Pricing your handcrafted product is a balancing act, to be sure. And, like many of you, I’m tired of seeing under-priced products out there in the market. Devaluing craft does none of us any good.
“But pricing is hard!”, they say. I see it all the time in handmade forums: “If I price my items for what they are worth, no one will buy them.”
Because on one side of the equation, an item’s price must accurately respect its maker’s skill, effort invested, time spent, and materials used. On the other side, an item’s final price must present a compelling value to the consumer.
Here’s what we need to realize: People don’t decide to buy your product because of its actual, calculated value. No.
People buy your product because its price matches their perceived value of your product.
Like Warren Buffet said, “Price is what you pay, value is what you get.”
Value is subjective.
Here’s something you might not know about me. I’m a potter. An aspiring potter, to be sure. And I love working with clay.
I am proud of my product. I am confident of the value it provides to my customers. I know what makes it different and better and awesome. And I’ve had success selling one-off pieces.
So today, I was working through a pricing worksheet. I was trying to decide if I should take my passion for pottery and turn it into a crafty enterprise. Because while I have a deep love for the craft, and while I enjoy creating beautiful, functional items from mud and sand — I absolutely do not feel guilty about wanting to make a profit. Isn’t that the point of a business?
Here is a standard pricing formula.
material costs + (time x hourly wage) + fixed costs + profit = wholesale price
wholesale price x 2ish = retail price
(It’s a solid formula for pricing products. I hope you use it, or something like it.)
Spoiler alert: After crunching the numbers I determined that a simple ceramic coffee mug made by my own two hands would be fairly priced at $45.
I can’t say I was shocked. I mean, I understand the work that goes into making a mug. I get it.
But I had to wonder: Would my potential customer get it? Would she think my mug was worth that much?
Because if the consumer doesn’t place $45 dollars worth of value on my handmade coffee mug, the reality is that she won’t buy it.
Now – many of us would like to argue that customers should value a handmade mug more than they value a Walmart-made mug. And I completely agree. I think we all should encourage the mindful choice to spend more money on high-quality, well-crafted items that directly support our community of independent designers and artists. Valid argument — I’m so on board.
And, as makers, it’s important to be able to educate our potential customers about the value of our products.
But, when I think about this pricing dilemma, I can’t help but think of one of my best friends.
Because you see, at first glance, she would appear to be my “perfect customer”. She’s liberal, she’s trendy, she’s from Portland, and she loves Etsy. It would seem she’s my “right people”, eh?
She’s also young. She’s on a strict budget. She makes mindful choices.
And to her mind, handmade mugs — even beautifully-designed, well-thrown, meticulously-glazed mugs handmade by her best friend– can only cost $20. $25, maybe.
Balancing the equation.
So here we are, right back at question of pricing.
I say, it costs me $45 to make a mug. The customer says, she only values my mug $20 worth.
On one hand, we have “go by the book”, pricing-formula output. On the other hand, we have “what the market will bear”.
Obviously, the equation isn’t balancing. What are my options?
- Find a new customer base who values my mug $45 worth.
- Find a way to produce my mug at a lower cost (material+time)– and therefore make the same amount of profit while charging a lower retail price.
I’ll tell you what’s not an option.
- Lowering my prices unfairly and cheating myself out of profits I deserve, while unintentionally devaluing craft for the larger community.
And that’s not a good option for you, either.
So how do you deal with this pricing tug-of-war?
Is the customer always right? Or, do you move on and decide to look for a different type of customer who values your product more?
What is your ideal customer willing to pay for your product? And, at what price is your product a good value?