A Rockstar’s Guide to Product Pricing

Oh boy. Product pricing has always been a tricky one, and is still something that I juggle and struggle with. Over the years I’ve sold a variety of different products, ranging from off-the-shelf wholesale items, to hand made artwork and bespoke jewellery. I’ve recently been reconsidering a few of my product prices, some of them are going up and some are going down, so I thought it was a prime opportunity to talk about this subject!

Cover your baseline costs

This is by far the most important consideration when deciding on your product prices. Calculate your costs to the penny, because if you’re selling in volume then it really, really makes a difference. Your ‘cost’ price is..

Raw materials + delivery of raw materials + product packaging (ie. jewellery boxes, tissue paper) + anything else that you’ve actually spent money on for the product

So, that’s how much you have spent on your raw product. It might not seem a lot (or it might, in which case your pricing might be WAY too low) but there are some other things to add on, too…

Cover your time

Have you set yourself an hourly/daily rate? You should have, or at least have some sort of charge for the time it takes to create your product. Your ‘time’ price considerations should be…

Time to create product + portion of time it took you to design the product (you might want to add 10p or something per product or whatever you feel will even out over time) + time it takes to package product + portion of time to add product to a website + anything else that you’ve used your time on with that product!

Don’t be tight on yourself here, it’s your time that you’re spending so make sure you’re going to get reimbursed adequately!

Your cost

I work out the ‘true cost’ of my product by adding the baseline and time costs together, this is the absolute minimum price that you should charge in any situation. This will cover your costs and time, but it’s still not the retail price of the item. Nor is it the wholesale price.

Your retail and wholesale prices

Here’s where things get fun! I jest, it gets complicated.

I once heard an equation that Cost x 2 = Wholesale price, Wholesale x 2 = Retail price, generally this equation can work very well, however for certain items you’ll find that the retail price might need tweaking. Here’s where value comes in, and it’s a combination of competition research, guesswork and trial/error.

Your calculated retail price might not be the price that people think your it should be, if they see a similarly made item retailing at certain price then they’ll start to question why your item price is different. If it’s obvious (better materials, finer finish) then it’s fine, but otherwise you should change your retail price to reflect the perceived value of the product. Don’t think about what you’d pay for your product, think about what your customer would pay. You’ll pretty much always undervalue yourself!

Do a little research, get a price point, and give it a go. If you find that you’re getting comments like ‘wow, that’s cheap!’ then you need to increase the price.

Top Tips!

• Don’t be afraid to alter prices. Suppliers change, your packaging may change (hell, you might get new slightly more impressive packaging that costs more but gives a better overall product – account for that in the product price!) and prices have to change inline with this.
• Experiment with new products. If you’re able to sell a new product at a slightly higher price than a similar product then why not increase the price of that, too? Remember, a bigger profit margin on the product will lead to creating new ranges of items, better packaging, better websites, and better overall customer experiences.
• Talk to others about your prices. Talk to your peers about your product prices and what they think the price should be, it’s awesome to get feedback like that!
• Listen to your customers! If you’re constantly being told that your items are ‘really good value!’ then that means they’re too cheap ;)
• Don’t undervalue yourself. This is something that we’re all guilty of, thinking that as mere mortals our items won’t be worth as much as something in a huge retail environment. WRONG! they’re worth more, and your customers will see that. Who’d want a mass produced item when they could spend a little bit more to support an artisan?!