Thanks to everyone who asked Craft
Businessey Questions for the Dotty Sunglasses Case draw. Your
questions are very helpful because when I come to write future craft Business
Type Posts I can refer to your comments and I can hopefully tackle issues
that you want looking at :)
There were 43 entrants, (1 being a repeat) and the Random Number Picker decided upon the number 17. Which means that Concha has won the Dotty Eyeglasses Case and I have to try and tackle the 'How long is a piece of string' question of Pricing....
So will Concha who wrote:
"Pricing, pricing... If you want to have fun but earn some money as well, how do you make up for all the fabrics and notions and hours of work spent on a single bag? Thanks so much :)"
Please step forward and give me your postal address so I can send you your Eyeglasses Case?
Before I start I'm just going to write myself a little disclaimer which includes things like; I don't have MBa from Harvard; I'm no Alan Sugar; the following tips are taken from my own observations as a bag seller, a bit of Psychology (from my Uni days), books, and resources on the net (which I'll include at the end of this post). What I mean to say is, I hope the info is nothing but helpful...
Pricing your craft to sell is a slippery fish of thing to get right. I can't suggest what you should actually charge for a particular bag. Unfortunately there is no neat formula to apply when pricing your bags, but I can suggest things that should be considered when pricing your bags). To my mind, (and the minds of experts) it isn't a simple case of charging for your time and materials, there are other factors to consider (which I'll go into in a minute). The price of a bag doesn't just serve as a charge for your handmade bag, it serves as a marketing tool, and it also serves as a refection (real & perceived) of the value of your handmade bag. So for the purposes of this here post about pricing your bags (and other crafts too, but as you might have guessed, bags are my thing so I'll talk about them) I am going to :
- Things to consider when pricing your bags that don't include the physical cost of making your bags.
- Get a little bit psychological (just a little bit, don't worry!) about pricing
Things to consider when pricing your bags that don't include the physical cost (materials and time) of making your bags.
- are you only just starting out?
- what is your method of selling (craft fairs, word of mouth, web)
- who are you trying to sell your bags to?
- is this your only source of income?
- who is your (and how much) competition?
1. Are you only just starting out?
If you have only just started started selling your bags (congratulations!) it's not only important to get a first few sales under your belt, you NEED to get yourself a bit of a reputation. Nothing beats word of mouth recommendations from happy customers, and new customers always feel more confident buying from you if they know that you have had quite a few customers in the past.
I used to blush with embarrassment when doing it but I almost always asked customers to write in my pretty guest book any comments they had (or at least which bag they bought). This book was left on the stall for everyone else to read.
So you need to sell more bags quickly so that more happy folks will spread the word (and hopefully will be happy to buy more from you in the future). This means that you should consider pricing lower (not too low, more about that later) rather than higher in the beginning. Be prepared (if you can) to just recoup your costs in the beginning (or settle for a smaller profit); I haven't heard too many stories of folks cleaning up at their first sale.
In the beginning I chose not to charge for my time. I chose to charge only for the materials and the market stall rent.
2. What is your method of selling (craft fairs, word of mouth, web).
You can sell your bags in crafts market; word of mouth at work, amongst friends and family etc; the internet on your own website, or on Ebay or Etsy; or at bag selling parties. Each individual method will incur it's own different costs and these should factored into the price of your bag. This means that you may want to charge two different prices for the same item...
I used to sell most of my bags a weekly craft market and others I sold to some of the girls (and in turn their friends) at my BORING day job. A stall at my craft market used to cost £35-£50 me day, compare that with selling bags to my work colleagues which cost me nothing. I used to knock off a few pounds off the price of the bag if I was selling to colleagues.
3. Who are you trying to sell your bags to?
Most everyone who teaches business studies will tell you that it is important to identify your target market, in other words, know who you want to sell you bags to. Your bags won't appeal to everyone, far better to aim to please a group of people rather than everyone (which is impossible). This way you can make and price your bag with a 'type' of customer in mind. For instance, do you want to make young and funky bags, or do you prefer to make more luxurious bags with more extravagant trims? A customer who prefers young and funky fashion is going to have a different budget to spend on bags to someone who prefers luxury items.
In this way you can make a cohesive collection of bags and charge for them according to who you are trying to attract. This cohesion is good strategy because this prevents 'collection confusion', in as much as customers are put off by an untidy market stall or messy shop, they are put off by ranges that don't seem to fit together. That's why lots of shops clearly define their luxury ranges from their value ranges.
My very first bags were cute reversible tote bags, each with their own matching coin purses. I made all of these bags from home furnishing weight silk and velvet and I charged the same price for all of them (£18.50), with a discount for two or more bags. This worked really well because passing customers could see that everything cost the same, it was just a matter of choosing the fabric that they liked best. I had a good idea of who the visitors of my local craft market where (tourists, well heeled locals, and young professionals, and a few students) and roughly how much they would be willing to spend so I tried to make my bags with them in mind.
