BS: Pricing

Subject: BS: Pricing
From: John Hardly
Date: 17 Apr 05 - 11:17 AM

This came up in a thread that I didn't want to hijack, so I'm starting this one.

Pricing is one of the most difficult aspects of my business. I have a marketing philosophy that sort of seems to work, but prices themselves have a certain "psychology" (for instance, the old $.99 trick (which doesn't seem to effect me) to try to avoid the reality of the next 10 or 100 of dollars).

One bit of psychology I use in my pricing is to never end my prices on the even $5 or $10. Since I'm selling what I make, those even 5s and 10s seem to become an open invitation to haggle/dicker. They are such an invitation because they seem more arbitrary (how did that product just happen to be valued at exactly $10?). So most of my prices end in 4, 6, 0r 8. They seem to imply more of a reason behind their price.

What I'd like some input with though is the psychological value of a buck. For instance...

1. What seems to be a lot of money? I know this is always going to have some relativity to the item being sold, but are there some numbers that just seem to imply "expensive". Is it $50? $100? $500? $1000?

2. Relative to #1 (maybe further explanation of it) -- At what price points does $1 make the biggest psychological difference? $9-$10? $49-$50?

2. What, to you, is the equivalent dollar value of the $20 of 20-30 years ago?

Subject: RE: BS: Pricing
From: Liz the Squeak
Date: 17 Apr 05 - 12:07 PM

I'm in the UK so I shall use £sterling instead of $US Dollars.

1) Expensive is relative to the disposable income you have available. I think £100 is expensive because it represents a quarter of my monthly 'disposable income' - although again, 'disposable' is also a relative term to what you actually spend your money on. For my purposes, it's what I have left after all my taxes, bank charges and direct debits have been removed.

2) To me every £1 counts, because it's one less to spend on some other thing that may be a necessity rather than a luxury.

3) 20 years ago, £20 was my monthly food bill. I bought a book or I ate... I coudn't do both. Today, £20 is my weekly 'disposable income' where disposable is books, entertainment, outings etc. I'm reasonably immune to the 99p trick, and I do shop around before buying large items, but I am awful for impulse buys if they are relatively cheap.

Helpful?

LTS

Subject: RE: BS: Pricing
From: John Hardly
Date: 17 Apr 05 - 12:19 PM

Very helpful. Thanks for taking your time to answer!

Subject: RE: BS: Pricing
From: Sorcha
Date: 17 Apr 05 - 12:46 PM

I'd really want to know more about the item.....price is so relative. If it's too cheap, people will expect it to break but they won't buy it if it's too expensive. Is this a non necessary craft type item?

Subject: RE: BS: Pricing
From: Hand-Pulled Boy
Date: 17 Apr 05 - 12:48 PM

'If you count the pennies the pounds will look after themselves!'

Subject: RE: BS: Pricing
From: Dave (the ancient mariner)
Date: 17 Apr 05 - 01:00 PM

Well put Hand-Pulled boy. Value shopping is how my money is spread. I will check out all grocery prices, buy in bulk if it saves me money, and look for the cheapest price on any given item I am shopping for. Large item purchases are the same, I shop around for the best deal I can get. If you advertise an item at $9.99 and your competitor is $9.95 you lost my business. I make a point of telling everyone I know where those items are on sale.

Subject: RE: BS: Pricing
From: Amos
Date: 17 Apr 05 - 01:02 PM

Interesting survey, John!

Partly the apparent steepness of a price-point is a function of the necessity presented by the object. You might happily spend $300 on a new washer if yours was totalled suddenly, but not, say, on an internet guise service or something that you could do yourself with a little effort.

$100 seems expensive to me, in the ordinary run of things, but not for a car! :) Not even for a multi-function printer. For a hand-crafted objet d'art, I would spend it gladly if the piece had that mystic compelling feel that some art has and other pieces lack.

The $1 trheshold is even harder to pin down in my mind -- 9-10$ is a big threshold if you are pinching pennies. I think 29-30 is a psychological ceiling, myself, depending on the scale of purchase being contemplated. And the jump from hundreds to >$1000 is a real chiller.

Hope this helps.


A

Subject: RE: BS: Pricing
From: Liz the Squeak
Date: 17 Apr 05 - 04:40 PM

And I ALWAYS take my penny change!

LTS

Subject: RE: BS: Pricing
From: GUEST,skipy
Date: 17 Apr 05 - 06:41 PM

It's relative to the purse!
I worked in aviation for 26 years, where you could buy the following from your supplier:-
Fully slotted, manually activated, rotary, fibre intrusive, laminate securing device, non metallic, corrosion resistant, light weight. for £10-00


or you could buy a wood screw for a penny if you wished!
Skipy

Subject: RE: BS: Pricing
From: Dave (the ancient mariner)
Date: 17 Apr 05 - 07:28 PM

What about those hexagonal tension inducing devices skipy, they are expensive too.LOL Subjective, you have to look at what your hourly wages are, cause at $10 an hour $100 bucks is 10 hours of labour; $160 is two days pay or 16 hours of labour. A lawyer can make $100 an hour...

