Last week I received an email from a reader that I’ll call L. L had gone through the worksheets in Pricing for Profit and in order to make the kind of profit she was hoping for, she realized she’d need to double her prices. In her words:
“This brings my pieces to double what I’m charging retail now and I’m in line with the going market rate.” (Emphasis mine.)
L concluded that she would have to charge $85 retail, while her competitors where charging around $35 to $40 retail.
When I pressed L a little more about her competitors, she sent me links to two Etsy shops selling the same type of product for $35 to $40 retail, and the link to one other company, who is “Not really a competitor – they own the market.” That company, a small, eco-conscios, design oriented company (according to their website), was selling the same type of product for between $140 and $160 retail.
Jackpot!
L’s perception is that this company isn’t really her competitor because they’ve been around for a while, and have lots of press and a celebrity following. But if I were in L’s case, I would WANT to make this company my competitor. I would WANT to look like a credible brand with a big following. I would WANT to raise my prices.
Thinking about L’s situation led me to create the incredibly unscientific graph you see below:
We tend to think that the only concern that people have when it comes to price is that it’s low. But your prices go a long way in influencing the way your customers perceive your brand.
On the lower ends of the pricing spectrum, customers are apt to think one of two things. Either you’re a hobbyist, just doing this for fun. Or you’re a major company, mass producing products overseas.
But in the middle of the graph (what actually amounts to the highest prices) is the SWEET SPOT. These prices communicate any number of things about your brand. That you are an artist. A visionary. A designer. A craftsman. That you are creating products worth valuing.
L’s competitors fall in the hobbyist section of the graph. Her non-competitor? They’re in the sweet spot.
Now price isn’t the only way customers perceive your brand. L’s non-competitor does a great job of giving the customer other reasons to value their product. They have a professional looking website that also shares the designers’ personal stories. It’s the sweet spot of websites, if you will. They communicate the story and meaning behind their pieces. And they have those celebrity fans and press.
But how did this company have the time and money to go after such press? It wasn’t by charging $35 for their pieces.
There are no numbers on my chart because the numbers that get you to the sweet spot will look drastically different for every type of product. L probably doesn’t have to move to $150 a piece to get to the sweet spot, but there’s no reason she can’t situate herself nicely in the $100 to $120 range.
L isn’t alone. Most makers need to raise their prices. But this isn’t a bad thing. In fact, it’s an opportunity to move into the sweet spot and let your customers know just how valuable your products really are.
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Want to dive deeper into the specifics of pricing your art, craft, or handmade products? Pricing for Profit that walks you through the two key elements of pricing your products – the formula that ensures you’re profitable and the value your product provides to the customer.
Click here to get more info and purchase Pricing for Profit today!.
Great point here about the relationship between pricing – brand – positioning. Proving once again that pricing isn’t a science but an art. And so much to do with psychology and how we value ourselves. Thanks Megan, like your graph!
I should definitely be taking notes on this post. I know everything you say is true, but sometimes there is a little voice inside my head that thinks I’m ‘cheating’ people out of money when I raise my prices.
I have to start acting more like a business woman and less like a ‘starving artist’
Thank you once again for all of your helpful tips 🙂
Thank you Thank you Thank you….for writing this post. I was in the audience at Etsy when you said just that “Raise your prices”. And actually I asked you a couple of questions during that workshop (I was in the front row…wearing a bright yellow sweater. 🙂
Anyway….it’s such a true statement. I also need to keep telling myself just that and I plan on raising prices this year on EVERYTHING. We work too hard as designers/artists and we should value that hard work and creativity. It’s important for our customers to understand the value of art and design because it tells a story and represents so much more than we realize. Thanks Megan!
Thank you so much for starting a conversation on this issue! It is so frustrating to hear from customers how your products are too expensive and how they can get a similar thing from elsewhere for pennies on the dollar.
I have also noticed the attitude a lot of customers have towards how much my time is worth is very relatable to the prices they see on the market.
Hi, I don’t normally comment – though I do love reading your thoughts (I get them delivered to my inbox, whereas I’ve cancelled most everything else).
This is so so so true. I am constantly talking to other crafters and makers in my area (online and physical) about the cost of their product.
I love your sweet spot idea. Yes – I want to be in the sweet spot, and I know all those other makers want to be there too.
