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Pricing

Praising let's talk pricing a little bit more so if you take any kind of like marketing one a one class um they love to tell you about the four p's of marketing there's product which is your entire brand it's not just literally the products that you sell to people it is also, uh your visual branding right you're logos and your packaging it is your customer service experience it is the styling of your photos um it's all of those things that is your product, your experience or rather the customer's experience within your business interacting with you as a business that's your product that's your brand then you've got price, which we're going to go into in more detail in just a moment ah then you've got place sometimes also people this is your market who are the people you are trying to reach and where do you find them? So when we talked about having different etc stores appealing to different markets we're talking about different types of people. So in stephanie's case she has her comic ...

books and then she also has her greeting cards and her prince um and she was telling me that different people in general go for the comic books, then go for the greeting cards um and that could be different in terms of all kinds of demographic, uh, assignments they could be that it's more women who buy the cards and more men who buy the comic books or it's more I don't know urban people versus rural people or people of you know various income levels I don't know how it gets divided but um if you're finding that the people who buy one set of things is very different than the people who buy another set of things from you you may want to consider separating out those at the shops or at the very least separating them out into two different categories so that you can keep things kind of visually consistent and appealing to those cussed because it's rare that you're going to have something either in terms of product or in terms of your brand in general that appeals to both of those demographics both of those markets equally well um and it's important to present sort of a unified consistent front as faras experience goes to your customer uh and then we have promotion this is typically what people think about um when they are talking about marketing but it's actually only one piece out of these four so promotion is the advertising is the newsletters is the social media um is your business cards is the events that you do I mean that's all part of that and that's how people find you um but what's really important is that all of these things are consistent and are in line with one another. So the most important thing to figure out first is who is your market and where are they? This can be really difficult on etc and going back to the question we had in an earlier segment about competition. Um, it might be worth looking off, etc first, because if you're selling let's, say, leather handbags um the price is very wildly among leather handbags. Um and it may be that someone is pricing their handbag lower than you because they have much lower costs either in terms of their own, uh, freelance time because they have much lower expenses both on the personal, the business side, maybe they live in a country where, you know, the cost of living is very, very cheap, eh? So they don't need to make very much an hour in order to be profitable. But if you live in the us or you live in europe or you live in japan, where the cost of living is much, much higher, um then your costs really go up. Um, so you know, if he is not always the be all end all place to reach your customers, particularly because you will be selling alongside people from around the rest of the world who may have different considerations for their business um you know as long as everything is in line you're still pretty likely to reach the customers that you need to reach but it may be looking beyond etc to also integrate another selling outlet into your business whether that's your own website whether that's uh you know using a marketplace that's more specific and is not just handmade in general but maybe it's an online market for handmade just in your country so people who are looking to buy things domestically will go there or I don't know it's it goes along with a particular aesthetic um so like you sell comic books for example among other things etc is one place to put those out uh but it's probably not like the best or only place to reach a comic book a reading audience right? There are lots of events and lots of stores that will probably reach that audience way way better um and this is not probably a big problem I don't think that like comic book artists are typically getting underpriced on their comics buy cheaper artists and other countries but they're always cheap so that's just unending emmick problem to the comic book industry is that just nobody's making enough money because they're too inexpensive just period um but that's not true for all comic books either I mean you can look at some of the like fancy or, you know, sort of like chris ware books where they're packaged in, like a really fancy way, and, you know, maybe they're hard bound and they haven't extra sleeve, and they get sold in, like the fancy indy bookstores, and so those comic books, you know, or the I guess they're more often graphic novels can get sold for, like two or three times the price of your typical, like marvel or dc graphic enough. All right, um, he's looking at a different market and it's still comic book readers. Um, but it's also other people who maybe are sort of tangential to that comic book market, and maybe you're sort of interested in it, but they're more into the, like, minimalist, uh, you know, style of his drawings or whatever. Um so is the most important thing is to find your market and then have everything be in line with that. So the people that you know you're trying to reach should be. You should be appealing to them with all of the other parts of your marketing, so that price should make them feel comfortable. You're branding should make them feel comfortable. Your promotion should make them feel comfortable, and it should all seem consistent if I were to go into a leg, I don't know modern, high ish and design store, where everything is leg you know, fifty dollars for the small things to like, I don't know a thousand dollars for the larger things, and I see something on the shelf that looks gorgeous and it's priced at ten dollars like my immediate reaction is what is wrong with this thing, right it's not like, awesome, I'm getting an awesome bargain here. It's, what is wrong with this quiet price that way? So having a lower prices not like universally better or more appealing two people, um, it all has to be just consistent and in line ah, so let's, look at a couple of I talked about how I sort things by, etc already, and