Recently I sat down with an artist we'll call Claire. And Claire makes magnets. I also should let you know that Claire's name and business have been changed here to protect her privacy.
So Claire sells magnets and sells each one for $5.
I asked Claire why she chose $5 for the price.
She told me that in Chicago, a similar magnet sells for $8, so she thought $5 was a good price.
When I asked her to compare her product to the Chicago product, she listed a variety of benefits of her own product over that sold in Chicago. Their product wasn't handmade while hers are. They use low-quality magnets and she uses hi-powered neodymium magnets. Her product is packaged for gift-giving while theirs is not.
She believed her product to be better but still priced it significantly lower.
Why do we do this?
Here's another example.
I spoke with Charles who wants to screen print t-shirts.
I asked him how he plans to price his t-shirts. His answer? Find out the prices of the other t-shirt shop in town and price his shirts lower. Why lower?
Because he's new to the game and feels that therefore his shirts are worth less.
And yet another example.
Maggie paints murals. She's been an artist for 17 years but still feels that she should not charge for her work. Her work is large-scale and takes many weeks to complete, but she still usually paints them free of charge or just asks for materials to be covered. Why? Because she feels that she needs to get the word out about her murals before anyone would want to pay her. Everyone she works for expects to pay her, but she turns them down.
There's this fictional prestige that we have as artists. We want to be an Artist, but it feels like "selling out" when you start making a living at it.
As if being a starving artist put more value on what we're making. As if making a living means we have something to live up to and we have to prove to ourselves that we're worth it.
Many people fear that raising their prices will mean less business for them, and that's partially true.
When I first started making dog tags, I sold them for $8. Now the same product sells for $26. Now, I didn't change the price from $18 to $26 all at once. This happened gradually over the course of 10 years.
When you increase your prices you will lose customers. Not everyone can afford or wants to afford a $26 dog tag. And that's ok. Because if I am selling dog tags for $8 each, I have to make 125 tags to reach $1000 in sales. But, if I am selling them for $26 each, I only have to make 39. So sure, I've lost some customers. And it's natural to be sad about that. But the reality is, you have a life to live. If you can make the same amount of money by making 39 tags as you can by making 125, why would you charge less?
You're also telling your customer what the value of the product is. If you price it low, they will perceive the value as low. Even if they really like it and want it.
Think about buying a nice wallet for someone you love. Let's say it's a graduation gift. your budget is $100. You search on Etsy and you find a gorgeous wallet for $27. And you find another for $108. Which one is worth more? The one that's priced more. And if you're trying to buy a meaningful gift, one that you're willing to spend $100 on, why would you "skimp" and buy a cheaper one?
Your customers are doing the same things.
I'm not saying you should double or triple your prices right this very moment. Pricing is part head and part heart. Part left brain and part right brain. Part 'what does it cost to make it' and part 'how much is it worth?'.
If you haven't already, jump over here and check out this article "How to Price Your Products." It walks you through a spreadsheet with built-in formulas to make sure that you're not just breaking even, but you're making a profit. The number you get on this spreadsheet should be the minimum number you charge. But you can charge more. Think of the value the customer is receiving instead of the value you put into it. More on that in a later post.
Let's discuss in the comments: What obstacles do you have for raising your prices? Have you ever rasied your prices and regretted it?