Thanks for your generosity in sharing your experience and thoughts. It’s always good to have a reminder about what I believe.
I was going to send this to the small shop where I work, when I realized it applies to wages as well. Thanks; I needed the slap. I’m applying this a bit differently – my own work deserves more thought and time.
Great post! I was walking around in a boutique yesterday and found a product comparable to mine (not hand-crafted) that was selling for $20.00 more and was much smaller than the one that I sell out of the same materials (and mine has more detailing). It was a perfect little wake up call that I want to be a premier brand and not in the middle line on Etsy, online, or in the shops I sell at. Your post timing is excellent and the example really hit home.
You can also create mistrust in your products by being too far below a ‘reasonable’ price – especially when using costly materials or claiming eco-friendly or ‘fair trade’ – consumers know these things cost and expect therefore, to pay for them…if you are way below, then there’s ‘no way’ you can be really giving what you say you do – that’s the thought process.
I’d rather make less items, more satisfyingly and sell for a higher price to make my target income – and give people something really good in the process 🙂
thanks – nice post – sending on to all my fellow artisans
Absolutely fabulous post. I have been following your “raise your prices” mantra and advice and it’s something I’ve mean needing- I mean needing- to do for a long time! I am going to raise my prices. I want to raise my prices :-)!
Oh what interesting comments! Thanks everyone.. I love reading these. I think personally I get nervous if a product doesn’t sell straight away, and want to lower the price, which is silly… That’s why I love learning from these articles .
This is such a great post. As an independent artist, price is something I constantly struggle with. Thank you, thank you, thank you.
This so absolutely true, yet you really can’t double your prices overnight without alienating (and potentially losing) virtually all of your existing customers. If you either make the mistake (which usually isn’t a mistake, just inexperience and sometimes a touch of insecurity) of starting with low prices, it takes time to establish the sweet spot. As you build brand awareness, tell your current customers that your prices are continually increasing in value. That will be an incentive for them to ‘buy now,’ it will make them feel better about their past purchases, and they will not be shocked and dismayed to find a piece they wanted 6 months ago selling for more money today.
Too many artists don’t believe enough in their own value to even try hitting the sweet spot. Thank you Megan for continually telling us all that it is OK to make a living!
“you really can’t double your prices overnight without alienating (and potentially losing) virtually all of your existing customers”.
Maybe. But her $35 customers are not necessarily the customers she would want to keep anyway.
Josephine – That fear of alienating current customers is one many makers have, but it’s important to understand that if someone can’t pay what you NEED to charge in order to make a living, they weren’t your right customer to begin with. Raising prices allows you to reach your RIGHT audience, which is much more important than your current audience, regardless of how much they’ve purchased in the past.
Awesome post Megan! I love your graph. This is really something to keep in mind while pricing.
Great topic and right on the money (no pun intended). I’ve been working hard to keep the pricing in the right place while continuing to offer more affordable items, developing relationships, forming a brand, and am currently working on a new and improved website. Thanks for, once again, an informative post.
What a great post, Megan! I feel like I keep hearing “you need to double your prices” without a whole lot of context into the why. I feel like that area in the middle was never really explained all that well, but I’ve just had my a-ha! moment. I don’t want to compete on price, but seeing myself in that middle section makes me feel much better about the rates I’m offering on my products (and future services). Thanks for clearing it up for me!
I absolutely love your graph! It visually gives me a reminder of how I want to stand out from the crowd. Where we as artists need to stand tall.
As always, thank you very much for the excellent advise and much needed pep talk!
I totall agree with everything you said (and you’ve said before). This really opened my eyes a few months ago when you said “do you want to be bargain-basement or handmade and treasured” (something to that effect, I’m paraphrasing).
You cannot compete with Walmart, or the people who aren’t pricing to make any money. If you don’t make money, you don’t have a business-meaning, you can’t provide those amazing products or services to people in the future because you CAN NOT afford to work for free.
The other thing too, with perception. If you don’t charge enough, people don’t value your work. For interior design, I always get the “just” piece. “Just pick paint colors for me.” Well, I can pick a color for you, but if you want a design, we need to go through the process to end up with a look that fits your needs, style and preferences. If “just” pick a color, it means nothing to you. If we go through the process, we can uncover what color it is that you really want, and we can make it coordinate for a cohesive look.
