I’ll admit it, I spent over $10 on a 70 gram chocolate bar at the grocery store last week.
Yes, there were multiple less-expensive options available, but I was buying this chocolate as a gift to bring to a friend who was hosting me for dinner, so I opted for the fancy (aka expensive) option. Call me a sucker for fancy packaging and branding. The truth is, the chocolate really didn’t taste any better than the $3 kind that was right next to it in the aisle, and I realize I could have gotten three of the other bars for less money than the single bar I purchased, but I was motivated by the perception that I was getting something “nicer” “more luxurious” and so I forked over $10 for a single, thin bar.
The thing is, we all do this all the time. We make choices on how we spend our money based more on the perceived value or what we believe the thing we are buying will give us (esteem, recognition, lifestyle) then the actual material cost or quality of that thing.
Do you think it really costs over $100 for Nike to make those running shoes? Nevertheless, would you even consider buying the half-as-expensive, but yet likely as effective, off-brand shoe?
We need to keep this in mind when we price the product that we sell.
For many makers and creators, putting a price on our products can be an area that causes a lot of stress and anxiety.
We worry, “Am I charging too much? Will anyone buy it?” “But it only cost me $X to make it, how can I sell it for more?”
We mistakenly focus entirely too much on the ‘price’ first and our own material costs instead of considering the actual value of our products and the impact they will have on our customers lives.
What you need to understand is that people buy things because they believe their purchase will solve a problem in their life. We don’t buy things just to buy things. For example, your product may make your customer feel beautiful, simplify their life, make their boring home more colorful, or help them give a unique gift to someone they love. These reasons are what influences decision making and helps us determine if the value of having this problem solved is worth whatever amount you have set as the price.
Focus on the value you provide before you set your prices. Charge what you are worth not simply what your products cost you to make!
This month, as you start restocking your inventory and preparing for the upcoming spring shows, consider how you are pricing your products. For this week’s Monday Motivation Challenge, I’m sharing some questions to help you get started in evaluating if you are charging what your products really are worth.
Consider the following:
- Are you including all your costs (materials, time, overhead) so that you at the very least break even?
- Are you including your time spent working as a cost?
- What value does your product provide your customer?
- What problems are you solving for your customer?
- How are you making your customer’s life better?
- Are your prices accurately aligned with this value?
- Could you charge more?
- What would you have to do to justify charging more? Can you deliver more value through your packaging, customer service, brand?
I’m well aware that when we sell something we have made, it can feel so personal, which in turn can make us uncomfortable with assigning a price. But the reality is we don’t run non-profits (at least I don’t!), and you have worked hard to create the products you sell. Don’t undervalue yourself and your work.
If setting your prices is something you’ve struggled with, or you aren’t getting the profit you would like from your sales, let’s talk. Schedule a free 30 min intro coaching phone-session and see how one-on-one coaching is a great next step to help make your business profitable.
We’re in this together,