- Today's video is inspired by the many emails
I receive from makers pretty much every week
who are having a bit of a panic
because they've downloaded
my free handmade pricing calculator
and they've put their numbers in there
and the suggested retail price for their handmade product
seems high to them.
So whether you've used my own calculator
or any other calculator or formula
that you might have found online,
you might have found yourself in a similar situation
and really thinking, sorry, things like,
you know, that's a bit too high or that's way too high,
no one's gonna pay that price,
it's not competitive
because many shops sell a similar product for much less.
So the underlying idea or thought here
is that you won't get any sales at that price
and that it's just not a reasonable price point
for your handmade product.
I totally understand those concerns.
They are very valid concerns.
You don't want to price yourself out of the market.
But at the same time,
you also need to be making a profit, right?
So let's dive into this today.
I've got four points to share with you
that you should consider
when you find yourself in this situation
with a price that you think is a little bit too high
so that you can see why that might be
and how you can either reduce that price
or make sure that people will buy at that price.
(upbeat music)
Bonjour, my name is Deb
and I'm the founder of Tizzit.co,
a membership community for makers
and handmade shop owners just like your fabulous self,
and you can learn more about this community
just below this video.
I'll put a link to it.
It's called Tizzit HQ.
But for now, let's jump straight into today's conversation,
which is what to do when you think the prices
or suggested prices that you got from a handmade calculator,
a handmade pricing calculator,
might be a bit too high.
And to start, I'd just like to remind you
that the one thing
you are not allowed to do when this happens
is to just put your prices down to what feels right to you.
That is the best road to underearning land
and a sure way
to not making this business really work for you.
So instead, I want you to think through
the four points I'm about to share
and really ask yourself for each,
could this be what's happening?
Okay, so number one is that even though,
yes, there is one and only one way
to price your product correctly,
there are many different formulas that can get you there.
The absolute, always true, North Star of calculating
and setting prices is this:
cover your cost, add a profit markup,
and you've got yourself a price.
Cost plus markup equals price.
That's the only absolute truth.
But as I was saying,
there are many different variations of that simple formula
that you can and should customise
to your specific business.
How to calculate your cost,
that, yes, is universal
and the same for any business.
But deciding on your markup isn't.
And for that reason,
there is no such thing as one pricing formula
that would work for every shop on this planet.
And not only that,
but on top of every shop and every business
really having a different markup
and a different markup strategy,
sometimes different products
and different collections within your own shop
might require a different markup.
In the case of my free pricing calculator,
I've deliberately chosen to use the formula
that I know to be the most conservative,
meaning the one that will give you
the highest profit margin.
I did this because I much prefer giving you
a number that's on the higher side
than a number on the lower side
because, from my experience,
you don't need anyone to help you do that.
Makers and creative shop owners
are usually pretty good at undercharging.
No help needed on that front.
But to give you an idea,
when I actually work with makers on this,
inside the Tizzit HQ,
we have a handmade pricing, sorry, course
as part of the curriculum,
and I give them not just one but four different formulas
and then not only explain
the difference between each, of course,
but also teach them how to customise it further
to work for their niche, for their products,
and for their goals.
So the first thing here is what formula did you use?
Do you understand that formula
and the markup strategy used in it?
And is it the best suited
for your products, your goals, and your niche?
Okay, let's move on to point number two,
which is taking a serious look at your cost.
Reducing your cost has an important effect
on the final price of your product.
If the cost of creating your products are too high,
it's going to be really difficult to charge less
without really compromising your profit margin.
That's just math. (chuckles)
So there are three things to look at
when considering if you can reduce your cost.
First is can you reduce your cost of goods sold,
your supplies, your material cost?
Where are you buying them?
If you're buying them at the local craft store,
you're buying supplies
that already have been marked up for retail
and then you're marking that up again yourself
as part of your own pricing calculation.
So whenever possible,
buy in bulk and at wholesale prices.
Another thing here is are you,
some, sorry, of your supplies too high quality?
Now, this is a tricky point
because I know the majority of you have quality
as one of your main values
when you're creating products
and I am certainly not saying
you should compromise on quality.