Okay, rant over…thank you for your excellent post yet again!
Rachel what you said really caught my attention. I worked in construction doing remodeling and when you are in a different home every week or two you start to see a pattern. So many homes look like they came right out of a showroom (the same one!) with no hint of the owners personality. We used to make jokes about how many times we saw exactly the same accessories.
At the same time I loved working with customers to find the right colors and textures for them. I loved working with designers like you that didn’t have right or wrong colors, just ideas about what the customer might love.
The coolest thing about my work now is when someone buys a quilt and tells me they are going to use it as a inspiration for a room.
Great article! Just purchased the pricing for profit just to keep things on track. Thanks!
Well said! It gives us all something to think about. We are not only designers, artists and makers we are business men and women trying to make a living from our skills, talents and creativity. I was once told by a fellow artist he didn’t give discounts to customers because he wasn’t a charity; he had to make money to pay the bills, put food on the table and keep a roof over his family’s head and he wasn’t prepared to barter either.
So think long and hard about your pricing for the future – I know I will.
I’d love to raise my prices but sadly I fear then i will just price myself out of the market completely and I don’t sell enough to be able to take that risk. It seems no matter what I do I never sell as many as other people selling a similar thing and I doubt doubling the price would ever improve that.
Aly – If your customers can’t afford to pay what you need to charge to make a living, then that’s not the right market for you!
If other people are selling similar objects at a lower price, what can you do to differentiate. (Hint, price is one of those ways.) Think about how you can change your brand and the way you communicate the value of your products (also perhaps the venues you sell in) to get those higher prices.
Great post! I’ve been doing a lot of thinking on this subject lately, and this is very well stated. You’re making a compelling case!
Great post Megan!! We all need a reminder that charging a fair price helps build our business, brand and respect for handmade goods. The “sweet spot” allows for profitability, growth and a more focused target market.
Great article! It has always annoyed me that obviously talented craft people who are also making handbags devalue their creation and work. I have never wanted to compete with Target or Walmart etc., My customer values my materials and my creation. I’m sad for people who obviously aren’t making money from their talent andU labor. The comment about not wanting to “cheat” their customer is misguided.
The biggest value you can give your customer is to keep yourself in business so that they can still find that great piece. The idea of the starving artist has never appealed to me.
That said, it probably is time for me to raise my own prices, since it has been at least 5 years since I have done so. I have many requests of those wanting to buy wholesale, and frankly I can’t afford to do that, because when I sell retail I’d be competing with my wholesalel customers at a much lower price, when I sell online and at the market. Do you have a suggestion for this dilemma?
“The biggest value you can give your customer is to keep yourself in business so that they can still find that great piece.”
Well said!
Great article. It is so easy to fall into the trap of under-valuing products and services offered. It cuts margins and many people don’t realise that they are actually making a loss. The other thing is it de-values whatever industry you are in as the perceived value drops
My business is still very young and I am “growing” my name as an artist and designer. When I developed my business plan, I had my list of competitors. A number of them are actually friends of mine on Facebook and we have met at the wholesale shows. They are very good at what they do and they do get the high prices. One tool that has helped me price my designs is called “Jewelry Manager.” It was one of the best investments I made as it prices out the raw material, labor, overhead and then the markups on wholesale and retail. Some of the first designs that I priced out I had to do a hard gulp as I was very concerned about the price. I had to remind myself that my designs and the quality of products that I use is worth it. And my marketing plan is focused on high end. Sometimes I fret that I could be selling more volume if I used cheaper products but that isn’t me. Continue to stay persevere.
Hi, I must be the only person here who is a bit uncomfortable with this argument. I get that everyone wants to make more money for their craft work. I soooo get that! 🙂 And I get that in the States (I live in the UK) there is a pretty huge population of people so you have more people with higher incomes per se than we do in little Britain. But in actual fact, 90% of the population of both our countries is middle to low-income. That means that by pricing your stuff (aimed at celebrities?? and the very rich for instance) you are pricing yourself out of the market for lower income people. Sorry, that just seems really elitist to me. Everyone I know is struggling financially (to a greater or lesser degree) and it seems really harsh to just sell my handmade stuff to rich people. Don’t poor people deserve nice handmade things too? I think so, so I’m happy to price my things in such a way that a broad range of people can afford them. Sorry but that’s my view anyway. 🙂
Hi Linda – You’re not the only one who has this concern, but there’s still quite a few people between “rich” and “poor.” My prices aren’t low, but I definitely don’t sell to only rich people. I have a range of prices in my line, to try to accommodate a number of people, but everything is still priced in a way that helps me earn a living wage. (I can’t continue to make my products if I can’t make a living.)
