Tuesday , 25 July 2017

Pricing Your Products: The 411

image courtesy of D Lippens on Etsy

So first off, what does “the 411″ mean? I remember that little saying from middle school & that was like, so 15 years ago! Whoa, that makes me feel old.Weird.

Pricing Woes

Anyway, pricing products is always a struggle. At least for me it is. You have to consider so many different factors & it varies depending upon what your selling & the value associated with your product. Ugghh!

Well, I just found a little pricing formula that helped me recently so I changed all my prices in my shop & honestly I’m still deciding what I think about it. I’m still getting traffic & some sales, but not as many as I was before. I’m in the process of continuing to evaluate my market & my competitors. Eventually I’ll know if it was a good move or not.

The Breakdown

My next post will be actually showing you the pricing formula, but today I wanna talk about the parts of the formula you need to consider. So let’s get started.

Material Costs

This is the cost of each & every material that is directly used to make your product including packaging materials & marketing materials used with the product.

Labor Cost

This is the cost to make the product whether it’s you making the product or an employee making the product. This is usually the trickiest part because we tend to price our time on the high end which in the end can make our products price unrealistic.

Remember when thinking of labor costs, how much do you want to make {or pay} an hour & how long does it take to make the product start to finish.

Overhead Cost

This is everything else other than material & labor costs. I can be rent, marketing expences, tools, equipment, electricity, internet, phone services, etc.

Profit

This is what you make after you’ve paid all your expenses.

Markup

This is a percentage of the materials &/or labor cost that’s added to reach a price.

2 Prices per Product??

Now some of you may not realize that each of your products actually has 2 prices. There’s a wholesale price & a retail price to consider…that is unless you’re not interested in wholesaling at all…then you’d only have one price.

So, until the next post with the actual formula…tell me…

What pricing issues do you struggle with in your business? Let me know in the comments below!

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14 comments

  1. I struggle with this! I just got my first wholesale deal with a Mackinaw Island shop! Squeal! I had learn how wholesale pricing worked first. As I was figuring the formula my wholesale price was higher than my price I currently sell them at. My current pricing is based on my material cost only, then I up it to give me a profit but I never considered my hourly rate. But I stick to my current prices because I’m in Michigan, Detroit Metro area, where the economy has been hit hard. I can’t imagine being able to sell my stuff for more anyway.

    I am in the process of making this a biz because it has gotten to the point where it’s more than a hobby. So I am learning! I have learned a lot from this site alone! Greatly appreciated!

  2. At present, because I’ve been lucky, most of my materials cost are low, because they have mostly been given to me – like offcuts from factory shops, which would otherwise be dumped! So have factored in a pretty low price here.

    Because I make my toys (at http://www.coldhamcuddlies.etsy.com) in the evenings, when I’ve done what I can to make disabled husband comfortable, it’s more a pastime than work, but because I’ve been making toys for over 50 years, I’m quite quick at it. But I don’t time myself – some take long than others, because I’m changing my mind as I go along (and so on).

    So, really looking forward to the next post. Folks tell me that I’m charging too little via Etsy: but it’s what I can get reasonably easily locally. So….what’s your advice?

    • My advice Isobel is that if you’re selling locally…in brick & mortar stores or at craft shows, then set your prices according to the market you have there…as long as you’re making money. That’s the point of having a business. If it’s just a hobby, then you only need to break even. If you have an Etsy shop & you’re trying to bring in customers from other regions, you don’t have to worry about what your local area can afford…your selling outside your local area. Charge what your product is worth & don’t forget your time!

  3. I am just now posting things on line. I have been selling stuff on at craft shows. Most of my stuff is not more than $25. I really struggle with valuing my time and adding it to my products and also wanting to sell. I think there is still the struggle of buyer to realize how much time and craftmanship go into a product. True crafters realize this but some people compare to production pieces so its always a toss up.

    • I hear what you’re saying Lynn. I believe that if you’re selling online using a place like Etsy, the people who are there looking at your items aren’t expecting production prices. They realize they’re shopping for handmade goods.

      Your job as the seller is to decide the worth of your products, who you’re market is, & then describe, photograph, & price your products in a way that appeals to your market & shows the value of your product. Good luck!

  4. From day one I have struggled with this subject. Everyone tells me that my prices are so low. So I have raised them up slowly over a period of two years. But they only sell at the low prices. So I tried doing every formula out there but my problem is my wooden puzzles take several hours to make just one. So if I add my material cost plus say minimum wage 8.75 and then something for overhead I’m supposed to get my wholesale price. Well that price is at least double if not quadrupal what I am selling them for now. Then I’m supposed to double it for my retail price and your talking about an insane amount of mony for a childs toy. What do you reccomend I do. I know people buy them for 25 – 30 tops. But then I get people saying im not valueing my work. What oh what should I do?

  5. Pricing is hard to deal with especially when competing with Department Stores or Big Box Companies like Wal-Mart or Target.

    But spread the word – Crafters should never be taken for granted. I have dedicated my Blog to making people understand crafters behind the scenes and how much work we actually put out to offer our items, and that we deserve to be paid for our time and skill, not just our materials.

    http://dreamweaverkalla.blogspot.com/

  6. Jeannette! I looked at your website & your puzzles are amazing! They’re beautiful! I’m going to go ahead & agree with everyone that you’re underselling. For sure. I searched for wooden puzzles on Etsy, then narrowed the results to toys & highest prices. Similar products are selling around $100 each. OMGoodness girl…email me at meagan@meaganvisser.com – I’ve got way to much to talk to you about. It won’t all fit into a comment.

    Here are some quick tips. If you want to lower you price you either need to find cheaper materials or decrease the amount you pay yourself. You can also skip the wholesale pricing & sale retail only. My guess, is that you can definitely sell your products for more, but you’re not selling to the right customer. You’re not selling mass produced walmart puzzles. You’re selling handcrafted, quality puzzles. If people want wooden puzzles on the cheap, direct them to Melissa & Doug…if they want custom, personalized, individually handmade give them your business card! Email me!

  7. I have a store manager and buyer who is interested in selling my products. He will be purchasing a quantity of each of several items. I am struggle with the question – do I offer a discount for quantity or other incentive.

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