green vase
Pricing your handcrafted product is a balancing act, to be sure. And, like many of you, I’m tired of seeing under-priced products out there in the market. Devaluing craft does none of us any good.
“But pricing is hard!”, they say. I see it all the time in handmade forums: “If I price my items for what they are worth, no one will buy them.”
Because on one side of the equation, an item’s price must accurately respect its maker’s skill, effort invested, time spent, and materials used. On the other side, an item’s final price must present a compelling value to the consumer.
Here’s what we need to realize: People don’t decide to buy your product because of its actual, calculated value. No.
People buy your product because its price matches their perceived value of your product.
Like Warren Buffet said, “Price is what you pay, value is what you get.”
nebula bowl
Value is subjective.
Here’s something you might not know about me. I’m a potter. An aspiring potter, to be sure. And I love working with clay.
I am proud of my product. I am confident of the value it provides to my customers. I know what makes it different and better and awesome. And I’ve had success selling one-off pieces.
So today, I was working through a pricing worksheet. I was trying to decide if I should take my passion for pottery and turn it into a crafty enterprise. Because while I have a deep love for the craft, and while I enjoy creating beautiful, functional items from mud and sand — I absolutely do not feel guilty about wanting to make a profit. Isn’t that the point of a business?
Here is a standard pricing formula.
material costs + (time x hourly wage) + fixed costs + profit = wholesale price
wholesale price x 2ish = retail price
(It’s a solid formula for pricing products. I hope you use it, or something like it.)
Spoiler alert: After crunching the numbers I determined that a simple ceramic coffee mug made by my own two hands would be fairly priced at $45.
I can’t say I was shocked. I mean, I understand the work that goes into making a mug. I get it.
But I had to wonder: Would my potential customer get it? Would she think my mug was worth that much?
Because if the consumer doesn’t place $45 dollars worth of value on my handmade coffee mug, the reality is that she won’t buy it.
raku bowl
Now – many of us would like to argue that customers should value a handmade mug more than they value a Walmart-made mug. And I completely agree. I think we all should encourage the mindful choice to spend more money on high-quality, well-crafted items that directly support our community of independent designers and artists. Valid argument — I’m so on board.
And, as makers, it’s important to be able to educate our potential customers about the value of our products. (Hint: If you need help articulating the value of your products– check out the Makery Library. There’s a free USP workbook in there with your name written all over it!)
But, when I think about this pricing dilemma, I can’t help but think of one of my best friends.
Because you see, at first glance, she would appear to be my “perfect customer”. She’s liberal, she’s trendy, she’s from Portland, and she loves Etsy. It would seem she’s my “right people”, eh?
She’s also young. She’s on a strict budget. She makes mindful choices.
And to her mind, handmade mugs — even beautifully-designed, well-thrown, meticulously-glazed mugs handmade by her best friend– can only cost $20. $25, maybe.
Balancing the equation.
So here we are, right back at question of pricing.
I say, it costs me $45 to make a mug. The customer says, she only values my mug $20 worth.
On one hand, we have “go by the book”, pricing-formula output. On the other hand, we have “what the market will bear”.
Obviously, the equation isn’t balancing. What are my options?
- Find a new customer base who values my mug $45 worth.
- Find a way to produce my mug at a lower cost (material+time)– and therefore make the same amount of profit while charging a lower retail price.
I’ll tell you what’s not an option.
- Lowering my prices unfairly and cheating myself out of profits I deserve, while unintentionally devaluing craft for the larger community.
And that’s not a good option for you, either.
So how do you deal with this pricing tug-of-war?
Is the customer always right? Or, do you move on and decide to look for a different type of customer who values your product more?
What is your ideal customer willing to pay for your product? And, at what price is your product a good value?
Related posts:
{ 24 comments… read them below or add one }
Next Comments →
This issue really resonates with me! I have struggled with this challenge for years and have finally taken ::both:: the option 1 and option 2 paths. I will not lower my prices on my one-of-a-kind (literally, I only make one of each) pieces and continually seek to be in the market that has the demographic that can see the value through the same lens as I do. This is a satisfying (as an artist) path that takes patience and commitment. But it is lower volume.
So, I also develop collections that are at a lower price point and I try to meet that buyer who appreciates the hand-made aspects of my work, but for whatever reason won’t/can’t pay the higher price. These pieces are not one-of-a-kind, use fewer materials or lower cost materials, but have the same design concept as my “signature collection”. This is a higher volume, lower margin business.
The good news is that some of the lower price point customers eventually “graduate” to the higher price point collections. And in the meantime, it creates positive energy for me (validation) and cash flow. The challenge with this strategy is not to let the lower price point pre-empt or steal customers who might otherwise buy the higher price point.