Subject: RE: BS: Pricing
From: hesperis
Date: 18 Apr 05 - 12:32 AM

I found with CD pricing that $20 CDN works well for in person sales, and you don't have to make change. $15 also works, but slightly less well overall, although some people will insist on trying to talk you down to $15 from $20. :)

Subject: RE: BS: Pricing
From: John Hardly
Date: 18 Apr 05 - 11:21 AM

Thanks for the input, guys.

I'm feeling the need for price increases and am hesitant because a 10% increase in prices would put most of my $40+ items over $50 dollars. I fear that may be a big psychological barrier. I hope not!

Subject: RE: BS: Pricing
From: YorkshireYankee
Date: 18 Apr 05 - 05:30 PM

As others have said â€" depends what it is... What are you selling? (am really curious) I'd say you're probably right about there being something of a psychological barrier at $50, but then again, there are things I'd consider $50 a very reasonable price for.

Another *big* consideration is what your competitors (if any) sell comparable items for â€" and (of course) whether the quality of their items is as good as yours. If others charge less but your quality is better, you can charge more than they do â€" IF you can persuade potential buyers that 1) your quality IS better and 2) the higher quality is worth paying more for (example: if someone is selling a bottle opener for $1 and some else is selling one for $2, even if the $2 opener is clearly better quality than the $1 opener, I may well think, "It's just a can opener â€" I don't really care if this one's not quite as high quality as the other one; as long as it actually works â€" and isn't likely to break/wear out significantly sooner than the "better" one, this'll do).

If you can persuade buyers that your merchandise is better quality, and you charge less than, the same as, or even slightly *more* than your competitors, I don't think you need to worry too much about the $50 threshhold.

Your biggest concern, IMHO, is the *perceived* value of what you sell. If folks think it's worth $50+, they'll happily pay it â€" except for the ones who can afford $40+ but not $50+. My guess is that there won't be all that many who are in that last category, though. If they can afford $40+, they can probably afford $50, or they wouldn't even be considering the purchase in the first place.

You probably already know a lot of what I've said above, but hope there's something in there you find useful.

Subject: RE: BS: Pricing
From: YorkshireYankee
Date: 18 Apr 05 - 05:33 PM

Odd... all the en-dashes I typed in the post above ended up looking like some weird symbol I've never seen before -- even though they showed up properly as en-dashes in the preview...

Subject: RE: BS: Pricing
From: John Hardly
Date: 18 Apr 05 - 05:51 PM

Yankee,

You've stated, in a nutshell, exactly what my concerns have been.

I'm a potter (you can go to baumanstoneware.com but, as yet, my site is under construction) and there are lots of us. I've seen many of my contemporaries take themselves a bit too seriously and price themselves right out of selling well.

There are so many concerns that I could write a lengthy essay -- but I won't bore you with it.

Subject: RE: BS: Pricing
From: Mary in Kentucky
Date: 18 Apr 05 - 06:16 PM

Yankee, it depends on whether the font is installed on the particular computer viewing the text. I'm not sure why your computer shows it correctly in the preview but not the post. My computer also has a funny-looking symbol.

John, do you remember me telling you about my friend (watercolorist) that used to exhibit at the St. James? She found that she could do much better at another show. One of my coworkers who saw her work commented that it was overpriced. I dunno.

I suspect you could get by with high prices at the St. James, but maybe not other shows. Also, at that show there seem to be knowledgeable people who recognize quality. Then again, my friend commented that many people made comments about a painting being the wrong color for their decor or not having enough wall space. (not what an artist wants to hear ;-))

I used to booth-sit with her and learned a lot about how to recognize "rich" people. ;-)

For psychological price breaks...I feel one at $30. I'll pay $20 for just about anything I want - or I'll pay $80 - $100 for something I really want.

Subject: RE: BS: Pricing
From: Bill D
Date: 18 Apr 05 - 06:21 PM

I sell crafts..(turned wood) and I HATE pricing. But I have learned that, at least for 'art', the artist must value his product enough, or almost give it away. Everyone sees when you are WAY too cheap and will buy a bargain, and most people see when you are way too high (though not all), but in between, there is this area where it is not obvious what is fair, reasonable and 'comfy'. I have observed that in 'art', if it seems too cheap, they feel they are getting a worthy product---I have actually had to raise prices on some things before they sold.

I have sold stuff from $5 to $400, and I usually try to let a potential customer see why there is a few $ difference between a $27 item and a $30 item, as almost every item is different. If the products are just almost identical, then the choice of specific price is more important ($25?, $27?). I almost NEVER have someone quibble over price--if it is basically within their budget, then a couple dollars makes little difference...but at the lower end of the spectrum, a $ makes more difference. I despise things priced with $.99 at the end, and would much rather see a round number.

