It seems to me that the moment has come when we should focus on the valuation of our products. I have seen great products more than once at prices comparable to mass-market massages and was shocked. Why? Because I had the impression that the costs of materials were counted + a modest margin, but it did not seem realistic to me that a person would also count their production costs there, i.e. the time spent on making the work.
My impression (from what I read a bit of different comments on the groups) is that many people have standard stores as a benchmark (i.e. their reference market), the so-called mass stores. This is a fundamental mistake! I understand that some people want everything as cheap as possible, as quickly as possible and with the best quality – they are the loudest on the web and they probably influence your decisions. But it is impossible to run a small-scale handicraft business effectively. Besides, this type of customer is usually the most demanding and it is from such people that returns often come. Consider whether your ideal client really looks like this? It is not without reason that in an earlier article I wrote to you about imagining the client you want to reach. So think back to that person and their values. It is probably a person who appreciates your work and the time you put into producing it, isn’t it?
So what is our benchmark? Who should we compare ourselves with? With other handmade stores! Preferably those that have already established a certain position on the market. And they certainly did not achieve this in “at cost” prices.
How do we calculate our price?
- First, let’s think how much we value the hour of our work (it will probably be a different amount in each country) – our dream hourly rate
- Let’s count how much time we spend on making a given product
- Let’s summarize the material costs (usually you probably buy more material for several products, so you need to count how much of it is used in a given product)
- Let’s count how much time we spend on promoting the product (this is also our working time, which in the future may help us decide to delegate this task to someone else)
- We will add other operating costs divided by the number of products
Our starting price = (Hourly rate x time spent on product) + material costs + (hourly rate x time spent on promotion) + other costs per product
I am curious to what extent the price differs from yours so far. If it does not differ or is similar, then bravo! And if it is different from what you assumed, then don’t worry! ? you can always rebrand your brand ?
Also remember that this will be your starting price, based on the “dream” hourly rate, including all additional costs, etc. I wrote it for a reason. There is such a marketing practice that even if there is no promotion, sellers cross prices to attract customers – you have this stock to do it easily ? Someone will probably buy at a standard price, but it may turn out that a product does not come off and you need to “Boost” its sales with additional promotion (although in the case of handicrafts it seems more reasonable to wait for the right customer than to sell it at all costs – after all, it is not so that you have a lot of products in stock and you have to get rid of them as soon as possible ?). And there will be no such drama, because you have a buffer for this purpose – in the end you will simply have a lower rate per hour, not a loss, or at best a breakthrough (it is also worth setting a limit below which you should not go down). To this you can, for example, add a permanent discount above a certain amount or a discount for regular customers, for another order, etc.
And again, go back to your client. If he appreciates your handicraft and will promotion attract him or just the product? Will the 10% reduction really be the decisive factor? Is it worth lowering the value of your product if the customer would buy from you anyway? Isn’t it better then to give a discount on next product? Think carefully before you get into the topics of promotion, because then it can be difficult to wean customers…
If you value yourself, others will also value you. I know that culturally in some countries it is not welcomed well, but probably because of human jealousy … At least that’s how I see it. But more and more people understand that handicraft is unique, it is a piece of art, hours of work spent on his product, the creator’s idea and they want to use it! ?