“The artist has only one ambition: to master his material in such a way that his work is independent of the value of the raw material.”
-Adolph Loos, ‘Building Materials’
In one of my classes, someone brought up her typical pricing strategy:
cost of materials x 3 +20% = wholesale price
As someone who has spent a lot time in the jewelry field, this formula of cost of materials times three isn’t new to me.
But it’s also one of my least favorite pricing guidelines. I might even go so far as to say I hate it.
First off, it fails to take into account labor, which is important to factor in when you make things by hand. True, if your materials are more expensive, then multiplying their cost by three will probably account for your labor. But if your materials are inexpensive (or free, if you happen to thrift or reuse them) then this formula is sadly lacking.
That’s why I prefer this pricing formula:
materials + labor + expenses + profit = wholesale price
But still, that formula should only be considered a baseline. Because, ultimately, your customer doesn’t make purchasing decisions based on this, or any kind of, formula.
They buy based on the value they think your product will provide.
When you’re trying to come up with solid pricing for your business (pricing that ensures you’re getting paid a fair wage and making a profit) having a formula can make you feel more confident.
But ultimately, you need to learn to be confident in the value your products provide.
While reading Glenn Adamson’s anthology, The Craft Reader
“The artist has only one ambition: to master his material in such a way that his work is independent of the value of the raw material.”
Loos goes on to site paintings that are worth far more than the value of the paint they were created with.
Now setting aside the fact that Loos was pretty much a racist prick (I mean, have you read Ornament and Crime?!? It’s disgusting) this is still an important ambition for artists and makers of all types to strive towards, though mastery of material isn’t the only criteria that should be considered.
Perhaps a new quote is in order:
The artist/maker has only one ambition: to create products that provide a value to the consumer independent of the cost of the raw material.
One of my most popular necklaces is a 52” long steel and silver chain that retails for $200. Because the chain is made up of mostly steel, the material cost to me is low (though there is some legitimate labor cost involved). But I can sell it at that price because it provides an incredible value for the customer. The versatility of the length and the clasp means the customer can wear it at least four different ways – long, doubled (either evenly or long and short) and tripled. The $200 price tag seems significantly less when you consider that you are getting four necklaces in one.
The value to the customer far exceeds the cost of the materials.
And don’t worry if your art (or craft) doesn’t “solve a problem.” There’s so much more to value than that.
I think that understanding and using pricing formulas is key to ensuring that your products, and your business, are profitable.
But ultimately, they need to be guideposts for your pricing strategy, not the be all, end all.
When you can provide a value to the customer that far exceeds the cost of the materials, you’ll have a much better chance of running a profitable business in the long run, and a much easier time selling your products at any price.
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True! Also I factor in my years of experience, design training, ideas. It took me years to build the skills to come up with my ideas and execute them with excellent craftsmanship. I charge for that because it’s valuable.
As Alex also mentions, the quality and artistic vision are important, and can encompass the value of our education and experience. A lawyer charges more based on their education, expertise, and reputation, why shouldn’t artists?
If we don’t value ourselves and our work, how can we expect our customers to? Go for it!
I believe that formula is used by importers in the gift industry and can not easily be applied to hand crafted items. It accounts for other factors when moving “CONTAINERS” of giftware related items into the country for distribution. The profit margin is pretty good when you are dealing with the larger numbers but is irrelevant when applied to hand made items.
In my mind, the customer pays for two things when buying a handmade item — quality and artistic vision. So price your work accordingly. I’d prefer to leave the “materials plus labor” formula to the world’s plumbers.
I very much agree with Alex with the fact that the consumer is paying for quality and artistic vision. Personally, I’ve been struggling with having complete confidence in my pricing. I will come up with a price that I think is fair based on quality of the piece, perceived appeal, and how much time it took to make. But when asking my husband for his opinion all he thinks of is what he thinks someone would pay for a particular item, and if it is lower, it makes me insecure about the price I had originally came up with.
Emily, I am right with you. I often tell someone a price I’m thinking and if they react with anything other that “Yeah”, then I freak out. I need more confidence 😉
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Can you suggestions and create? I have Seth Godin. Thanks!.
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it would also be useful
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