Welcome to the third edition of the ArtFire Success Series, where you learn how to make the best experience out of your ArtFire shop, for both you and your shoppers!
Today we cover pricing.Your price tells a story: make that story a good one!
Imagine this:You’re on the hunt for a custom made, hand-stamped necklace. You want handmade quality at a reasonable price. You’ve narrowed it down to two… Choice #1 looks like quality work and includes a free gift with purchase and is only $50. Choice #2 matches the quality of the first but is $30 more, and it comes gift wrapped with a special note from the jeweler. Which one do you choose? What factors going in to making your decision? Your first choice seems like a great deal because you’re essentially getting two things for the price of one, and if the quality isn’t great you at least didn’t pay much money for it. But what if the end result is the opposite and you end up with two great custom items for only $50? What if the shopper is new to the business and is testing out prices?
Why should I buy your product as opposed to someone else’s?
Pricing, like all experiments, need a hypothesis – something that you want to prove:
“Why is your $400 original artwork piece worth buying?”
“Because it reflects how much time, effort and money went into not only the physical making of the painting but also the money going into the venue I’m selling. Shoppers will recognize this and agree.”
Not a bad hypothesis, it takes into consideration the various investments that go into professionally selling an original art piece and shipping it out. Let experiment #1 begin. You will learn much about your business and its audience in the next 30 days to then start a new experiment.
The Basics of Pricing
Even though pricing works on trial and error there are steps and even a formula that you can follow to make sure you’re pricing your work accordingly:
- At minimum, cover costs.
- Breaking even on your product is not necessarily a bad thing, specially if you’re just starting out, this helps you figure out who your customers are and to start building a following.
- Charge for the value you’re bringing to customers.
- If you’re going to charge for value then you better deliver, set the foundation for trust between you and the shopper, and keep them wanting to come back.
- Leverage what your competitors are charging.
- Do what your potential shoppers would do, compare prices with your competitors and see how compare. You could charge what a larger competitor is charging but at a lower cost for you.
- Make the price relatable.
- Think about what sort of clientele you want to attract. As creatives, we often think that our only audience are people much like ourselves. If you’re constantly pricing your work for that audience, then you’ll likely never be able to successfully raise your prices. Instead, consider the audiences that would be willing to pay a lot of money for your original work.
- The economy changes, your business changes and your prices should reflect those changes.
Affordability is a relative concept and as merchant you need to keep this in mind because this means that shoppers from every economic level will reach your product and want to buy it; pricing your work is not just about what “you” would pay for it and whether you could afford it (you already did afford it, you created it!)
Much like handmade items, vintage pieces require an outpouring of energy to prepare for listing, from cleaning, steaming, styling and photographing these one-off items, not to mention sourcing. Account for all this effort when pricing for vintage, in addition to the proven durability and high quality of the items.
Build Value Based Trust With Shoppers
As an online merchant AND shopper, you know that earning a shopper’s trust, and in contrast trusting a merchant for the first time, can be quite the experiment on the human condition. Online shopping and in-person shopping may be completely different ball games but together they compliment each other.
Yes, pricing your handcraft items can be tricky, they’re your handmade babies and you want them to go to good homes…at a reasonable price that reflects your efforts, expertise, and professionalism. Pricing may seem like a difficult task specially in the early stages of your business, you’re experimenting, branding your business, making a name for yourself. All you should really focus on is staying consistent with the quality of your work and letting it speak for itself (along with your excellent Customer Service skills).
The Top-Down Approach vs. The Bottom-Top Approach
This popular top-down formula will help you figure out how much to charge for your item:Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail
- Materials: Make a note of the materials you use to make each item and how much you spend on them per item. If you sell vintage items or craft supplies, input the cost of the item when you purchased it. (Google spreadsheet)
- Labor: Consider your production process task by task. All in all, how many hours does it take to prepare this product for sale? How much should you pay yourself an hour for all you do? Include production time, packaging time, shipping, photo editing, email replies.
- Expenses: List business expenses not tied to a specific item (ex. studio space rent, utilities, equipment purchases, gas money for driving to buy supplies, shop commissions.) Next come up with the number of items you’d like to sell in a month. Divide that number into the total expenses. Track your expenses carefully so you can come back to it as you learn about pricing to sell.
- Profit: Where are you headed with your business? This number depends on what you’re selling, your material cost and unique talent put into the work. If your business is just starting off, breaking even might be a great way to start and then you can re-evaluate your pricing as your business grows.
Perhaps you already have a price range in mind for your items and you just want to figure out what your expenses will have to be to make that possible. This is what we call the bottom-up approach of pricing. This approach uses research and testing to determine a price you think is right and then figure out how much you’d ideally spend on each part of the process so that you reach this pricing goal.
- Do research. Consider where your prices exist in the wider ecosystem of items available on ArtFire and online. How do your prices compare? Remember, items from big company stores don’t have the added value of a personally handled, one-of-a-kind piece. Their prices can provide a point of reference, but these retailers aren’t your direct competitors.
- Determine your target audience. Get a clear picture of your customers and for what occasion they are purchasing.
- Test and gauge response. Once you land on a price that you think makes sense, seek unbiased feedback from fellow business owners and shoppers. Ask questions and take cues from in-person shows. Talk to people in your network or seek advice through the ArtFire Forums. You can also set varying prices for similar items in your shop to see how well they sell – a process known as an A/B test.