Wednesday, May 23, 2012

Heidi's Tips & Tricks for 5/23/2012

This week's post is a big one, and an important one for all of us... PRICING

This is a hard topic and one that I think we all struggle with. There are a lot of factors to consider with pricing your items and I'll try to address as many of them as I can.

One of the first things you need to implant in your mind is that YOU are not necessarily your own target customer. Asking yourself "what would I pay" is not going to give you an accurate measure of what to charge because, well, you are NOT buying it, you are making it! :) The proper place to start when pricing your items is to get an accurate picture of your costs.

Costs include the obvious things like material used of course, but it's a LOT more than that too!
- time to create
- paypal fees
- etsy fees
- shipping materials cost
- time to package/mail
- time to photograph & write online description/listing

AND... you want to ALSO make a profit!!

Then there is the added pressure of finding your spot among the competition and wanting/needing to make a sale in order for any of it to be worthwhile. It's a difficult balance to find!

There are a few different approaches to make. My own opinion is that you must absolutely cover your material costs, the time to make it (you can choose how much $/hr for yourself), and cover all the associated fees. Some of the other "costs", you can decide for yourself how you want to handle that. At the end of the day... if you feel content and not like you are burning yourself out for minimal gain, well, that matters.

There are a lot of theories on how to appropriately price your times. Some take the costs (as listed above) and double them for wholesale price, then double again for retail price. Unless your item is in huge demand, that model doesn't usually support itself for handmade items! The theory is also that you pay yourself the amount you would have to pay someone else to make the item. For most, that would be at least minimum wage and possibly much more. Again, I don't think this works for most handmade items. Personally, I make more "per hour" on some of my items than I do on others. On some though, I get a significant amount of personal enjoyment and satisfaction from and I place a value on that as well. It may be a very personal decision in some cases.

And don't forget... a profit is not supposed to be included in paying yourself for your time... it is supposed to be over and above that. I will admit that for some of my items, I don't do that and it is a personal struggle for me.

So, why is it so important not to undervalue your items??

- You are helping set the standard. If you price too low, it drags all the other sellers down too. Some techniques already get very little recognition as an "art" and there is a stigma that in order to sell you have to be priced low. So, that's what people do and then it is a cycle that you can't get out of. As a crocheter, I know this first hand. If you look at items you are familiar with the process of making, you can easily see how underpricing is a real issue.

- People WILL pay for quality! If you have an item that you are proud of and deserves a reasonable price (and I think we all do!), then price it that way! Yes, some of the people looking for items will be "bargain hunting"... I admit to being guilty of that myself... but those people are only a part of who is here. I would rather pay more for something that looks more professional and has good customer service than always taking the cheapest one. I will also pay more for something that is exactly what I want... and so will others.

- If you price too low... you'll get burnt out. This is a very important thing to remember. If you find yourself working like mad, possibly at the expense of family or home, and then peeking into your paypal account and being disappointed at the amount you see there... then burn out is a real possibility. You need to value yourself and what you are giving in order to do this.

- You may find you aren't making ANY profit!! And this one is scary! If you forget to include the standard fees (always 50cents for etsy and paypal PLUS the percentages for EACH of them), or forget to include your shipping costs (envelopes, wrapping, labels, business cards... of yes, and the taxes on the shipping rate you pay)... you may actually find that you are making no profit at all! That is one of the reasons it is important to calculate your profit separately from your hourly rate.

- You are labeling yourself with your prices. This is one of the things that I know is a constant to-and-fro for me. I want to be competitive... but I also believe that I offer among the BEST of similar items! I don't want to be the highest priced... but I do think I deserve a certain price for my time and costs. I want to catch all the sales because I know people will be satisfied with my items... but I don't want to lose sales if people think I'm over priced. So, back and forth I go! For most of my items, I'm content being on the high end of the range of prices for similar items. I KNOW my products are quality and I'm comfortable with the profit I'm making. But I'm also lucky because I offer a few items that sell really well and that balances those that are slow sales. This struggle is even harder for those who are in a category with LOTS of competition. For those of you... that's where it is even more important to have photos, titles, and descriptions that are second to none so that the quality of your items speaks through all aspects of your listings, including price.

Having a plan for pricing that you are comfortable with is the best place to start. Try this for starters:
... Take your material costs and the cost of paying yourself for time it takes to make the item.
... multiply that number by 1.5. Add pp/etsy fees and shipping material costs. This might be your "wholesale" cost.
... take that initial number again and this time multiply by 2 before adding fees and shipping materials.

How does that fit in? You can play around with your "hourly wage" and see what happens. It's a place to start anyway... and a place to start thinking about what should be going into your prices. 

Something else to consider... what have you bought from another seller that you have just been WOW'ed by? I got some booties for my daughter from a seller that I had looked longingly at her items for quite some time. The price though had me hesitate because, like I said, I'm a bargain kind of girl. Anyway... when I finally got them I was just blown away at the quality of workmanship! I WILL be buying more and now I'm okay with the $30 price tag because they are worth it! If you feel that way about the quality of your own items there is no reason to believe that your customers won't also!!

So... I hope that that has brought to light some of the mysteries of pricing. Like I said in the beginning... this is a HARD topic! If you have any other tips or questions about pricing, feel free to comment here. There are still items in my shop that I feel pretty clueless about pricing... and I think we probably all feel that way so don't be shy to ask people's opinions. Just remember... there are a lot of different customers in the world! :)


No comments: