If you ever want to start a heated discussion between craftspeople, bring up the topic of pricing. How to determine the value that you will charge for your chosen craft is an extremely emotive topic for many people. There is a well thought out ‘formula’ that is suggested as the model for calculations. A post at Ink and Spindle (just one of the many, many places you can find this discussed) explains it well (and if you read the comments following that post you will begin to see the passions that this topics can arouse.)
In simple terms, the theory is that materials plus labour (charged at an hourly rate between $10 and $20 here in Australia) provides you with your cost price. (I note here that for many craftspeople that rate is covering their skills as a designer, maker, marketer, cleaner, material sourcer, etc. Just sayin’.) By doubling it you arrive at your wholesale price – a price that allows you to cover your overheads like electricity, insurance, rent, machine maintenance, accountants fees, bank fees, advertising, marketing, product photography, packaging, labels, care instructions, and all those other little things that go into the production of any product. That means that if you are able to sell your product to a retail outlet to on-sell, you aren’t selling at a loss. (Because that would actually defeat the purpose, surely?!) They, having their own overheads to cover, will sell it for double the price they buy it for. And that makes this your retail price.
Which all makes sense until you start doing the calculations. Amongst the many, many craftspeople I know, who make items to sell, I can count on one hand the number who actually apply this formula without modification. Sometimes the modification is sensible – very low overheads for example, or absolutely no intention to wholesale, so a lower retail price that still allows for reasonable profit to put back into the business. But often the modification is based on a statement like ‘but no one would want to pay that much for this’. And there you have it. A self-licking ice-cream, as a colleague of mine once put it so nicely. Craftspeople sell for lower prices thinking that people won’t pay for higher prices, so the customers expect those lower prices to be the usual price. Some craftspeople feel guilty charging ‘higher prices’ and will make statements like ‘but I only want to cover my costs so that I can keep making things’. Which is all well and good if you are making things as a hobby, but is that self licking ice-cream if you are in business.
I am guilty of all of these things. I have said, both out loud, and in my head, “I couldn’t charge that because people wouldn’t want to buy it at that price.” I have said ‘oh but I am unknown, so I will have to have lower prices to start with’. How ridiculous is that when you think about it – takes the same amount of time, materials and skill whether you are known or unknown. I have improved my processes, reduced my material costs, and streamlined some practises so that my making is more efficient, which means that the gap between my ‘retail price’ under the formula and the price that I sell my products for is slowly getting smaller. (I still couldn’t ‘wholesale’ my bags and properly cover my costs at this point though.)
But I had a revelation tonight. I was comfort browsing on a discount website that I like (sad but true) when I saw that they had handbags on sale. I was having a look at what styles they had etc when I looked at the prices. These bags, made in a factory in China, from synthetic materials, and on a discount site, were selling for over $200. And no one was commenting ‘oh that is too much for a bag made in a factory out of fake leather that will peel after I use it for a while. I don’t know the person who made it, or how long they have been making them for.’ Most consumers would look at it and said ‘I like it’ or “I don’t like it” and “I am prepared to pay that” or “I don’t want to spend that much on that bag.” End of story. The brands, while well known as being ‘fashionable’ are not necessarily known for having high quality. Often you are paying for the cachet of the label, the trendiness of the design, and not the care with which it was crafted.
My question is then, why so many craftspeople, myself often included, spend so much time worrying about how much we are going to charge for an item made with skill, love, original design, integrity, and made locally and ethically? If a customer likes our product they will buy it. If we are worried about whether they will think it is ‘worth it’ then maybe we need to think about how we are marketing and presenting our product. Is it a ‘handmade tea towel’ for example, or an ‘artist’s original design hand printed on eco-friendly ethically sourced cloth, that is a piece of art in it’s own right, but can also dry dishes’? (You will note that I don’t print tea towels so am not using my own work as an example!)
I am not about to hike my prices up to over $200 for a tea towel, but I am going to remember that if I don’t value my work, why should my customers? Ruminations indeed.