Honestly, this really is a conversation about affordability, but as my friend Tara Gentile would say, prioritization. If someone really wants your product, they are going to find a way to prioritize their money to make it happen. We’re not asking people to stop buying food for their children, but people spend money everyday on things that aren’t necessary (TV, movies, video games, etc) and I’d like to see them prioritize spending on handmade goods the way they make spending in those other areas a priority.
Perfect! Just what I need to hear right now. Thank you.
Linda makes a great point about making your prices out of reach for less affluent folks. The way I deal with this is to have a full spectrum of price points and to make even the items at my lowest prices as beautiful and appealing as the top of the line.
Sharri! This is exactly one of the strategies that I use! I have earrings that sell for $40 and necklaces that sell for $400. It doesn’t have to be a one or the other strategy.
Your info graphic says it all–no numbers necessary!!! Yes, I agree with other comments about making products that have a range of price points, but I also believe that a large part of being an entrepreneur, in any field, is to be fully committed to what you’re doing. For me, that means having value in what I do and providing a fair valuation of my craft to indicate to potential buyers and my larger target markets that I’m not looking at my venture as a hobby, but rather as a pursuit of excellence in every sense of the word–production, knowledge, customer service and commitment to my craft.
Well said, Tracey!
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I had to re-read this again, because it really needed to click with me. I am about to put my pieces online, and when I glanced at what people were selling on Etsy using the same materials, it was way low. In fact, it might just cover parts. Then I was concerend, because I have this beading software that gave me a price I should sell my pieces for, and I thought about it all night whether it was too high. But after re-reading this, I realized that in order to make this my business, I need to find that “sweet spot” that defines me as a business woman. And, looking at other things in my category online and their prices, I realized my competiition goes way beyond Etsy, and that my prices are good for me to sustain my business. So thanks for this post!
Hi Megan! What a timely post 🙂 I think my biggest struggle in my handmade goods is always pricing. While I will scour Etsy to get an average rate of what others are charging for a similar item, I do also remind myself to take into account the time and energy that goes into the making. A cheaper price may boost sales but may not do much in motivating me to finish it properly and look into the details. I decided to set up my own online store outside of Etsy (while still maintaining some items on Etsy) because I want people to see that I’m serious about my brand and it’s not just about the price. I hope I did that right haha. 🙂
Seems like I’m the only one, but I’d caution the approach to price for perception.
Yes, you can communicate that you sell premium goods by attaching a premium price, but the size of your customer segment in the middle class will decrease, which is the largest sales base in the world. instead, you’ll increase your upper class audience, but these shoppers already have their pick of established retailers who offer quality and brand power. Ironically, many upper class shoppers do not shop on the web, the primary marketing and distribution agent for smaller boutique brands.
It all goes back to knowing exactly who you customer is and what their needs are. if you are targeting web-savvy creative thread seekers with a healthy wallets and a proven and unrelenting appetite for the values your unique products represent, by all means – jack up your price and dont leave money on the table.
However, if you are not, it doesnt make much sense to jack up your prices to improve perception – maybe to cover overhead, but from my line of work in finance, I’ve rarely advised that. You incur less sales risk by really understanding what is driving your whole sales prices up. Lean out your process and get your cost under control – one thing that I see far too often are brands that arent aggressive enough in lowering production costs. buying from your suppliers at wholesale to raise your margin % is a forgotten virtue.
I hate to use a car industry example, but it makes a point. would you rather sell porsches or toyotas? porsches are more glamorous, but you rely on a few sales to keep your company alive – much more risk and anxiety for business owners. its better to have a predictable sale which is more likely to happen at a lower price point.
There are hundreds of products, hand-made or not, that are sold at lower price points and still have a reputation for quality. I wouldnt partner with a manager whose vision is to raise prices to improve brand perception. In our marketspace, it’s to focus on the actual product and ensuring that it meets a need to improve perception.
Brian – I think you make some interesting points, but the model you describe is not really applicable to someone making artisan goods.
