How Do I Price My Handmade Goods?

[Epheriell]

I know this is a perennial (and controversial) question, and I had one of my blog readers ask it. I wrote about it over there, but thought you guys might like to have a read, too! :)

Please note - this is aimed at professional artisans, not hobbyists. We price differently! :)
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Today’s question is from Linda Ursin, and she writes:

**How do you know what price to set for your crafted items?**

Ahh, the age-old pricing question! We all ask it – and chances are, we’ll keep asking it for as long as we’re in business.

I hate to break it to you, but pricing is never a done and dusted thing. As your business grows – as you grow as an artisan – what you make and what you charge will evolve with you.

There is no one-size-fits-all magic bullet to pricing. Sorry!

However – there are some tools, guidelines and strategies to take into account when you’re pricing your wares to ensure you’re making the money you need to be making – and making what you and your work is worth, rather than underselling yourself.

Underpricing is a HUGE issue in the handmade community, and anything I can do to battle that is a good thing in my book



1. Price With The Head

Let’s start with the most basic of tools – the formula. I promise it’s not too scary!

I have found many formulas out there. The most fundamental and basic one is probably this:

Cost Price (labour + price of materials) x 2 = Wholesale

Wholesale x 2 = Retail
So, what does this mean to me, and you? Well, say you have a labour cost of $20 per hour (think about how much you could live on if this was your full-time business!). And your materials cost for an item was $5. Lets say I made a pair of earrings that took 1/2 an hour.

$20 x .5 = $10 labour + $5 materials = $15.

$15 x 2 = $30 = Wholesale Price
Now, if you want to make a profit – which is the amount you have to grow and re-invest in your business - you should double this amount for Retail, which equals $60. (By the way, the retail price is what you should be selling for online, and at markets.)

Sounds like a lot, hey?

But, in professional handmade business circles, this is standard practice. It is difficult for those of us who do this as a hobby to look at it like this sometimes – and when you’re competing with people who sell at a price that doesn’t even begin to come near their true costs, you might feel like you’re being greedy.

Remember – hobbyists aren’t trying to make a living out of selling their craft – they’re just trying to cover materials costs and maybe get a little extra on the side. That is how they can afford to charge so little – their livelihood is not relying on this money.

Also – if you’re selling internationally – and especially if you’re selling in another currency in some places (for example, I still sell in USD on Etsy because I’ve found through experimentation that listing prices in AUD puts off my American customers from buying, but it doesn’t bother Aussies to buy in USD) you need to take exchange rates/paypal fees/paypal currency conversion fees etc into account.

For those of you who want to do a super-serious, completely in-depth calculation to work out your prices, check out this excellent article by Australian Jeweller Simone Walsh (http://www.simonewalsh.com/about/articles/pricing-for-craft-design.php).

When you graduate from a hobbyist to a business, you’re going to need to re-think your pricing. Starting with a simple formula like the one above is an excellent start… but it’s not the end of the story. Once you know mathematically what you should be pricing, you need to turn around and look at your price from another perspective.



2. Price with the Heart

There’s more to price than the basic in and out formula. Why do you think Apple has such a huge profit margin compared to other tech companies?

It ain’t because their materials and labour costs are way lower. No, it’s because they’ve built a brand that enables them to charge twice as much for pretty much the exact same technology as their competitor – and their customers are not only happy to pay, they’re ravenous, raving fans, just dying to drop another wad of $$ on the new model eye-phone, even when their ‘old’ one works just fine, thank you very much!

That, my friends, is the power of branding, and that is where pricing with the heart comes in.

Someone who outlines this very issue excellently is my friend Megan Auman. She actually wrote a new post on this recently (http://designinganmba.com/2013/02/28/latte-brand/) – but she’s been writing and talking about this issue for a long time now.

You need to start looking at your brand from the outside – through the eyes of your customer. Visit your shop and pretend you have never been there before. That it’s just a shop you’ve stumbled upon while browsing Etsy. Even better, pretend you’ve stumbled across your band on a stand-alone website, or in a retail store! (Etsy can sometimes have the issue of making people expect artificially low prices.)

What does it say to you?

Does it say ‘professional artisan’?
Does it say ‘high-quality craftsmanship’?
Does it say ‘unique, exclusive design’?
Does your brand scream ‘cheap’ or does it scream ’boutique’?

I want you to be intentionally blind to the prices – blind to the fact that you make these things. I want you to pretend you’ve never made one of your whatevers, and that you don’t have the skill or the inclination to make it.

What would you expect to pay for it? What would you be willing to pay for it?
Take this to another level. Are you even your target customer? Because hey, maybe your target customer is someone who is willing to pay WAY more for your whatever than you would. What might someone really be willing to pay for your wares?

A good way to research this is to show your product to friends or family. Especially those who are a little bit removed from what you make. Ask them – ‘if you saw this in a shop, what would you expect to pay for it’? You might be surprised.

I’d like to let you in on a little secret.

