How to make money

One of the most common questions/requests that we hear is “how do I sell more?” or variations like “what makes an item sell?” or “how should I best market my shop/item?”.

Sitting behind these questions can be two things: a desire to make more money, or a desire to feel successful. The feeling of success is very personal thing. One of you may see endless sales as success, while another may feel successful through the freedom of expressing yourself creatively. You are each right, if it is right for you. It’s worth taking the time to consider what success actually means for you, but for now let’s talk about making money.

In it’s simplest form, making money is about a value exchange. Someone has a need (your customer), and you offer a solution (your product) that fills it.

The pain of the need should balance with the price of the solution, and the price should be larger than the cost of making it.

 

Customers spend money when they find a solution that meets their need, and costs what they expect it should. Ideally the solution exceeds their need (think ‘added value’) and the cost is slightly lower than they expect (‘a bargain’).

Profit is the difference between your cost and your selling price. You want to set the price as high as you can based on the value of the solution and the size of the pain. Customers don’t buy if it is perceived to be priced too high – ‘a rip off’ – or too low – ‘a fake’ or ‘low quality’.

What this is all saying is that making money is hard if you only think about selling things from your own perspective, or price based solely on the cost of making an item. It’s a lot easier to make money if you think about how to sell your items from the perspective of customers. In the early days of selling (or selling a new type of thing) it’s really important to learn as much as you can about your customers.

  • What is the common thread among the people buying?
  • What is the need they have?
  • How does what I’m selling meet the need?
  • What would make it more valuable for them?

The answers to these questions can be found by listening to people. Are they looking for a necklace, a gift for their sister, something that can be delivered in a hurry, or some combination? Those are each different needs, and each have different pains. When you sell something, don’t be afraid to ask you customer a couple of questions to help inform what you do next time you are writing your descriptions. Don’t be afraid to experiment with your listing descriptions, photos, and pricing to try and learn something about your customers over a longer time frame.

  • What are their expectations for price likely to be?
  • What should the price of my item be?

I’ve written about pricing before using the example of an iPhone. Most of us would reasonably expect a new iPhone to cost  $1,000 or more, and would steer clear of anything claiming to be a new iPhone for, say, $300. We just wouldn’t trust that it is ‘legit’. And so it is for customers with your items. If I want a finely handcrafted item and I find something claiming to be that but it costs the same as something mass produced down the road, I would assume it was a fake and not buy it.

When pricing your items think about what your customer is likely going to be looking for, and go looking for it yourself. Google search for the most generous description of your item that you can think of. e.g. instead of searching for ‘woolen hat’ think ‘handmade merino beanie’; rather than ‘silver flower necklace’ think ‘custom silversmith necklace’. See what you find, and how it stacks up as a solution next to yours. Your item is custom made, unique, and in limited supply – it should be more expensive than most things you find.

And if that price is still lower than your cost, then you won’t make money.

It’s as simple as that!

2 thoughts on “How to make money

  1. Thanks Jenny, I’m glad they are helpful! Great feedback to receive, we’re really trying to keep things bite sized and simple so I appreciate the comment 🙂

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