Yes, I think it’s important for makers to ensure that they buy supplies at wholesale prices, but when you’re making artisan objects by hand there always needs to be a little room for play in the production process. “Lean” doesn’t always fit in our world. (And yes, I totally understand the value of lean manufacturing. My father owns a machine shop and my brother is lean certified. I practically grew up with the concept!)
I also think you aren’t giving the middle class enough credit when it comes to their spending habits. In the example I give above, I’m not suggesting that the maker heads into an exorbitant price point. Raising her prices from the $35-$40 range to the $80-$120 range is not going to price her out of the middle class – that’s less than most middle class citizens pay for cable, or the monthly payment on their toyotas. (Oh, and to answer your question, I would rather sell a Porsche than a Toyota – as an artisan, I’m not in the volume business.)
The other thing I would dispute is the notion that most smaller boutique brands are using the Internet as their primary means of distribution. I would consider myself a small, boutique brand, and about 95% of my sales come from selling to stores and boutiques. Most of my products are sold in physical locations, and it’s a business model that can work for many makers!
The reputation I’m talking about here isn’t just one of quality, but of being an artist, a visionary, etc. There’s just as much a need for art as an efficiency produced product, and in our current state of things, I would even go so far as to argue that we need art more. The world is full of efficiently produced products, I don’t want to be just another one.
You ask “would you rather sell porsches or toyotas?”
The better question for makers is which one of those are you making?
Me?
Honey, I am HANDCRAFTING those porsches, with all the custom attention to details because I LOVE to make porsches.
ANYBODY can make those generic toyotas, which you might be very happy to buy- go for it.
But if someone else wants my careful and unique creation I will be right here, with the price point reflecting all of the differences between my brand and the ho-hum brand.
(or rather, the price point still needs work, but I”m getting there!)
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Everyone was telling me to raise their prices and I wouldn’t listen. I kept saying everyone else is selling their stuff for cheaper and now I finally see it.
Thank you for your advise. I have been working on my own handmade items. I can spent only working in one of my ideas about 2 or 3 hours. The material I bought is too expensive as well some of my tools. I had no idea that in order to promote any idea is good to charge is the key to success. Right now I realize that I should charge enough to recover not only the long hours I have dedicating to each of my handmade items, as well the high price I’ve been paying to get the material and the tools that are very expensive. Thank you is good to have on time a good advise.
Karmita♥
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I love love love this post – I have a knit accessories shop and am constantly competing against people who either don’t work full time or who have many people helping make their items, or who don’t have very complicated pieces (these are all generalizations of course), so that my pieces and prices look very high in comparison.
However, I have been reminding myself that a) I set my prices based on calculations, not just “oh I think I’ll do this,” and that is not ridiculous, and b) I set my prices also based on what I would pay, if I were looking at my shop as a customer.
I think a lot of things on Etsy are undervalued and it is making it hard for others to put a “true” value on their pieces, so this concept of the sweet spot and of not shying away from higher prices is a great, great article. Thank you!
I agree whole heartedly with this article. The problem is that if you drastically raise your prices, your “regular” customers probably will shop elsewhere. And I think it would take quite a while to grow your business back up–just food for thought.
My other beef along these same lines is that I have seen several Quilters (for example) on Etsy price their items really low and they say in their profile that they are only charging what they have paid for the materials in the quilt. They are doing it because they love to quilt but don’t want to keep all of the things they make so they are selling them on Etsy at cost. This really hurts the other sellers out there who are also selling quilts, but who are trying to make a living on Etsy.
But my regular customers understand that my work is good. They see it, they have it in their hands, they value it because it is good. It’s not walmart, it’s not even JCPenney. My repeat clients are the ones who say, “You should be charging more money for this.”
And you know what… my prices can be a bit more subjective for those repeat customers, especially when I know they are telling others about me. My prices are pretty subjective, anyhow. 🙂
As for making my work unavailable to lower-income people, that’s like saying I ought to sell my hand-crafted Porsche for the same price as the assembly-line Toyota so everyone can have one. But… I may choose to give away that Porsche or offer it privately to someone who can’t really afford to pay full market value. I am just not going to offer it publicly at a price that makes people assume my Porsche is really just a Toyota in disguise.
Brilliant post. I agree with it completely.