I look at the price range, and then I go and I looked within that because as a consumer, I have an idea in my head of how good something is going to be or how much I'm going to like it based on its price, right? Like I can't afford to buy the travel journal for over fifty dollars, but I also know, or I also think that I'm going to hate anything that's like under ten dollars, I am a part of a particular target market, and you know, the people in that price range, some of them, um are going to be reaching out to me, I am their ideal customer um I am no one's ideal customer in that really high range and I am no one's ideal customer in that really low range so knowing where you are knowing where your market is finding them whether that's on or off etc and then making sure that all of your marketing is in line we'll help you get the best results um so let's look at some actual pricing formulas uh really quickly we've got the bottom up approach where you start with your freelance rate and figure out the price and we've sort of done this already with the product profit calculator on and then you've got a top down approach um where we will address the question of what if I feel like I can on ly charge x amount and then back out of that so uh for the bottom up approach you've got your price equals your freelance rate times the number of hours plus the materials um and I have a note on here that the materials costs should also include any time or cost it took to get those materials to you so if it cost you ten dollars to buy the beads but then it also cost you two dollars in shipping that should be included in there or if it cost you two dollars apiece for the wood but you had to go to home depot to go get it. How much time did that take you you know uh using your hourly rate and then factoring that in to the cost of the materials. I've also put a little note here that some people just find it easier to add a markup of ten percent to cover these costs if they don't want to track exactly how much it cost in shipping to get, you know, tiny style of beat, a versus tiny style of bb, and you have, like fifty styles of beads in a single necklace like that could be a nightmare to calculate I get it. Um, so if you want to mark it up around ten percent, that'll sort of cover it in most cases, and then we have the top down approach. Um, the top down approach because you're backing into an hourly wage, does not include your personal and your business expenses in it. So here is the equation, your price, the price you think you can charge minus your expenses divided by the number of hours it took. You will back out to an hourly wage and notice they put expenses, hearing and put materials here, because this has to cover all of your business expenses. So here's, an incomplete way of calculating this. Um, if I'm selling a pair of earrings for one hundred fifty dollars, the materials were twenty five dollars aa, and it takes me three hours I might be tempted to say ok it's one hundred fifty dollars minus twenty five that's one hundred twenty five dollars divided by three nets me forty one sixty seven an hour forty two dollars an hour that's about what I need my freelance rate sure great. That seems like it works okay no problem except that that doesn't take into account all of my expenses that's forty one sixty seven that needs to cover that's not just my take home pay that's everything else and that needs to cover everything else in my business that needs to cover you know, having the lights on it needs to cover my web hosting it needs to cover all my business expenses and then some. So what do we do to actually get that more accurate? Well, we look at it on a monthly basis and so I know my business expenses on a monthly basis but I don't know them on a per piece basis. So let's say that on average my monthly business expenses are a thousand dollars in one month assuming I sell all of my areas I can make and sell forty five hundred dollars worth of hearings minus six hundred dollars in materials that's twenty five times thirty no that's not right seven hundred fifty dollars in materials um twenty five times thirty minus my business expenses right this is the price minus materials and my business that's my total expenses there divided by one hundred and eighty equals fifteen dollars in twenty eight since an hour that's my take home pay if I price my earrings at one hundred fifty dollars s o if you can pay all your personal expenses on fifteen twenty eight an hour working eighty eight hours a week I mean eighty eight hours a month okay, great. My guess is most people are not gonna be able to make it work on this um in which case you need to take a look at your pricing or you need to do that product profit profitability calculation and figure out where you can trim things or adjust things where you can hire help et cetera. Okay, so in order to figure out this price of course you have to do some market research you'll have to look at other similar products in places where your target market might be whether that's other stores, whether that's magazines or blog's or websites where those kinds of people hang out see what other products heir featured there that are similar to yours in this example it's pair of earrings um you know what other ah, what does other jewelry costs especially what does other what do other hearings cost in the kind of store where you could picture your earrings the kind of magazine where you could picture your earrings um and then sort of pick a price in there based on um comparing your product to the other ones in there are your earrings a little more complex than the average ones that they show maybe you could make it a little more expensive, that sort of thing um and it's ok to change your prices certainly um including on etc it's always nice to do it sort of gradually and to give people a little bit of a heads up I certainly know people who have realized uh sort of all at once that their prices were way too low because first of all they weren't making any money and second of all their stuff was really profitable and so they doubled their prices overnight. Um in most cases that tends to alienate some of your more loyal customers so you know, even if you do need to double your prices I would maybe give customers like a really big advanced notice. Maybe you can use it as part of your marketing. You can send out a little message to past customers saying, um hey just wanted to let you know these prices are really going way up, but if you buy something from me in the next three months, you can still get something for the old price sort of reminds them that you're there uh makes them feel a little bit special because you're looking out for them right um makes you seem, like, really, popular and sought after. And, like, they have excellent taste, right? Because they shopped from you in the first place. Never a bad thing.