Subject: RE: BS: Pricing
From: mack/misophist
Date: 19 Apr 05 - 02:33 AM

The notion of "expensive" depends on the product. For something I expect to use for the rest of my life, $100 may be cheap; for 'use once and throw away', $1 may be expensive.

Subject: RE: BS: Pricing
From: Mooh
Date: 19 Apr 05 - 09:00 AM

I sell a service (music lessons) where a half hour is $16 and an hour is $25. I like round numbers 'cause it's easier to do the math. The hour lessons are a holdover from when I didn't do half hours and when I had competition in the marketplace. I feel I cheat myself somewhat with the hourly rate, but it's now reserved only for casuals and longstanding students. When there's a bit more turnover, the hourly rate will jump. When folks question me about it the standard answer involves an explanation of "overhead" (insurance, supplies, building costs, etc), and it usually stops them dead. From what I can figure, my services would be much more expensive in the big city, as would my costs. Music is an investment. Hagglers tend not to be long term customers, in my experience, but that's because I don't deal myself down, period.

Music lessons have been priced artificially low in my area for many years, and that affected my start-up price, but I've raised the cost and will continue to until I'm satified that I've established what the market will tolerate.

Peace, Mooh.

Subject: RE: BS: Pricing
From: John Hardly
Date: 19 Apr 05 - 11:33 AM

Thanks for all the responses. I appreciate the time and effort put into them.

Paul Simon wrote the song "Maybe I Think Too Much" and I've always known that the sentiment therein applied to me. I've thought this through every which way except out.

I've arrived at a few conclusions. They affect the way I do my pricing but I'm not sure if I'm absolutely right. I think there's just a bit of guessing and luck involved in finding good pricing too!

1. I make my entire living from my pottery. I've seen those for whom pottery (or their craft/art) is a second income and it can alter their pricing to either extreme -- some underprice because they aren't as dependent and they are selling lesser quality (or, as is the case with the very famous Warren Mackenzie, are philosophically opposed to pricing functional pottery as art).

Others who are a second income are afforded the luxury of higher prices and allowing for the subsequent probability of a slower cash flow.

2. I like the idea of being an "everyman's" potter. I purposely make fuctional work and I like the probablility that, by virtue of not pricing it like art, people will be more likely to employ the pieces in the day-to-day lives -- not relegate it to their display shelves. I think that the use of pottery elevates the enjoyment of, and enriches the simple mundane activities of life.

3. part of #2, I don't like playing the "art game". I don't much care for the emperor's new clothes self-promotion and marketing that characterizes so much of today's art/craft world.

4. The price of a pot is not exactly what someone will pay for it. It's more complicated than that when dealing with functional, serial handmade pieces.

The price of a pot is

what enough people will pay for it...
to make it possible to make as many of that piece as you want to (or can keep up with)...
and to make it a cost-effective item to add to your line.

So, if there is an item that I'm making that I can't keep up with (inventory-wise) I might consider that's a time to raise the price ... with the caveat -- whatever the new price is, I should either be able to make as much money off that item at years end as I did before, OR, if it's something I didn't enjoy making as much anyway, I make less of that item but make up the income on more cost-effective items.

...all this knowing that it's unlikely that everything in one's line can't be equally cost-effective to produce.

5. Pricing, for an artist, should not be based on what that artist could afford. We are not, generally, our own market.

6. The price should fit into a larger marketing strategy.

Most other potters at the shows I do think my prices are low (and the customers regularly remark on the value they think they are getting). But if I engage those other potters in conversation about pricing, I usually find out that they have a much more scattered approach to marketing -- they wholesale, consign, have their own gallery, and do more shows than I.

When I tell them that only have to do a dozen shows and need no other market to sell everything I make, that creates a different picture -- I have way fewer "middle men" taking their share from my work.

And that strategy has worked pretty well for me for the past 15 years (of a 27 year pottery business -- the first 12 years I did everything differently). But now, the fact that I can't keep up with inventory like I used to when I was younger, and the fact that show fees, travel expenses ---life---- is just getting more expensive, I'm trying to re-evaluate my pricing.

I still believe in the principals I've stated above, but I would be quick to add...

There's certainly no reason not to ask as much as possible (possible as outlined above) for my work. But I've noticed that...

1. There are lots of other potters out there. It's not unusual to have pottery constitute 35-40% of a shows artists. I like what I do. I sell well and I'd like to think it's because of the quality of my work, but I don't want to kid myself either -- there is a large market of folks whose only criterion is $$.

2. Pricing pottery seems to be a lot like swimming in glacier lakes. You comfortably wade out in the water until...yikes!...before you know it you've plunged into a drop-off. It seems like such an on/off switch with certain prices and their effect on buying. Seems like one dollar either side of a certain number suddenly turns on or shuts off the buying.

I've rambled too much. I appreciate the sounding board.