Pricing Etiquette Don't
Let's dive right back in to that pricing subject we did a little bit of work with some pricing formulas we backed into what our take home pay could be at a certain price we talked about how pricing is marketing um we also looked at that bottom up approach which is awful which we also sort of covered in the product profit segment um but now I want to get into a couple of the squishier topics around pricing um particularly when it comes to pricing etiquette and then later um to working for free or working for exposure um so first and foremost um I want to say don't change your price is too often it's perfectly fine to market test your price is um but if you change them really often unless you have tons and tons of customers and tons and tons of sales that's not going to be super effective um at getting you really good useful data right if you sell something you know if you sell ten products a week and you're changing your prices on a weekly basis or maybe even a monthly basis um and it's...
lots of different products that's not going to give you a really accurate picture of why those people are your sales were going up or down you might be tying your increase or decrease in sales to your increase or decrease in prices when really it was due to some other factor if you leave them up for a longer period of time over, you know, several months for example um you'll be able to sort of smooth out for those other factors a lot mohr and you'll be able to get a better idea of whether or not that pricing change is what's driving um or inhibiting your sails right um people ask me all the time well so when do I change my prices? How often should I change my prices um and I like to start with a bottom line answer to that which is that, um inflation at least in the u s is around two and a half percent per year historically so if you're not up in your prices bye bye five percent every two years to begin with you're already losing money just because of the national and global market um I would say that if you are changing your prices every year or less or less frequently I should say, um everyone or more years that that's perfectly fine, perfectly reasonable and people expect that to happen. Um, prices change at retailers all the time. You don't expect the cost of a lot at your you know, um corner cafe to stay the same price for the next five years um so that's something that your customers built into expect anyway um it also in that pricing is marketing vein shows your customers that you are becoming more skilled and becoming a more successful business person down the line if people see your prices slowly going up over time and I mean a little more maybe than five percent a year, but if you know five percent every two years, but if they're going up by, say, five percent every year or ten percent every two years um, that sends a message to your buyers that you're going places as an artist and as a business person, right? Um other people are clearly willing to pay more for what you do, and as long as they, um, have had a good experience with your product in your brand in the past, they will be too they'll be willing to go along with that, and they'll be willing to take that price increase in stride. Um, you don't wantto, you know, double your prices overnight unless maybe you're in the wedding invitation design business, in which case that could be great for business. Um, but having a a slow and steady increase in prices is perfectly reasonable. Um, and from the service side of things, um, you can increase your hourly rate if you bill for your design services or your creative services on an hourly rate um, it's perfectly fine to increase those prices every year or two also um it sends the same message and people are all so conditioned to expect that that will go up gradually um you can use it as a marketing tool I like to do this you can send a an email at the beginning of the year or the end of the year to all of your current clients especially those you haven't worked with in a little while that says just a heads up my hourly rate is increasing from ninety dollars to one hundred and five dollars in twenty fifteen um as a um current client um or a preferred client or whatever language you want to use um if you hire me for anything in the first three months or six months or whatever it is um you can lock in the the lower twenty fourteen rate like well grandfather you in um and that can remind people that you're out there and still available to work with them um it shows them again that you're going places that your rate is increasing because other people are willing to pay you that um and it lets them feel like uh you really care about them because you've given them the heads up first of all, they're not just getting a surprise bill that's higher than they expected um and you're giving them this like special deal where they still get to pay the same rate for a certain amount of time um so perfectly reasonable to change your prices as long as you're doing it sort of deliberately with heads up um if you have an online store you khun do a similar thing where you post a message on your site you can post send out a newsletter to your subscribers post on social media prices are going up as of this date that incentivizes people to buy before the price change it makes people think that your business is doing really well whether it is or it isn't um and it reminds people that you're out there right it's a reason to write two people other than I have these things on sale still come and check him out right? Um number two don't undersell your retailers uh this is something that new businesses especially uh often have trouble with um the price that you sell to end customers to retail customers is the same price that your retailers need to charge, give or take um retailers again, they know their own market. So even though I had a suggested retail price of twenty six dollars for the ham um some stores knowing who their customers are and wanting to bring that ham or in line with the rest of their collection would price it more thirty six dollars and they didn't really care that you know you could get the same ham on my website for twenty six they just wanted to make sure that the price was more in line with the rest of their marketing for their store right so um your suggested retail price for your products should be the same as what you are selling to people um if you undersell your retailers er they're not gonna want to work with you anymore because people are just going to buy directly from you and they're not gonna buy from the stores and so why should those stores shell out you know all this money for your product when people are just going to be heading to you anyway it's of course the store's prerogative to price something however they want teo they've paid me the wholesale price for it they own the product now they can sell it for whatever they want um but if I've told them up front I'm selling it for twenty six and then I go ahead and I put everything on sale for twenty dollars well then suddenly if they're pricing at twenty six they're losing all kinds of money and that's not cool um other people think that they can charge uh they're online customers the wholesale price so if I can get away with selling these for thirteen dollars apiece wholesale well I don't need to make you know that much profit it's still profitable a thirteen dollars I'm gonna sell it online at craft fairs also for thirteen