Putting a dollar figure on our cherished creations can be a difficult thing. What happens more often than not is that we sell ourselves short and end up losing money (or not making what we should) on our items. The reality is that a unique item is more valuable to most customers than a mass-produced equivalent item, so your pricing should reflect that.
Here are some handy ways to think about pricing – the ‘cost’ approach and the ‘value’ approach – and a helpful wee exercise for those of you wanting more specific instructions.
Most of us price our items one by one, taking into account how much we paid for materials and equipment, how much time it took us to make the item and adding them together:
This can work fine for a one-off item, or for someone making things as a casual hobby. But if you’re wanting to be getting a more reasonable income from your creative work then there are a few more costs to consider:
|Time spent on photography||$dd|
|Time spent listing on Felt and promoting on social media||$ee|
|Any promotional or advertising costs||$ff|
|Shipping and Felt commission costs||$gg|
|Bonus unexpected extras like free samples or gift wrapping||$hh|
When considering some of these costs you start to see the value of, say, doing a lot of photography at one time to make it more time and cost efficient. We’ve previously talked about how photos are the single most important factor when selling online, so be sure to read that also – no amount of good pricing gets around sub-standard photos.
This approach to pricing ensures that all of your COSTS are covered when making an item. You can start to play with an hourly rate that you pay yourself. This should be, at a minimum, the living wage of ~$21/hr, but you might want to consider what your time should be worth and putting that higher number in instead. What should a skilled craftsperson be paid?
The final step in this cost approach to pricing is relevant for anyone wanting to do their craft full time. You might have some expensive new equipment that you are saving up for (or paying off), you might have rent for a workshop or creative space, there is tax to consider, and insurance in case you’re unable to work for some period of time. If you are at the level of making and selling full time then invest a day or two in meeting with either an accountant, a financial advisor or business mentor, or even the business team at your bank. There are a lot of supports out there and it’s worth taking the time to set yourself up properly and making sure your bases are covered and that you are not paying excessive costs. If you are in this camp and struggling to find help then let us know and we can gather some more resources and supports.
A different way to think about pricing your items is through the eyes of your customer: what is the value that you are offering them?
When someone buys, say, a handcrafted dining table they aren’t buying something to sit around for dinner. They’re buying a centrepiece for their dining room. They’re buying compliments from their family friends on “this amazing table” and the joy of telling the story of where, how, and by whom it was made.
When buying a necklace or some earrings, a customer is purchasing the perfect gift for a loved one, or the unique compliment for that outfit.
Viewing our items as unique and valuable contributions to the lives of our prospective customers is a different way of thinking about pricing. It’s much more about storytelling, branding, and marketing than it is about the cost of making something. Sure, you still need to have a back-of the-napkin rough total cost of your items to make sure you’re not losing money, but you can start to explore how much above that cost you work is valued by customers.
Putting a price on your items in this approach is more of an art than a science, and it’s led more by emotion than logic. Would you buy an iPhone that was listed at $150? Most of us wouldn’t trust that it would do the job – we value an iPhone at $1,000+. Most retailers have at least a 200% mark-up on items they sell – i.e. they sell them at 3x the cost price – and a produced-by-the-thousands item is often perceived as being of much less value than something more unique and limited in supply. Would you pay $300 to see a band that plays every week, or just one that comes to Aotearoa once every 10 years?
If you decide that your items are unique, high-quality, and in limited supply, then they are more valuable in a customer’s eyes than something similar that they could get from a big box store. They question that you need to answer is how much more valuable, and who is the customer?
We recommend playing with your pricing to learn the value of your items and who is buying them at that price. If your items are priced by cost then why not try doubling, or even tripling your prices and seeing what happens over a 6-month period? If things aren’t selling, it’s because they aren’t perceived to be valuable. Is that because of your work, your photos, or your pricing? A more expensive item will typically take longer to sell than a cheaper one, but when you view the income over time you often end up better-off from selling less items at a higher price.
Splitting the difference
You might be wanting some more specific instructions. So take 5 minutes and try this exercise using numbers off the top of your head – don’t be a perfectionist about it!
- Add up the fixed costs of making your work across a month or year (e.g. equipment/tools, rent, business cards, a proportion or your power bill… whatever)
- List out your time costs ‘designing and making’ per item or item type
- List out your material costs per item or type of item, plus estimated shipping costs
- List out your time involved in ‘selling’ each item (photos, writing descriptions, listing online, shipping time…)
- State, realistically, how many items total you want to be making in a month or year
From the numbers above, your can figure out a rough estimate of the real cost of each item or item type by:
- Dividing 1 by 5 to get ‘fixed costs per item’
- Adding up 2+3+4 per each item or item type
- And then adding these two numbers together for each item type
When it comes to pricing your items, take this number and double it. Or triple it. Or multiply it by 10. You can list the same item multiple times at different price points and then keep an eye on how long each one takes to sell – just use a different front photo or list them at different times!
It’s more common for us to see items listed at too low a price point than too expensive. You deserve to be rewarded for your amazing work, so don’t be shy about asking for a lot more money than it cost you to make an item. That’s how to build a successful business.