Tuesday, 25 February 2014

Pricing – How to figure it out?

One of the biggest questions that comes up in the hand-made crafts selling business is “how do I price my products?”  I’m not an author yet, but I’m sure that this question also comes up there.  Well, there are several different methods that you can use to answer this question.

First of all, it’s going to depend on your purpose for selling?  Are you selling your crafts for the purpose of funding those crafts?  In which case, you simply charge for materials and shipping.  If you are wanting to actually turn a signicifcant profit, well, that takes a bit more calculation.

The easiest way to price your products is to price similarly to similar products.  This would take a bit of research (which is probably more fun than doing math).  Be specific in your research.  For example, I make crochet newborn photo props.  If I search that, I’ll get a multitude of products ranging from $3.00 all the way up to $50.00.  However, if I search Newborn Ladybug Crochet Photo, well, that limits my competition greatly and I can then decide how to price my product competitively so that I can offer a good deal but still turn a decent profit at the same time.  The key here is “competitive” not “lowest”.  Some people might aim for the lowest price and then they are not being fair to themselves and customers often equate a low price with a cheap product.

The basic formula for pricing (AHHH, here’s the math I was talking about) is (Cost of Goods + Labor) x Overhead= Price. Overhead refers to the other resources that were used during the production of your product:  Electricity, water, rent, air, etc.  Labor considers the time and energy that you put into it.

I like to use a completely different method, we’ll call it the minimum wage (again, it uses math).  Let’s say that minimum wage is $8.00,  It takes me two hours to make up a single newborn photo prop.  That’s $16.00.  Then, I add in the cost of materials (for the prop that I have in mind (the newborn turtle shell cape and hat set), that’s two skeins of yarn), which totals up to $4.66.  Roughly, it comes up to $20.00, which is what I charge for it.  Makes me feel like I’m making $10.00 an hour :-P

However you do choose to price your products, don’t cheat yourself.  You have worked hard to make your product.  I know that you want to sell it.  Selling is exiting, and gives you motivation and energy to keep going.  It’s awful tempting to price your products lower so that you can make more sells.  DON’T!  You are cheating yourself, and you are not offering a competitive market place for other crafters.  Also, as I mentioned before, cheap products are…well…cheap.  The materials are not good quality, the work you put into it may not be the best (after all, you are working for pennies, why put forth the effort?).  It just isn’t worth it.
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