Let’s take a quick spin through some of the most common pricing mistakes and make sure you know how to avoid them.
1. Changing your price too often.
As you learn about pricing a sudden desire to experiment can wash over you. That’s natural. If you spent several weeks becoming fluent in Finnish, you’d probably want to try out your skills on native Finnish speakers.
Ordering some lingonberry porridge and discussing the works of Juhani Aho would be the perfect test of how far you’ve come.
And it’s possible that a price rise is long overdue in your business. If you go about it in the right way, maybe you could charge twice as much as you are now without experiencing a drop-off in sales.
You’ll never know unless you try, but I’d urge you to proceed cautiously.
Continually increasing your price can make you look indecisive and pushy. Asking for more, and more, and more until you finally reach your customer’s breaking point isn’t a good way to run a business.
You serve real, live human beings. People who feel some degree of trust in you, not crash-test dummies. It’s okay to try things out, but plan to do it over a fairly long time scale – a year, perhaps, or a couple of seasons. Use what you’ve learned to set new prices, then just leave them alone for a while.
2. Justifying, explaining or defending your price.
Don’t justify your prices. Seriously, make a pact with yourself right now that you’ll never do it.
People don’t justify things unless there’s a reason to do so. When you start defending your price to a customer, you make them question it. Five seconds ago it was a marker of quality and value, but now you’re being weird and anxious about it.
That makes the customer think there’s something wrong with your price. If you’re tripping over yourself to explain it, there must be.
When you’re in the Apple store buying a sleek new computer that costs twice as much as a PC, does the assistant say “This is your total today, but before you say anything let me explain. This is the best machine you can buy. It’s light, beautiful and powerful. You’re getting a seamless user experience and perfect harmony of hardware and software. You’ll be able to set it up by yourself, straight out of the box, and it’s unlikely you’ll ever have to worry about bugs or viruses. So…. Is that okay?”
This doesn’t happen because the price is the price. It’s not up for debate.
But what if you put your prices up and people do ask why?
It’s always better to show rather than tell. If you dial your value markers up to the max, the reason behind any price increase is implicit. What you’re offering is clearly of a higher value, so the “makes sense” price is higher too.
What you must bear in mind, however, is that for every person who asks you outright, a dozen more won’t have questioned your price for a millisecond. But if you sit them down and reel off a spirited defence, well, now they certainly are questioning it.
That’s something we never want them to do because when price is the battleground, you can’t win. Your mass-market competitors will laminate you to the bedrock every time.
When value is the battleground, however, you’re the champion.
So don’t justify your price to customers at trade shows or craft shows. Don’t write it into the FAQ on your website. Whenever you get the urge to explain, chase that feeling back into the shadows with a boathook. Just don’t do it.
3. Having a complicated pricing structure.
Confused people don’t buy. Aim for a pricing structure so clear that it could be immediately understood by especially naive hamster.
This is one of the reasons I’m not a fan of quantitative pricing.
4. Setting the same price as everyone else.
While it’s important to keep an eye on what your competitors are charging, don’t fall into the trap of letting them set your prices for you.
Even if you make a similar product, your businesses and customers are different. Their prices can certainly inform your thinking but they shouldn’t set it in stone. Develop your own pricing judgment.
5. Setting prices based on your costs instead of value to the customer.
You’re an artist. You create value. It doesn’t matter if the materials you used to make your lovely thing were just hanging around in your studio, or if didn’t really take you that long, or if you enjoyed every step of the process.
When it comes to value, all that matters is what the customer thinks. Price your work on that basis.
6. Staying in your personal pricing comfort zone.
Many of us were brought up to believe that if something costs a lot it’s a bad deal, and if something costs a little it’s a good deal.
When you’re trying to set your prices this kind of thinking is no help at all.
In the first instance, it’s not true. Every day people pay huge sums for a seat in business class on transatlantic flights.
As far as they’re concerned, if they get off the plane feeling refreshed and ready for the day ahead, instead of aching and crumpled, it’s worth it. They’ve paid a lot of money and it was still a good deal.
Similarly, we’ve all been burned by low-price items that completely failed to live up to their promises. Cheap earphones that sound tinny. Bargain-basement nail polish that turns your whole foot orange. Sometimes cheap items absolutely aren’t a good deal.
So relying on your own internal pricing compass can lead you astray.
And in any case, you’re not your customer. What you’d personally pay for a product like this, or what feels high or low to you doesn’t matter.
Do everything you can to create and communicate value, including setting a “that makes sense” price, then step back and let your buyers make up their own minds.
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