Wednesday, May 16, 2012

10 Tips on How to Successfully Price Your Crafts

by Yvette-Michelle Cottle Darby

This article was written to explain in detail how to price your crafts. There is a previous article "Pricing Your Handcrafted Products," which took a brief look at this topic. However, the goal is to look at the topic more extensively and provide some tips on how to successfully price your crafts and your services. Setting a price can be know easy task and often times for those creating unique crafts and art, the idea of placing a price on their creativity can be a challenge.

It is important to keep in mind that an important component in pricing is profit. The key is establishing a balance between being competitive and profitable.

1. Mark-up

The mark-up is generally 100% more than what you paid. However, depending on the product you may be able to increase your percentage. If however, you are producing your own item you will want to consider a few key elements when deciding upon your mark-up. To keep it simple, keep the following factors in-mind:
    • Cost for the raw materials + labour cost + other cost (eg. rent, machinery, packaging, ect.)  = product/service base price
    • Your base price is the minimum amount you can sell your items for while covering your cost
    • How much are customers willing to pay?
    • Is your product unique?
    • What are your competitors pricing?

If you make jewellery how much will you price an earring and necklace set, that took you 45 minutes to make?

If the cost of the beads and finding your purchased cost $25.00 and you are paying yourself $15.00 per hour for labour and provide your customers with a jewellery book for their set. Consider the following;

Materials Cost = $25.00
Labour            = $11.25
Jewellery Box = $1.50
*Other Cost       = $2.50

Total Cost         = $40.25

*Other Cost; includes a percentage of your rent, utilities, website, online shop or cost for craft show, transportation, etc. 

You can price your earring and necklace set at $40.25 or you can "Mark-up" the price based on the quality of your product, its unique features, what competitors are selling similar products for, and most importantly what customers are willing to pay for your product.

The "Mark-up" is the additional profit you make that gets added to your business to support the growth and development of your business.

2. Method of Selling

It is crucial to identify your method of selling your craft. Where you are selling your creations will significantly impact the price by which you can sell the item. Take the time to visit the store, craft fair or online site that you are thinking of selling your creations and make a list of the prices of items that are similar to your own.

3. Target Audience

You will need to identify who you are trying to sell your craft to and where they will most likely buy your items. What is the nature of your buyer and what are their needs? What are they willing to pay for your creation?

4. Competition

Identifying who your competitors are and what they are selling similar products for is also crucial in your pricing. Identifying the quality, craftsmanship and unique features of their work, and situating yourself in the market. This also helps you to identify the unique features of your work and to find ways of standing out from your competitors.

5. Customer Service

What level of customer service are you offering. The time you invest with your clients and the care given to their needs will be a greatly appreciated. Customers are often willing to pay more for an item when they know they are receiving a quality product accompanied by quality service.

6. Raw Materials

The cost of your materials are simple items to include in your pricing. Keeping track of your raw materials and what is used for the creation of each item is important. If the same item is purchased at varying prices, perhaps taking the average cost is a method you can consider.

For example, if your purchased 5 meters of fabric at $14.00 per meter, but later returned and was able to purchase 5 additional meters of the same fabric on sale at $7.00 per meter; then perhaps the price of the material for the items you are making can be the average to the two. This will therefore make your fabric cost $10.50 per meter.

7. Labour

The cost of labour may be what you have to pay yourself or a contractor that you use to make all or part of your item. You may pay by the piece or by the hour. It is important that if you are paying yourself that you determine what rate your services are going to be valued at. Are you above minimum wage?

9. Fixed and Variable Cost

These are business expenses that you will incur during the course of doing business on a daily basis. Often it may be overlooked when pricing; however, it is crucial to factor in these cost into your items in order to sustain the cost of doing business. Regardless of how much you sell and how much you make each month, many of these cost (eg. fixed cost) are constant and must be paid on a monthly basis. Things like the rent for your workspace (eg. studio or part of your home), telephone, utilities, etc. should always be factored into the price of your items.

10. Packaging and Shipping

Your unique creations deserve the proper presentation. An investment in the way your creations are packaged and delivered to your customers are also part of your branding. This variable cost must be factored in when pricing your crafts. Your hand knitted cowl from organic wool, is a special item for which you are charging a higher price and the presentation is a factor in this.

I hope that this article helps you with your pricing and provides you with some key tips in successfully pricing your crafts.

Today we will be discussing on Crafted Spaces Radio, The Challenges of Pricing; listen in here!  You are invited to add your thoughts on this topic.

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