As an artisan who makes her living from what she makes and sells I’ve had quite a few lessons about pricing.
I sell my work at The Rocks Markets and a select number of fairs each year. Being based in Sydney I have a fairly competitive selling space and this has never really bothered me, I’ve only ever known it to be competitive.
Years ago at Kirribilli Markets the organisers put next to my stall a lady from Perth, WA, with jewellery similar to mine. Her work was naturally different because it was made by her and mine was by me but there some shared elements, except with pricing. Where I had pieces for $10 her’s were $20. I heard her nearly in tears talking to her mum in Perth about how competitive Sydney was, she had brought the price down from $25 to $20 and yet there was an established stall holder next to her (me) with them at $10. Perth is one of our most expensive cities in the country, not only because of the distances involved but mainly because of the lack of local competition.
My heart went out to her. I know how hard it is to have a profitable business and markets are hard work. I was frustrated with the market organisers for putting her next to me, it was a very poor decision on their part that was unnecessary and she paid the price for it.
The thing is, she wasn’t gouging with her prices, she had set her price to her audience and then changed audiences.
When I was starting out I wanted the books on how to make a living from your craft to tell me exactly how to price each piece of my work. I was constantly disappointed with the answers because they didn’t work for me. Fifteen years later I understand why.
My business needs to be able to make enough money in the good times to see me through the slow times of the year. Now I think I’ve learnt most of my lessons about cash flow but knowing how the universe works I won’t tempt fate and say I’ve learnt all about cash flow! Mainly because it can be one of the most painful experiences to have as a business owner when cash flow crises’ arrive.
Planning my money for the year makes all the difference. I use a simple family organiser calendar to figure out when my regular weekly, monthly, annual and growth costs are. This has made a huge difference as it tells me what I need as a minimum to come in to cover what goes out – this is particularly useful for the slow part of my sales year.
It also lets me see what I need to do with sales and income during the busiest part of the year, what I call “the season”. I love the season, it lets me recover from the slow winter months and then get ahead to the point where I can impersonate a squirrel hoarding her nuts.
But what about pricing? For me that’s been about testing the market place, finding out what customers are happy to pay, listening to them when they say something is too expensive or that it’s very good value. These comments are great indicators to what customers expect to pay. So is the number of pieces you actually sell.
This does also have a lot to do with your designs, whether they appeal and to how many people.
My white lace imprint Peace Bird necklace and brooch has been a revelation to me about having a piece that appeals to a lot of people. I have realised I could put the price up to around the $50 point for it but am keeping below $40 on purpose. I want it to keep moving as it is making such a difference to my weekly sales income.
Within the my porcelain range of jewellery I have about five price points at market (the full range is at market) and some have more margin in them than others. This is because I need to keep the pricing scale simple as I have a very small opportunity to talk with customers, they can be gone in seconds so I need to be on point and clear in my message.
You’ll find all makers have a range of margins within their products. Ideally you want your cash cows, the pieces that are easiest to sell and go to the most homes to have the highest margins. While the slowest to sell have the lowest margins. Sometimes this happens, usually it doesn’t. What I’ve found is that they tend to average out.
What matters most for me is becoming the best sales lady I can. Bad sales people are pushy, annoying and aggressive, alternatively they are passive, lack lustre and closed. The best ones are warm, engaging, welcoming and informative and that’s what I aim for. I am naturally a bit cheeky and laugh easily and this is also very important for my sales. I want to enjoy being at market. I’m there with my market family, in a beautiful location with the magnificent Sydney Harbour Bridge next to me and my work gets to travel the world and become stories in people’s lives. I love it.
As a stall holder at The Rocks Markets I am an ambassador for my stunning home city of Sydney. I’m asked for directions, where to get the best coffee, how to get to the bridge, what to do in Sydney and loads more. If I was as flat as a pancake and closed off I’d be failing not only myself and my business but also my market and my city. And that would be plain daft.
