I didn't see the potential wholesale problems with my pricing.

The mistakes I made are all about my own mindset and I have been adjusting them over time ever since.

I would say to hubby- but I can make X amount in X amount of time and he would say, "right, because you have done this thousands of times, other people can't- your customer can't".

As you become better and better at what you do, you will usually get faster and more productive. Does the fact that you work faster mean that you should charge less? Where else do we expect to pay less for experience?

This is why you can't just calculate your actual production time (although you must know how long things take you to produce).

And what about all the time it takes to do the kind of things we need to do to grow our businesses- how do we calculate that time in, when it is often more time than the actual making?

Factoring in our direct costs (raw materials), indirect costs (taxes, overhead, fees, etc) and labor time for each piece (production, marketing, packing, shipping, etc) is a good place to start with our pricing.

And then we need to take a look at the more complex issue of value.

Pricing needs to take into account all these varied aspects.

What is the value of your work to the customer?

Maybe starting at the end zone is a good idea -

(and working through a pricing exercise)

the price my item would sell for in a retail store that my target customer would be shopping in.

Value will take into account what other items are selling for in the marketplace, the uniqueness and skill set of our work and materials and the fact that our work is handmade and designed.

(we need to factor in costs and labor time when pricing our handmade work and we need to think about value, too - what is the value to our customer?)

I recently asked a few boutique owners (that I do not wholesale with, but have my target customer) what my product would sell for in their shops. I would recommend this if you struggling with the value component of your productline.

I will likely need to reduce costs by 10-15% and increase prices by 10-20% to get to a place where I can focus on wholesale. I want to stay fair to my retail customers (by doing what I can to reduce costs and expenses), but learn to be fair to myself, too.

One easy fix - in my Polarity shop I have always charged less for my small lockets even though they cost me exactly the same amount and take me exactly the same amount of time to make as the regular size locket.

A customer buying a medium size shirt in a department store would not expect to pay more than someone buying a small shirt. It is me who has trained my customer to see this as the way it should be by the way I have set up my pricing. No one buys my smaller locket because it costs less- they just want a smaller locket.

(and I will also be changing the wording in my locket listings from "I solder" to I clean, drill, braze with a flame at 800 degrees, grind, paint, polish and seal - well, maybe not exactly that- I don't want to put anyone to sleep, but maybe something that reflects the actual nature of the work a little bit better)

*sigh*

16 comments:

zJayne said...

Well said, stated, shared and from a place where success and knowledge can be valued.

Pretty sure I've had this conversation in my head with myself time and time again. Odd to just stop by today and see this post.

Oh,
and,
you rock!

Unni Strand said...

So true... I have a job to do with my pricing too. But I almost don't know where to start. It is so complicated.

Jessica Doyle said...

I understand where you are coming from. It's a difficult balance to find at times. My sales numbers have gone down a bit since I put my prices to what they should no need to be but the dollar value of what i'm selling is up.

I hope that someday the numbers will increase to.

You do beautiful work and and are uber-talented Cat and never let anyone tell you differently.

xo

SillyLittleLady said...

Pricing has always been a very complex and this article brings out new things to think about and a new approach to the whole set up. I have always had a problem identifying the "value" of my products to others and asking a boutique who caters to my customer base is a fantastic idea!

Thank you!

info said...

As a finance professional and a woodworker I understand what you are saying. I was luck when I started I used a % for galleries and then figured out my retail price. I have my work sell at a gallery at the same price that I see them for at a art show. You do not want to sell your product for less than a gallery around the corner sell it for. this will make the gallery owner rightfully mad.
David
darbynwoods.etys.com

urbanartifaks said...

i've wrestled with that very same issue--why do we perceive working with reclaimed objects as being less expensive than similar items? because we dont have to BUY our main materials?? Yet they're so much harder to work with.
My awareness has grown tons this past year and my prices have nearly doubled to where I'm comfortable with what I charge, plus I can still afford to wholesale.

Orion Designs said...

So many of us have had these same thoughts and doubts. Most of us don't get it right at the very beginning. The important part is that eventually we DO realize what we need to change, just as you have written here.

As far as wholesale pricing goes, I have several product lines that I cannot wholesale because I can't properly mark them up. Why? Because the perceived value of the product does not warrant the actual retail price that my pricing formula results in. At least I realized it before trying to wholesale that product.

Another great post. Thank you!

TesoriTrovati said...

Excellent.
This topic cannot be stated enough.
I am about to launch into Etsy and am struggling with this issue of value and pricing. I know what my work sells for in the galleries that represent me, but I am not sure that will go over in a different market (i.e., Etsy). So do I change my pricing or make different types of things? I also greatly appreciate the challenge of using found objects that seemingly have less perceived value in the buying public's mind. But I have always looked at it like this: I am an artisan jewelry designer and the most important component in any piece of my jewelry is me. My time, talent and labor are often the most expensive part. When I meet with clients and talk about it there is no question as to pricing. But online is a different animal entirely.

Thank you for an eye-opening post. I will come back to read it again and send my friends over too!
Enjoy the day!
Erin

m debello said...

I think this is a topic that everyone struggles with. From time to time I think you need to re-evaluate your pricing. I will say that your reasonable retail prices allowed several of my high school students to buy their own lockets from you after they had seen mine. This is not always true of the jewelry I wear.

Catherine Ivins said...

Thanks everyone for all the great comments- you have all given me so much to think about!

xo- Cat :)

Elisabeth said...

Great post about an important topic. I am struggling with this too. It's hard because when I lowered my prices, my sales went up. Ugh.

Can you do a blog about wholesaling? I want to get into it but don't know where to start. Thanks!

Elisabeth

LeatherwoodDesigns said...

Excellent post and thanks for sharing. I've also been thinking along the same lines with pricing and my (possibly over simplified) process description. I think it is something we all struggle with!

Ola Fumilayo said...

when I was considering applying for a business loan this year I was forced to take a good look at my prices when I did a cash-flow history and projections chart.

Getting it down on paper in a detailed manner is a sure-fire way to dispel illusions about how little and how much you should be charging (Cat, I think you noticed that when you did your taxes)

Another great topic, thanks

Brenda said...

Yes, yes and yes! Excellent post, Cat!

Pricing is so hard, particularly if you sell on Etsy, where the pressure to lower your prices is so high.

I'm about to go through my pricing - again- and like you, thanks to taxes.

I've also been struggling with pricing/sizes and think I've come to the same conclusion.

Looking forward to seeing what you do!

'odd and old' Linda Dacey said...

Succint and to the point bravo you!
ps great blog thanks

witchmountain said...

This was really interesting and useful information thank you ( I too am related to a successful artist and find it very hard to value my work - both in monetary and aesthetic terms)