4. Is this your only source of income?
I have had more than one email asking me is it right to charge for something that you love doing anyway! I also know of a fair few customers who choose not to charge for their time, because they are happy to just to make enough money to buy more materials. This is obviously fine if this is not your only source of income, or your are just starting out and you want to grow your customer base. However, if you want to earn a profit than you need to at least start charging for your time, before you add a percentage on top for profit.
As soon as I was able, I wanted to make a profit from my bags because I dreamt of leaving my day job. In general, I used to charge for my time in two different ways. I chose charge two different rates one rate for simple-could-make-it-with-my-eyes-closed bags, and higher rate for trickier, lots of swearing involved bags. Nowadays I still do sell my bags but selling bags is no longer my main income (as you know) so I'm not too worried about making a profit from my bags. I choose to only charge for the materials and my time.
5. Who is your (and how much) competition?
To get a bit of an edge in the market it's important to be distinct from your competitors. You can be different from the competition in various ways, sell bags which are unique to you, sell them at different prices to the competition (usually lower), provide tip-top and or fast customer service, or sell them using different methods (see no.2). It's always a good idea to keep abreast of trends, to know what the IN things are, and it's good to know what other people are selling, (not so you can copy them!) so you can try to offer something that is different to them. It's best to do this research before you go whipping up a squillion bags, but it's also important to keep up this research as your business grows to keep yourself competitive and ultimately it makes you life easier if you aren't trying to compete with everyone and their granny! If you offer something different to the competition you are less likely to have to lower your prices to compete!
In the beginning my competition was other bag sellers in my local craft market (though they were lovely people, in fact I was surprised to find that almost all of the other traders were really friendly and helpful). Before I sewed a single bag I wandered around the market to check out what other bag sellers where offering, and I made point of offering something different. In the end my best sellers where my reversible totes (made from looky-likey Kath Kidson linen fabric) and Basket Style Bags neither of which where being sold by anyone else.
Getting a little bit psychological (just a little bit; don't worry!) about pricing .
This is a whole huge area in itself (and if you wanted to you could go very deeply into it (like all of the big chain stores do. Believe me, they all spend millions on research into understanding the mind of the consumer, yerk!) but for the purposes of this post we are only going to touch on a few things:
- Value your work. It's important to value your work, or how else will others? Don't be panicked into dropping your prices of your bags (so you end up making a loss) if things are slow. Have a look at how you can market your bags, or try other ways of selling your bags, before you go selling them for a song. There is a 'right price' for everyone and if you price an item (that obviously took lots of work) too low you'll have folk thinking all sorts like 'is this really handmade?' 'what's wrong with it, why is it so cheap?' The same obviously goes for charging high, I personally don't think think that the 'reassuringly expensive' strategy helps in this day and age of competition (it might work for luxury cars and designer clothing). You want to encourage more customers to buy, not to scare them off with inflated prices. Price fairly, because as consumers we are very savvy these days and we have a good idea of what things ought to cost...
- Actual Value Vs Perceived Value. There's a difference between actual value (the cost of what it takes to make and sell the item), and Perceived Value (the value that the customer thinks the item is worth). You could take two identical purses and end up charging two different prices for them. For example purse 1. is sold (as is) on a plain looking serviceable market stall for price X, whereas identical purse 2. is sold for more on a prettily decorated market stall, the purse has a cute label of the maker, your service is warm and friendly, and the purse is wrapped in tissue paper...OK, perhaps it costs a bit more to sort out labels, a pretty stall, and some tissue paper, but customers DO appreciate these finishing touches and this can be reflected in the price. It's about creating a pleasant buying experience for the customer as well as making them feel important (without them, everything is pretty much lost!) in addition to creating pretty bags for them to buy.
- Psychology of Discounting. Discounting isn't just for reducing the price of your items, you can also use it to encourage more sales of your bags. You can encourage customers to buy more items by offering various discounts. Such as discounting on multiple purchases, or bundling (buy the bag and get the matching purse at a discount), or buy X, and get Y free. The idea is NOT to appear as a bargain basement (far from it), but to make the customer feel rewarded for spending more money with you. On my old market stall I noticed that most of my customers were buying bags initially as presents for others (fair enough, I'm the same!) this meant that customers weren't looking to treat themselves. So to encourage more sales I wrote up a cute sign for customers suggesting that on certain bags they could treat themselves too, especially as I was offering a discount on a matching coin purse that they could either give as presents or keep for themselves. I found that this worked very well...
Right I think that's a lot to be going on with! For those who are still with us, and they have reached the end of this post there's further reading on the subject (of course you can apply as many, or as little (or none!) of these tips as you like, but I'd just like to say (that for me at least) mugging up in a few books and keeping an eye on craft trends etc. has helped me give me some focus and helped me organise myself, and hopefully run a shop that other people like, (and would buy from again), so I think the time spent on research (might not be the fun part, but) is well worth it :)
Further Reading (all free and downloadable guides):
- Pricing - a huge in-depth guide.
- Getting organised to work at home - you can't do this from the family dining table!
- WAHM - Guide for working Mothers At Home to successfully building business from home.
- My 'Business Resources' links on the left hand side of this blog.
Like, phew! That took me AGES to write, I hope it's of some use to you!