Wednesday, 17 March 2010

How-To: Setting the Price

After struggling with price setting for my scarf (see this post), I decided to do some research. It turns out, unsurprisingly, that pricing craft and art items proves to be difficult for many people out there. We worry that the price is too high while it is often too low. We disappoint ourselves by not charging the price, we feel is appropriate. And very often, we simply have no idea how to reach a reasonable price.

Below are some tips and useful tools collected from all over the craft sphere. I know they helped me and I hope they will help you too.

  1. Arriving at reasonable price

Now, this may seem like a taunting exercise, but it is in fact a simple mathematical equation.

Item cost = cost of supplies + (hours x your hourly wage) + selling fees

cost of supplies – this is self explanatory, but you have to remember to consider all materials you used to create this piece.

hours – this not only includes the time you spent working on a piece, but also procuring supplies, taking and editing photos and posting items on the Internet.

hourly wage – this vary depending on your country of origin and how much you would like to earn. I think it is not a bad idea to start with 1,5 x minimum hourly wage of your country and then adjust according to the price your competitors use.

selling fees – this are costs of etsy or artfire postings + postage supplies

Item value/price = item cost + profit margin

profit margin – how much you would like to earn on this piece. How valuable you think it is. Some people suggest you should triple the item cost or charge as much as the market will bear (i.e. as much as people are willing to pay) but I think it is a much better practice to add the value you think is appropriate. I find it better to charge the lowest price I can bear. But don't undersell yourself. Charge what you think your creativity and skill is worth.

  1. Reality check

To make sure that your price isn't completely unreasonable, compare it with your competitors' prices. To identify your competitors, check other crafters in your category. And remember, mainstream manufacturers are not your competition. You create one-of-a-kind pieces of art and they make uniform items. Their price will often be lower but it should not concern you, because you create in a different category.

  1. Too high, too low

Now that you checked competition, consider revising your price. While doing so, remember that too high prices may discourage your shoppers (especially, if you cater to students and young people) but too low prices will almost certainly cause suspicion. Customers will often overlook low priced items assuming that the quality is also low.

It is a good idea to have a wide range of prices so that each of your prospective customers can choose something affordable. At the same time you will give them a chance to try your products out, before they are ready to spend the big bucks.

  1. Useful resources

For more information on pricing check out this few exercises from Etsy. Use rolbe etsy calculator to calculate the price, using the cost indicators. And check out this website for postage costs.

And btw., the great photo on top of the page was taken by DCvision2006

1 comment:

  1. Or...think of a price. Double it. Take away the number you first thought of and you have your price!!