Thanks for writing about this. I see too many crafters/artists undervaluing their work and it breaks my heart. We should all have more confidence in the value of what we make, because if we don’t, then the customer certainly won’t.
I hear you, Judith!
I love the way that you’ve developed several lines at different price points to appeal to different customers!
How timely – I’m engaging in a bit of an internal pricing war this week. I think too often, the advice in the craft community is “the lower your price, the more you’ll sell” and that isn’t correct…but when sales are slow, it becomes tempting.
I’ve found that there is balance between finding the “ideal” market at the price you want and exploring ways to make the process of creating faster or less expensive for you as the creator by increasing efficiency – - and in turn making the price for your work friendly to a larger population, but still have value.
A bit rambling, but where I’m at mentally right now. Thank you for the post!
Lowering prices is tempting. It seems like a quick fix. But it’s ultimately harmful in the long run, I think.
We shouldn’t compete on price at the expense of profit– no one wants to win the race to the bottom.
That said — I think that finding ways to produce items more efficiently in order to appeal to a lower price bracket is a valid strategy.
I set out to design jewelry that is hand made, unique and also affordable, which means I grapple this dilemma often when designing a new pieces. I am lucky that in jewelry I can drastically lower prices through materials and if I order these materials in greater bulk, it will help reduce over all costs. I did however just yesterday get really excited about an idea I was toying with…but one little part of it would be so expensive that the finished necklace would end up costing 4 times as much as the most expensive item in my shop…and not look like it should.
Great post…so I glad I just discovered your blog and love it!!
Thanks Sierra!
What did you think of Judith’s strategy of multiple collections? I think it’s awfully smart.
I definitely see how great the multiple levels of pricing are, but when I have tried to do that it has affected my press a bit. Most of the national mags require I have between 60-1000 of each piece in order to be featured, so I do have to consider that when I design. I have started to create more time extensive higher end items, such as the necklaces re-purposed from vintage scarves where there are only about 5 from each scarf available…but I release enough initially that all of the colors add up to about 100 total necklaces. The OOAK pieces I design follow that same method as well.
I LOVE that green vase btw…the contrast of rough and polished is fantastic!
I struggle every time I place a hat on line. I love making my hats, I makes brimmed summer hats and crochet hats, but I struggle with how much I should sell the hat for. People have e-mailed me and told me I am asking to little for my hats, but I am so afraid of my prices being too high and no one buying them. I started using better material and brighter colors and realized how much prettier they are. I raised my prices on these hats only and have sold quite a few, but recently, I’m not even getting many views. This is where I question my prices. I want to lower my prices but I know the price I’m asking is more than fair.
I’m going to try the formula you gave and see how it compares.
Thank you for this blog, it has been the biggest question in my mind.
Definitely use the formula. You need to make sure that your prices are high enough to at least cover your costs + your time.
I think you would be doing a disservice to yourself by lowering your prices.
I vote for the first option, with one condition: your work should really stand out.
As someone who works primarily with seed beads, it’s up to me to create pieces that won’t be conflated with the $3 daisy-chain ankle bracelets sold at Saturday Market or the stretchy woven bead cuffs made in Pakistan and sold at Target.
If the customer can’t tell the difference, I’m not going to give them a lecture, I’m going to start designing work that no one in their right mind would copy and mass-produce.
I’ve noticed that when I compromise on my prices, people still balk at the price. Don’t forget that poverty is just as big a distraction as a 50-hour per week day job!
Teresa,
Your work is brilliant! And you are right: stand out we must!
Hi Sarah – thanks for continuing the great pricing discussion here on your blog. I had no idea you were an aspiring potter!
I think Teresa is right on – the more special you can make your work, the easier it is to command higher prices. The link between branding and pricing is key.
I also think becoming more efficient at production can help (either be allowing you to lower the price or giving you more cushion in the profit margin). Often times just working in batches can cause a big drop in production line.
Can’t wait to see how your line evolves!
I couldn’t agree more!
Along with finding another market, is being super-clear about the benefits + features of your work and creating a brand that speaks to your quality and value.
True that.
Also — for anyone who needs a little help polishing up their benefits+features, I’ve got a free workbook just for you.
I also have the price-guilt-syndrome, but there’s another aspect that puts a kink in it, as well: inexperience.