But unless you're going for a very high brand positioning,
sometimes good enough is just that,
it's good enough.
If you're using, for example, paracord,
you know, that rope that rock climbers use,
to make a baby swing,
you definitely want that rope to be really strong.
But if you're using paracord to make a key chain
then you don't need to be buying paracord
that can hold up to, like, 300 kilos
because no one has keys that are that heavy, right?
And that's not just for safety reasons,
with the baby swing, by the way,
but because the cost of that more expensive rope
can be reflected on the final price without any issue
because the end customer, the parents,
they understand the value of it.
It's justified.
If a supply or material you're using is valuable
but not in the eyes of your customers,
you're paying too much for it
or you need to communicate that value more efficiently
to justify the higher price,
which we'll talk about in a minute.
Okay, still in the realm
of looking at how to reduce your cost,
you also want to take a look at your overhead.
That's really the next step.
What's included in there?
Is there anything you can do
to make your overhead expenses more cost-effective?
And finally, time, labour.
The one thing you're not allowed to do here,
unless you, of course, set this too crazy high amount,
which I doubt you did,
is to think straightaway
that you can just lower your hourly rate, right?
Instead, do an honest review
of your actual creation process
and ask yourself things like,
how long does it take me to make this product?
Which part of the process is taking me the longest?
Can I organise it differently
so it isn't that time-consuming?
If you're using a new technique,
something that you've learned to do only recently,
can you improve those skills
to become a little faster at it?
Are you going above and beyond
and, maybe because you know your craft so well,
almost spending too much time on some technical details
that the end customer will not understand
or that will not increase
the perceived value of your products?
And speaking of, this is a great segue
to point number three,
which is your product's perceived value.
There are also many cases where the value of your products
is the level of care
and attention to details that you put into it,
the craftsmanship and the process itself,
the quality of your materials,
and sometimes you just can't cut corners on those, right?
That's not what your brand
and the positioning that you're going for are about.
In those cases,
your cost might be high but for good reasons.
As in, they might be high
but, at the same time, as low as you can get them.
So instead of decreasing your cost,
you need to increase the perceived value of your products.
Offering true value, true quality,
is by no means a guarantee of success.
A great product will not sell itself.
You have to communicate that value with your customers
for this value to be perceived by them.
Branding, images, copy, messaging,
packaging, social proof, storytelling.
There are many levers that you can pull here
but lowering your cost isn't always the answer.
Increasing perceived value can be
because then you're able to sell your products
at the higher price
to customers who are delighted to pay that price.
And a quick sidenote here,
sometimes you can both decrease your cost
and increase your perceived value,
which would mean, really, more profit.
So it's not just one or the other.
So, again, everything I'm talking about in this video,
really stop and think about it
and see what adjustments you can make on all fronts.
Last but not least,
number four is that maybe, just maybe,
that price that you're seeing
in this calculator that you're using
or the figure that you're getting
after working through a formula
and calculating that price for yourself,
maybe it's not actually too high.
What if, just what if, yep,
that price isn't actually too high, right?
This is really not a business issue anymore
but a business owner's issue,
and by that I mean a mindset issue.
The vast majority of creative shop owners, makers,
and artists I work with
will 100% of the time convince themselves
that their products are not worth that much
based on nothing else, really,
than their own bias and limiting beliefs.
Sprinkle a little bit of imposter syndrome on top
and, boom, you've got yourself a shop
that's not turning a big enough profit.
And look, I'm having a bit of a laugh around this
but we all do this.
It's very normal.
But part of your job as a handmade business owner
is to mange those self-sabotaging thoughts.
It is something you can work on.
I actually have a full video on this
called Handmade Pricing Fears
I strongly recommend you watch,
I'll link to it below,
and then another one around how to reframe the thought
that no one will pay that much for my products, right?
Which I will also link below.
My absolute best recommendation, though,
if you need help with your handmade pricing strategy
is to check out the full handmade pricing course
available over at Tizzit.co,
which I will, you guessed it, link to below this video.
Until next time, take care,
and au revoir.