Tuesday, November 4, 2008

Tuesday Tip: Setting Prices

One of the hardest things to do is set prices. Sometimes it seems like a good idea to lower your prices as much as possible so that everyone will come to you, but that can backfire as many customers equate low prices with low quality. You want to make sales, so you don't want to charge to much; but you don't want to undersell yourself either. You want to charge a fair, competitive price.

So let's evaluate those two things separately: fair and competitive.

Competitive Pricing
This is actually the easier part. Do a search on etsy for items similar to the one you are pricing, and see what others are charging. There will usually be a few outliers--people who charge much more or much less--but look at the middle of the crowd. Consider their materials and yours--if you make a ring sling out of silk, it stands to reason that you should charge more than for a cotton one.

Fair Pricing
This takes a little more work.
1--determine your materials cost. If you buy materials by the yard, for example, then figure out how many items per yard, and divide the per yard cost... Figure these numbers as exactly as possible.
2--determine your time cost. How long does it take you to make/market your item. This includes the time it takes you to select and purchase your materials, design your product, create your product, photograph the item, and create the listing. Of course some of these things (such as materials or item descriptions) can be used for more than one item, so in those cases you should pro-rate the time. Once you have determined how much time you put into the item, then pay yourself a living wage--most etsians I know (including myself) pay themselves about $10/hour.
3--don't forget fees. Etsy has listing fees and sales fees, paypal has fees, and if you have to relist an item then you have fees again. Your prices should be enough to cover all the fees and still pay you fairly. This etsy fee calculator can help you figure out how to adjust your prices to account for the fees.

What about shipping?
When figuring out what to charge for shipping, remember to include your supplies (boxes, envelopes, tape), as well as the time/gas money you spend to send the item, in addition to the actual shipping cost. Some shipping methods cost more than others, and some packaging supplies cost more than others...Evaluate your options and choose something that works well for you, then charge accordingly.

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