If I am trying a new technique, or one that I just don’t use often, I’m not going to be as skilled as someone utilizing that method on a constant basis. Therefore, takes me longer to make an item in that way than someone with more practice who can whip out higher quality in relatively no time flat. In pricing theory, more time = higher cost/price, however, with my products having a lower quality, how can I possibly justify charging X amount based on time to create when Crafter B is charging the same X amount because her stuff’s that good? If I’m the consumer and presented with both, I’d go with Crafter B and likely think that Crafter A (me) is out of her gourd. :)
I would have to agree with Scatterbox. I enjoy ceramics at the local studio, but I’m nowhere near as proficient at it as some of the potters there who’ve been doing it for years. I’ve seen the lady who runs the joint churn out pitcher after pitcher after pitcher and while they’re all unique in their own ways, they’re all similar enough that it didn’t take her more than an hour to make the bodies for six of them. By the time she’d done the handles and and added some embellishments, another half hour had gone by and I’m sure it took her another hour or so to trim them all. (She also doesn’t screw up her pieces by guessing at glazes like I end up doing half the time.) If I made a pitcher, it would be sort of crooked, possibly bottom heavy, and likely be covered in the word’s third-ugliest glaze. And by the formula, it’d need to be priced around $80-100 dollars (maybe higher depending on how many times I had to pay the day rate at the studio to finish it). In other words, I’d be out of my mind.
I have just started selling my bags on Etsy and pricing has definitely been an issue for me.
When launching, I decided not to include the cost of my time/work as it would make my bags and other items too expensive – the competition on Etsy is stiff and there are A LOT of shops selling bags.
This, I must say, has not work for me. Even though my sales have been quite steady and good, considering how long I have been on the market and the time of the year, I feel cheated! I put a lot of effort and love into each of the bags and pillows I make, in choosing the fabrics, in taking the pictures, all other things that need to happen for me to list an item and I am cheating myself of a salary or profit.
So I have decided to increase my prices and take the hit, if there is one. At least I will feel good about myself and my business when I make a sale.
Thank you for this post and for sharing your experience. I will definitely try and use this formula and see what results I get! :-)
I’m really chewing on this right now. I’m a coach so I sell services not physical products, but I have a similar pricing problem. The community I am called to serve has financial limits. And my true-cost price that comes out of “the formula” is far to high for the people I want to connect with. I haven’t found a solution yet b/c everything I do (writing and teaching courses, coaching, etc.) is extremely time consuming. The materials don’t cost much, but MAN is it loads of work hours. Any thoughts/advice from Team Pricing?
Ah — I hear you. I think about this a lot myself, too.
Maybe as a counterpoint to your more fabulous (read: more expensive) one-on-one coaching, you could offer more affordable info products — like workbooks or better yet, audio courses.
(Do you do something like this already? I went to your site but couldn’t find a link to a “Services” or “Coaching” page.)
This is a problem I am CONSTANTLY struggling with! I try not to underprice myself but handmade being in competition with “Made in China” DESTROYS perceived value. Of course people shopping on Etsy are aware of the value of handmade (for the mostpart) but that doesn’t stop them from thinking we’re all crazy for charging what we charge. It’s a wicked tightrope act that I have yet to get a handle on.
I have been struggling with pricing for years – and today i spent ALL day doing numbers! Every time I think I have a price, I question it thinking it’s way to high. I do not understand how to put on (or how much) for a “profit” – or how do you figure out how much to base your overhead on – working out of your home – or bump it up to “maybe” someday you’ll have rent to pay?
I’ve been struggling with friends and family saying, go lower no one will be able to afford your bags. But everything I read or hear says the double/double.
How do you get over the guilt?
Just found your site and have been reading for a while – love it – great info.
Thanx =)
I think we’d drive ourselves crazy with the materials+labor+profit equation. A better model to strive for is looking at all the mugs being made out there from the $60 mugs to the $10, find where yours fall in the spectrum and then do what it takes to get your price to that point and still be making a profit: start making those mugs a tad faster/more efficiently in whatever production methods possible, purchase materials in bulk so they are at the cheapest (actually our materials are much cheaper than many other artists pay), and then, find the markets and customers who will pay the price you want to get. That may mean moving from the neighborhood craft market to a bigger art fair in a bigger town somewhere where your costs will be higher to do business, but if that’s what it will take, it’s what you’ll need to do. PLUS, someone may have already said this, but mugs are not the best item to do this exercise with. They are one of THE most labor intensive and personal items we make. Other items like vases, lamps, plates can be more simple to make and people are just willing to pay more for them… Have your prices across ALL of your production line even out so you make bigger profit on some items to cover the expected items like mugs that one needs to also make, and which may not be your biggest profit item…
ok I think I understand what you are explaining but my question is how do you decide how much you pay yourself an hour? I tend to leave that out of my pricing and consider the cost for the item and its packaging the rest is profit. I guess perhaps because I feel being able to work for myself would be payment enough lol
I’m new to the selling scene for my crafts and I personnally think I do charge to low but also feel that if I charge what i should then no one would buy it. As it is all my friends and family think i already ask way to much for my items. and I really don’t pay myself for my time at all on the current prices so i’m not sure what to do
I’m also working on having different price points
{ 5 trackbacks }