I actually raised my prices 2 times last year. The first was a small, 10% rise in April. The second was a much more dramatic rise in September (and honestly, I have to thank Megan’s talk at the Artful Business Conference here in Australia for finally giving me the push I needed to take that step).

For example: at this time last year, I was selling this pair (https://www.etsy.com/listing/54722032/simple-sterling-silver-earrings) of sterling silver earrings for $22 ($22!! I seriously can’t believe that figure now – SO low!). Then it was $25. Now it is $35, and I’m much more comfortable that I’m on the right track with my pricing. Megan would probably tell me off – tell me I should be charging about $60 retail for them – but I’m not quite there yet! Like I said at the beginning, you’re never ‘done’ with pricing.

In the first 2 months of 2013, I sold around the same volume of jewellery on Etsy as I did this same time last year. (I sold a lot more overall this year because the business on my own website is much, much higher now). However, guess what? My revenue – the money I earnt – from those same volume of sales? It’s DOUBLE what I earnt last year. Therein lies the power in raising your prices to what you and your work is worth.

Not only that? I am much more comfortable with my prices now. I am a professional artisan. This is my livelihood. I have years of skill and practice. I make an excellent, quality product. And my prices reflect that.

Do yours?

{Original Article here - http://www.createandthrive.com/ct-qa-how-do-i-price-my-handmade-goods}

[Former_Member]

Very accurate and informative post! Thanks for sharing!

[Former_Member]

in depth and inspiring. thank you!

[Former_Member]

Could I be cheeky and ask what you think of my prices? I would really really appreciate it :0)

[Epheriell]

Sam, my first instinct is that they're on the low side, especially if you are hand-making the polymer clay cabochons!

[Former_Member]

Jess,
I really appreciate you taking time to share this with us, but what about the vintage guys? I for one spend a lot of time trying to find cohesive items for my shop, not to mention spending time listing every single one.

Even upcycling items is so difficult! I almost feel bad charging so much for my upcycled items! Do you have any advice on this? :)

Best,
Kelly

[Epheriell]

Kelly,

I wish I could help you with that, but I have NO idea when it comes to pricing vintage items! Looks like it's something someone in the know definitely needs to write about.

[Former_Member]

Ok thank you very much Jess. Yes I make everything that is polymer clay in my store, from the colour mixes to each individual application of petals :o)

[PotteryLodge]

I continue to have problems with prices my items. I want a variety of people to be able to afford my work, but at the same time it takes so much time to finish a piece. I haven't had any sales (but one from a family member) so prices need to stay affordable to give people a chance to buy and see my work for themselves.

[Former_Member]

A-to-the-Men

I raised my prices twice last year & I'm just about at a retail price level. It hasn't stopped people buying & my business continues to grow. There are plenty of customers out there who are happy to pay prices that reflect the quality & workmanship of our products.

[Former_Member]

I feel very confused about pricing as I'm quite often given opposing opinions :0/ A store owner recently told me I shouldn't expect to be paid for my time, because I'm making the pieces whilst looking after my disabled son? so I haven't been asking for what I consider is their real worth. She wasn't very nice to me, even though I sold and had stolen from that store way more than the other jewelry sellers. Ever since I've been very disheartened and have lost confidence in it and myself :0(

[Former_Member]

Pricing is a huge struggle, especially for me with crochet. That's part of what held me back from opening my shop for the longest time. Might have it right, might not :-)

[Former_Member]

Thank you! Just what I needed to hear.

Also, Sam your time is indeed valuable! Your work is really cute and nice,stay true and I wish you much success.

[Former_Member]

Lovely, thoughtful article. Unfortunately I keep feeling that the pricing equation does not apply to paper crafters in the least. If I was to apply that formula to my cards, I would be up somewhere around $10 each. That's more than Papyrus charges for crying out loud...

That said, I did raise the prices of my coasters & hand stamped tags last year and it feels like they're more accurate now. Of course, when I raised the coaster price I was convinced that I would never sell another set ever again. Amazing how we beat ourselves up, isn't it?

[PaperDotCo]

Thanks for the informative post.
I still struggle with pricing, and it is tough when other shops can offer it for less.

[NatashasDesignz]

This thread is so interesting. I am having the same problem and getting so frustrated. I am a business but don't seem to get my pricing right.

I haven't been getting many sales so have asked the lovely Etsy community what they think (baring in mind I hand Sculpt my Flowers using Polymer Clay then incorporate into my designs)

Some have said they are way to low, so I take a look at my prices (Aiming more toward the Wedding Market) and increase just slightly, I would then get another comment saying they are too high.

I really do need to get them right but really don't know where to go from here now

I do agree that they should not be too low and do feel that the problem is partly because we are competing against hobbyists or newbies that aren't aware of how things work to be successful

[Former_Member]

Hi Natasha :o) I was just about to convo you about changing to $, but you've already read the post so I don't need to Lol.

[Former_Member]

I too have trouble with this subject! This was a very interesting post! Thank you for this!