dollars the same price all around right um except that that store has all kinds of expenses that I don't need to pay to sell my ham toy they have to pay their employees they have to rent the space they have to turn on the lights so they need to make thirteen dollars off of that twenty six dollar him I might be fine sitting at home making you know three dollars off of my thirteen dollars ham but now I've undersold the retailer completely by thirteen dollars and some people don't quite realize this when they're starting out they film my prices thirteen dollars I sell it to everyone for that uh but there's a difference between wholesale and retail prices it needs to be the same price to the end user so if the customer online is paying a different price from the customer in the store then you have a problem and your retailers will not want to work with you and you will be having a really hard time signing accounts so don't undersell your retailers and then we mentioned this earlier when we were talking about your hobby versus your business and having a hobby business that sort of pays for itself but isn't meant to generate any profit or cover your living expenses um if you have one of those hobby businesses and um you support the rest of the handmade entrepreneurial group in general I would not support I would not price just to support your hobby you know there are people on there who you know maybe you're retired and you love knitting so you make these beautiful scarves and hats out of hand dyed yarn and you just sell them for the price of covering the yarn because that's all you care about you don't want to spend your pension funds on um you know this fancy hand dyed yarn uhm because it's kind of expensive but you also don't feel like you need to charge one hundred dollars for a scar for one hundred dollars for a head because first of all you khun cell weigh more when they're twenty dollars so you know that you'll be able to cover your er um yarn expenses and secondly um you know, that just feels weird or it just feels mean um maybe you feel like you're doing a service to the greater community by offering more affordable goods of a high quality um and that's one way that you can kind of think about it but whenever really high quality goods like that are price just to cover the cost of materials it creates among the broader public especially in big forums like let's see um a sense that that's how much these things should cost um you know, if it's possible to get beautiful hand I'd scarves and hats for twenty dollars then why on earth would you pay one hundred dollars? Um obviously if you're in a very high end store and you saw this thing for twenty dollars, you might be suspicious right? If all the other things on the shelves or two hundred dollars, three hundred dollars and you come across something that's twenty dollars instantly you wonder why why is that twenty dollars right you're pricing has to match the rest of the marketing so if it doesn't, everybody stops and goes woo that's way too in expect why is that? Is there something wrong with this woman? I'm going to be allergic to it is going cause my hair to fall out when I put this hat on like it's beautiful it's soft but what's wrong with this was this you know, made in like really horrible factory somewhere the dyes in it toxic to my skin like people will start asking that question so um when you price to support your hobby or business that sort of brings down the value of everyone else who's selling similar products um which doesn't affect you if you're already retired do you have a day job? But it's not great for everyone else. So you know, I can't tell you what to price your products at um, but as pricing etiquette if you want to be polite and considerate of everyone else in the space um please don't price your goods just to cover the cost of materials if you I want to do good and give back and, um you know you feel bad about that uh you want people with low incomes toe have, um access to really great quality products donate some right if it costs you twenty dollars in materials and you charge one hundred that means that's one scarf that you have to sell and four that you can donate that you can give to a charity or, um an organization where, you know, you can make sure that low income people are getting access to, uh, low price good. You could even just, like sneak it into the salvation army if you want or the goodwill right? And suddenly it will become priced at, like, five dollars, and people will have access to that for a low price and that's perfectly fine. Um, any questions about anything I mentioned in this pricing etiquette session changing prices, etcetera? Would you have question coming from sarah? Sarah? Same. What about pricing for beginners who do have lower quality goods for example a teenage girl just starting out of business that is still working on her skills? Well, that's a good question. Um, I mean, in that case, you know, the pricing has to match the rest of the marketing right, and so if the part the pricing needs to match the product first and foremost so if it's a teenager just starting out and you don't have a lot of skills yet um chances are the quality or the um sort of design aesthetic of that piece or something will indicate that it's not a mature piece yet right it will indicate that it was made by a beginner and it's perfectly reasonable to have a lower price that matches that um you know in that case of those products are not going to be compared to the products made by somebody who's been working as an artisan for decades it has been really honing their craft and you know um has learned a lot about working with materials and color theory and design theory and all of that sort of thing so again you know the pricing is marketing so as long as you are you know and I imagine that goods being produced by a teenager are also going to be sold in an appropriate market most of the time uh maybe she's selling them to her friends and her relatives or in the neighborhood or at um you know, a local fair or a church bazaar or something like that or maybe you know, on online in a place like etc but in general you know, people will be prepared to pay a lower price for that product uh mme both because of the maturity that it shows in the craftsmanship in the design and because of the market it's being sold to it's probably also not coming in like super sophisticated packaging, a teenager probably doesn't have the best customer service skills, yet they're still developing their interpersonal skills, um, and their organizational skills. So, you know, in that instance, I think if everything is in line, that works out just fine if that you know, that teenager isn't pricing for ah, hobby necessarily, even though maybe they don't really have high living expenses. Um, maybe while that teenager has their business and personal expense is being paid for by mom and dad, they're super profitable. Um, even if their prices are high, you know, maybe they don't need to make a really big freelance rate um, that will happen after they graduate from college, and they have all of their own expenses. Uh, but yeah, as long as the price itself, I mean, the price doesn't equal the freelance rate necessarily, right? There's profit in the middle of that. So, uh, the price can be totally different depending on you know what your expenses are, what your level is in the industry, um and also what your market is, of course, it just all has to match, yeah.