By being a better sales woman I can sell more pieces and achieve my financial goals for my business.
If I’m selling something for $35 then it can’t take two hours to make because then it would not be doing its part to contribute towards the market rent, public liability, raw materials, my labour in making it and then selling it, the studio rent and utilities, transport and kiln firing costs and then have any room for profit.
So taking into account the labour to make something is key in your pricing decision. This can result in adding new range that have little labour time so they can pay for the fancier pieces that you love making – they are called the cash cows, the bread and butter pieces and we all need them. We all need to have ranges that sell quickly and easily that support the business.
Counterpointing these are the art pieces, the ones that would be priced in the hundreds if not thousands of dollars but are the big showy pieces used to gather attention, demonstrate our skills and get media attention easily. If we sell these pieces it can often be at a loss but what they have gained in terms of promotion means they’ve already covered their costs and have contributed to profits.
There are also the issues of customer perception with prices. You need to know who your audience is as a starting point and then understand what they expect to pay.
At market I have customers from all over the world and there is an increasing number coming from northern China, mainland Chinese. They’re perception of prices in Australia is vastly different to the UK parents visiting their backpacking daughters and sons and shopping with UK pounds.
The mainland Chinese have little international experience and their currency is vastly different to the Australian dollar. They think that just about everything is expensive in Australia (a valid point based on their experiences in life) and are generally only willing to spend money on accommodation, food and big brands (who have been very smart with their marketing, but that’s another story, I’m thinking Pandora here). For these Chinese they can only shop if there is a discount and that is purely a cultural issue, nothing right or wrong in that, just how it is. Plus, northern Chinese have very little English, whereas in stark contrast southern Chinese learn English in school and have a much wider experience of the world. I rarely make a sale to mainland Chinese. They generally always say I”m too expensive and I’m one of the most competitively priced jewellery stalls at market.
Whereas the English parents visiting their 20 something kids in Sydney are traveling with the strongest currency in the world, even during their recession the UK pound was the most powerful currency. These parents have a lot of international experience, they convert $50 to about 20 pounds and smile. We can communicate easily and they respect what’s involved in making something from scratch. They expect my pricing to reflect quality. If I was any cheaper they would doubt the authenticity and quality of my work, it wouldn’t add up to them and they’d back off.
If something is priced too cheap then it won’t sell. If it is too expensive it won’t sell. There’s a sweet spot in the middle that is particular for each product in each market place.
There are certain markets that I won’t do because customers will think I’m expensive and I’ll have things stolen. There are also a few fairs that I wouldn’t get into because my prices are too cheap. Usually I don’t even consider them anyway because their rents are way too expensive.
If a rent is $500 per day then you have to sell a lot of things to cover it. If you’re that busy then you’ll have to have help and pay them as well. I have not been able to justify such a rent for my business because the pricing of my work doesn’t have a margin big enough to cover the costs and have me come out ahead. Generally it will be the stalls who import cheap products that have a healthy margin and sell like hot cakes that can take this risk – or food and that’s why food at street fairs is expensive, it’s because of scary rents and labour costs.
When you are testing your designs to find out what price to put them at, where to sell them, who your ideal customer is and where they shop, make sure you know what your costs are, and this includes your labour. How much would you have to pay a helper during the making process? What about someone to sell for you at market so you can go to your God-daughter’s wedding or be around for your kids on the weekend?
The key is in the testing. You’ve got to give it a go and actually find out what people will actually pay you for your work. This can be different to what people say they’ll pay for something, the handing over of hard earned cash is the real test.
I think the best way to do this testing is when money is coming in from somewhere else and you can build it up piece by piece. You’ve got loads of lessons to learn with you product design and customers and everything in between. So give yourself a safe space to do this in, don’t do it with bucket loads of pressure for it to be a do or die thing.
Your marketing, presentation and sales skills will have as much if not more to do with pricing as anything else.