So far in our How To Series, we have discussed Starting Your Business, Funding Your Dreams, and Website Design. Now we move on to another very important part of your operations: pricing of your services or product. Pricing is essential in the scheme of your operations. It will be how you keep the lights on, buy new merchandise and set up the every day “upkeep” of your business. This was a very difficult part of the process for me because I just didn’t truly understand how one should price. Over these 3 years, I have come across great resources.
Know Your Worth: It wont matter what you are selling if you personally don’t value your worth going into the service you are providing customers and clients. In this day and age, it’s very easy to see what your competitors are doing and do the same as them. There is nothing wrong with doing market research in your field, but you are not them, and neither is your service or product. Before you fix your lips to apologize for your pricing, stop yourself. You know the your worth and the worth of your product, so the price is perfect just how it is. Right now, Camo Jackets & Camo Pants are the hottest thing since sliced bread. I see a plethora of people selling them, and they are all priced less than mine.
Cost of Camo Chart
The chart above gives a break down of Camo Cost+ Listed Price + Shipping. There are days that I buy camo for as little as $0.50 to $14.90, but generally speaking it’s $5 a piece. If you compared my profit to my competitor’s, you can see that I am retaining more profit. I know the value of the product. Yes, you want to have great pricing to bring customers in, but you don’t want to be giving away pieces for free just for the sake of getting customers. Assuming my competitors are getting it for the same price and shipping at a flat rate, they are not bring enough return on their investment.
Image via Nickey on Etsy
Souring Material: Material for Imperfect Concepts is it’s only source for merchandise. I personally dont make jewelry or create clutches, so I cannot do a percentage per cost of unit. Nickey created a great worksheet “Art of Pricing For Profit” to help determine pricing for such things. When you are buying material, make sure to buy as much as possible to bring down the wholesale price cost. Also, shop around different vendors to see who can bring you same quality for less. If Jake can sell you the same fabric that Bob is selling for 35% more, why not buy it from Jake and get more material you really will need.
Know the Vendors: Everywhere I shop, they know me by name. At first this was kind of weird, but now its comforting that these store owners and staff know me. Items are put to the side for me, and I am even called when great pieces come in. Last week, I went to buy some camo jackets and she slashed the price by 50% without me even asking simply because I am a repeat customer! Having a personal relationship with your vendors will work in your favor. When you are in the need for a certain material in a rush, they might stay open late for you. Build those relationships, and they will help your business in the long run.
Calculate All Cost: When calculating your pricing are you putting everything into the cost? Are your customers paying for shipping or are you including that in your cost. Is there a shipping and handling fee? Are you adding the cost of packing material into your cost of the product. See its not just about the material itself for the product. There are a plethora of other variables when it comes to pricing. You want to be able to multiple by {3, 5, 10 or 15} to gain profit from your service or product. Some people have accused Imperfect Concepts of being an expensive vintage designer boutique. I personally think we are below the cost of people who are making millions every year. Decades II charges $595 for the current Yves Saint Laurent heels I have on the site. As you can see I am $100 less. I know my target market and that price is great.
Price for Profit Not Your Customers: Shonda Rhimes made a great point on Next Chapter she did with Oprah. She said she had to stop writing her story lines for the viewers each week and more for how she wants the story to go. If you let your customers dictate your pricing you will probably never make a profit. They are going to want more for less. That might work if you were a Walmart of the world but you’re trying to get your footing and pay your bills. No matter the cost of something you will have a market that will pay for it. Look at Apple, they introduce a better version of their latest project twice a year and their is always a increase in cost. During college I had an ibook, macbook, macbook pro and trust I worked my three jobs to get them. I am one of those people that buy what they want no matter the price. Of course I look for discounts but I am going to get what I want. Your customers are just like that too. Provide them with excellent customer service and a great product and they will keep coming back. You need to make a profit to stay in business.
Going Cheap: Being the look or service for less is not always the best bet to win you over customers. Dirt cheap or low low pricing is not always appealing. Customers might wonder why your neckline is $5 and your competitors necklace is $45. That is a huge gap and it makes your customer believe your product is not as good as your competitor. Also don’t try to undercut your competitor. I get emails ALL the time about other people’s pricing and I simply say if they are more comfortable with that price pay for it. Im not going to cut my price just for you to shop with me. The customer has no loyalty if they need you to do that in the first place. Here is a great post: If I were You.
Image from www.youngwebbuilder.com
Monthly Sale Goals: Imperfect Concepts has weekly, monthly, quarterly and yearly sale goals. They are all in place to keep me on track of where my business is going. I also keep track of what spikes those big sales months. Did a blogger write about ICB, were we featured on the news, or in a magazine write up? These questions help me calculate how much I would need to work and sell to cover my costs and meet my goals. This will help you determine what you need to charge in order to reach your goals as well.
Personally speaking, pricing is one of those things you truly have to figure out with some trial and error. Do your own worksheets and figures. Know what you are willing to accept for the product or service even when its discounted deeply. You have to feel comfortable with the price. You want your customer/client to feel great about this price and you want to feel great too. What’s the point of giving your customer a “steal” if it’s eating you alive? Great books that cover pricing are Pricing for Profit, Pricing for Profit eBook $100 Startup, Other great resources regarding pricing: About.com Retail, All Business, & Dummies Guide
This post includes affiliate links to Amazon which I will receive a small commission on sales generated by your purchases.
