How do you price your products? When you see competition in a market do you aim to be the cheapest, or the best? Are you losing money on any of your products in favour of trying to gain a sale?
You can see it almost whenever you shop online. There will be several prices in and around the same value, and then the one that undercuts them all. The lowest of the lowest price. While this can be good at times for grabbing attention, sellers need to be careful about how they are setting their prices.
Assuming that the lowest amount is going to always get the sale is faulty. There are a lot of customers, particularly those who have the means to not need to save every cent they can, who often avoid the lowest price. This is because price, in addition to being an attention grabber, communicates value.
If your valuing of your product is the lowest of the low, it may automatically be negatively associated with that level of quality. Particularly if you are making your product yourself, as in Etsy or other craft oriented sites, you are putting a lot of time and effort into producing your product – don’t sell yourself short!
So how do you stop this?
How you should be pricing your products
(Labour + Materials) x 2 = wholesale price Wholesale price x 2 = Retail price
These are two of the simplest formulas available for pricing. They are designed to ensure that you are not just charging for part of the project, but for your labour, your efforts, and your quality.
There is a tremendous tendency to undervalue what it is you are producing with handmade products. Let’s look at the example of jewellery. Jewellery can be very time consuming and complicated to make, yet a lot of it online ends up being dirt cheap for the simple reason that the crafter figures that s/he only paid very little for the materials. What this doesn’t take into account however, is the labour that went into this craft. Instead of selling your necklace for $4, try selling it for $10.
A good standard to follow is the market. Price competitively, but not by just purely undercutting, don’t be afraid to be comparable in price instead of competitive. You can do this with a simple product search, even picking by most popular sellers.
Why you should care about pricing
Right now this business of yours may be little more than a hobby, a way to make some extra cash. But what about later? What about if a company becomes interested in your products and asks you if they could carry them? This would be exciting, but you would have to set prices then too, and it’s better to have them set first so that you get the best deal.
Making sure that you price fairly doesn’t have to mean ripping the customer off, but it doesn’t have to mean working for free either. Don’t be afraid to price comparably, and reward yourself for the work you’ve put in.