Getting the price right

I have returned to writing a series of articles on the business of business…. and one of the most challenging aspects of owning and running a handcrafted company is determining the proper price to charge for the goods.  I think every artist struggles with the value, worth, market bearable price, and profitability of their work.  When you begin to tear apart the concept of price there appear to be a few key factors:

  1. The cost of the materials involved – this should make up a part of the price.  The raw cost of materials should always be the foundation of the price for your work.
  2. The cost for the time invested – Your expertise and time spent creating must be factored in.  (At some point when time is extensive there might be a threshold of what the market will pay for your work… we will discuss that later).
  3. The comparable to other similar work on the market – It is always challenging to be the highest price in the same genre of work, or the lowest.  People will often undervalue your work if your price is lower than others.
  4. Know your audience – Steve’s soap has a much broader audience than my shibori.  Knowing the demographics and economic condition of your audience will help to also gauge your price.
  5. Know your competition – Knowing the competition, and finding unique niches to differentiate yourself from the rest will also add value to the product, allowing the price to be a stable one.

Here are some practical suggestions for getting started at determining your price:

  • Go shopping to find out who does what you do, and what they charge.  Speak with fellow artists.  Often they love to mentor on issues like pricing.
  • Compare their products to yours… make notes of what is different, what is similar…. these will come in handy later.
  • Compare your work to theirs – what differentiates yours from others?
  • If you do set up at art fairs begin to take note of who visits your tent and buys from you.  Is there a common thread of who is attracted to your work?  For example i can tell you that most of our customers are women, and they are concerned with all of the chemicals in our world, so they like natural things, they love scent, and they buy with their eyes first so display has to catch their eye.
  • How much did the raw materials cost?
  • How much time did you invest in transforming the raw materials to your product?

There are a ton of people that want to tell you formulas – like 2.5x the price of raw material = retail price.  Sometimes the formulas have to be tested in the market you are in.  If you live and show in an area that is economically depressed you can ask any price, but the market may not bear it.  On the other hand you may live in a prosperous area and the market may be able to bear your price but you have it too low.  This can create a barrier to sale because your price undervalues your work.  Be honest, be fair.