Pricing handmade: why you need to raise your prices
You can watch the video, or read the post below.
1 – You guessed your prices, not calculated them
If you’ve guessed your prices, meaning that you’ve looked at your product thinking: “You know what? I think it’s worth $39, and that’s what I’m going to sell it for”, then you’ve probably underestimated, and I want you to raise your prices.
2 – You based your prices on opinions of people who are not your target market
Maybe you’ve asked your family, friends, or in a Facebook group how much you should charge for your product or how much would they pay. The problem is, they are not your target audience. If they want to pay $10 or $100 for an item shouldn’t matter. What matters is how much it cost you to make it and how much would your ideal customer pay for it. That customer is likely not in another Facebook group for makers or Etsy shop owners, so make sure you’re not basing your prices on opinions.
3 – You’ve just used the pricing calculator and realized you were missing a few important elements in your pricing
I have a free pricing calculator that can help you price your products here. If you use it and find out you’re missing some of the important pieces in your pricing, like time or overhead, you should raise your prices to account for that.
4 – You’re not paying yourself more than the minimum wage
If you work the equivalent of a full-time job or more on product creation, packaging and sending orders – but you’re still not at your revenue goal/profit goal – you’re undercharging and this story has no pretty ending. You need to raise your prices now or you will burn out and your business will never grow.
5 – You don’t use perceive value in your pricing strategy
Perceived value is what people perceive the value of your brand and products to be. It doesn’t necessarily reflect the cost of your product, but more what they are willing to pay for it. Why do you think Chanel can sell their bags for $2000? Do you think it costs them $1000 to produce them? Heck no. It’s brand experience, packaging, and how the experience of shopping with them makes you feel.
Sometimes for the customer, the fact that you have higher prices is a sign of higher quality. That’s why by raising your prices you can actually make more sales.
6 If you were to sell your products to wholesalers, you wouldn’t make money.
As a test, divide your prices by 2 and imagine that’s the price wholesalers are buying your product for from you. Are you losing money? Neutral? Making money? The reason I’m asking about that is that a lot of shops have their retail prices that are closer to what their wholesale price should be. Are you one of them? Even if you’re not thinking of selling to wholesalers, that’s a handy test to help you determine if you’re not charging enough for your products. If you’re not making money if you divide your prices by 2 and selling that, you need to raise your prices.
7 – You’re hurting the handmade community
Made in China is not handmade and always keeping low prices makes it very hard for the community as a whole to raise the prices. Repeat after me: handmade is not cheap. It’s actually opposite of that! People who shop handmade for the good reasons, who actually are your ideal customers, understand that. They will pay more for handmade. By keeping your prices as low as possible you’re doing a disservice to the community in general because it’s harder for people to put their prices up. It’s also confusing for the customers when they see a product for $5, a similar one for $30, and yours for $60. They don’t know that the person who has a $5 product doesn’t make any money, the $30 product guy is just breaking even, and you’re there, trying to sell your product for $60 because that’s the price it should be. So please, as a community, let’s raise our prices so we can stop attracting customers that are better off shopping on Amazon.
The last thing I need you to hear is this: YOU ARE WORTH IT! Most of the times pricing issues come from uncertainties and doubts about ourselves and our work. You are talented, you have a gift that no one else has (yes, same skills maybe, but each design is unique to you), you work hard, and your products are beautiful. You are worth it. Raise your prices.
What do you feel is your pricing strategy doing for you at the moment? Is it working? Do you need to raise your prices? Comment below, I’d love to know!
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