In my earlier posts on What's Your Worth and Matchmaking Ins and Outs we looked at figuring out how much you need to make in order to cover basic costs of living, extras and dreams. This method is in opposition to what people are normally taught about budgeting which would be, take what you earn in any given time, work out what your bills are and live off the rest – and if you don’t have enough, cut out some expenses.
But don’t just take my word for it - after my post, my friend Sonjette, directed me to Ginny Wiehardt’s About.com page interview with Amanda Clayman - a professional money-matters advisor to artists, on Artists and Money. She makes the same recommendation I was making. Take a read, it’s got other good advice as well and I truly believe with any advice you get, yes, including mine, you should always look around to see whether other people are agreeing with it or tearing it apart before you take it in as part of your regimen.
Costing and Pricing – what should you do when?
Ok, easy to answer- costing should be done before pricing. But, a lot of us don’t do that – we just go ahead and price and omit costing altogether and sometimes that seems to work fine, for instance when your product has super cheap materials/components and takes very little time to make and you know already that the market buys products like it at a high price. But when that’s not a clear case, costing is a vital part of deciding what your price will be.
And then there’s always another approach – suppose you are going to start making something, for example, friendship bracelets – your design may be a bit different, but essentially, your product fits in with an existing category – so you may want to start with some Market Research to find out what the going price range for your product would be. Effectively, you are finding out your price range with this.
Marketing and Market Research
There are of course other things that will affect what price you can get paid for your product – your ‘Star’ status for one; if you are a well know artist/designer, you can probably make the exact same item as lesser known beings and get much more paid because of this. Do you have an idea of your own reputation? Are there things you can do to improve your standing? Now, there’s an interesting thing to look at this in another post in this series.
Good marketing can also improve prices you can get – promoting your items as more durable, more fashionable, better for you and the like can capture an audience willing to pay for that. Sometimes, professional product presentation makes all the difference, but how do you know what will capture people’s interest and get you in the doors you want to walk through?
We often hear the term ‘Market Research’ – especially for us in the Caribbean, if you go to any loan or funding agency for help, you will most likely be asked for this. It doesn’t have to be a daunting process to carry out and can be very useful to you, giving you a feeling for the response you will get to your product.
There are simple starter things you can do:
- Look around you – what are people using? Are they cheap goods, high end?
- Buy local magazines, look in the style section of paper to get a feel for the trends
- Visit shops that sell items like yours - ask for a price-tag to be turned over here and there to get an idea of what things are selling for
- Ask shop assistants what sells best, what’s popular
These days with the internet you can also use more novel approaches – I think that’s a whole other post as well, but a simple one for instance; how about sending out an email to your friends with a picture or a few and some info about your product asking them a few questions:
- Would they be interested in buying it? Y/N
- If Y, pick from a list the highest price they’d be prepared to pay for it
- Do they prefer sample A, B, or C (maybe different colours or designs)
- Where do they shop most? Mall A, Mall B
If you do use email though, always remember not to seem like you’re spamming people - start by politely stating the intention of the email and ensuring everyone that if they wish not to receive further emails like this from you, they should reply with “Remove” in the subject line and you will remove them from your list.
Challenges of Costing & Potential Pitfalls
After all our fun Market Research though, we do still need to be able to say what it costs to make our products. When we omit this step, and go straight into selling, this is where we potentially end up in the biggest patch of quicksand struggling to stay afloat - What happens if you find your costs turn out to be higher than your price? The obvious thing is that you run into some potentially serious financial trouble. What may be less obvious at first is that you have also set up an obstacle for yourself if you want to attempt to correct the situation; Once you set yourself up with low prices, it’s difficult for you to just raise them by any significant amount as people who already buy from you will most likely feel you’re not dealing above board with them. They will wonder what changed about your product and explaining that you didn’t cost it properly is not going to paint you in too professional a light.
On the other hand, if you price too high, thinking your product is up there with some other high priced items and your buyers beg to differ, it’s not so easy to just drop prices either; people who bought at the high price may feel ripped off and you lose potentially good clients.
What you need to aim for is having the buyer feel comfortable that they are purchasing something that is worth the money they are paying – whether that’s a low or high price and knowing that your own costs are fully covered. Come back later this week and we’ll talk about ways to cost your products.
In the meantime, what are your experiences with or tips for Market Research, or costing/pricing stories?