The Art of Setting Price – Part 2

In the first part of this series,  we talked about how to gather the data you need to determine what price you should charge.  In the second part we’ll talk about how to finalize your pricing and how to communicate that pricing to your customers.  Although the data collection process, as detailed in part one,  can take time,  it’s actually probably the easier part of setting price.   Now comes the hard part,  setting your prices and sticking to them.

Once you’ve crunched the numbers on what you need to make and assigned tentative prices for your products,  you can compare those with your market research data.  Sometimes you’ll find that you can charge more than you thought you could and still be competitive.   Other times you’ll find that the prices may need to be adjusted downward slightly.  The hope is that the highs and the lows will balance.

After the final adjustments are done,  do one more set of calculations.  There are two parts to this final bout of arithmetic.  One part is to figure out if you can afford to and want to do quantity discounts and what those discounts will be.  This set of calculations should also include what your minimum order quantity will be.  For some people,  it’s the minimum number of a product they need to make their minimum profit requirement.   Other people may have very low minimums to try and differentiate themselves. Some shops will have set minimums and quantity discounts that are stated prominently in their pricing literature.   Others may not advertise these minimums and discounts,  but every shop should know what they are. The time to make pricing decisions is not when someone is standing in front of you asking.  Those decisions should be made when there’s no pressure and you can keep your income goals clearly in front of you.

The second set of calculations to be done deals with your absolute lowest price.  This is the rock bottom minimum you can charge and still make at least a small amount of profit.  The hope is you will always be able to charge more than this number,  but you should always know what your lowest price is and stick to it.  Again, the time to make this decision is not when a potential customer is arguing with you,  or when someone offers a huge job that is terribly tempting.  Know your lowest price before you get into these situations,  and make sure you don’t go below that price,  no matter what the incentive.

Now that you’ve done this last set of calculations,  you should have a final price for each product you offer,  along with quantity discounts,  if you intend to offer those,  and a rock bottom minimum price below which you will not go.  All this information now needs to be communicated to your customers.  If you’re selling online, pricing information can be communicated in each product listing.   If you’re running a brick and mortar shop,  printed pricing can be offered with order forms.   As a general rule,  it’s a good idea not to make any mention of your rock bottom minimums in the pricing you release to the public.   After all,  it’s never a good sales tactic to let your customer know the minimum payment you’re prepared to accept.

Your pricing is now set, and you’re on to the really difficult part,  holding firm on those prices.  We’ll discuss that in part 3. 

Trendy Thursday: 6 Industry Trends That Need To Die

For whatever the reason,  I seem to be having a “you kids get off my lawn!” sort of day,  in which I’m finding everything a little annoying.   Given my state of mind,  it seemed like a good day to write about a few trends within our industry that I think need to end,  immediately.   Some of these are social media related, and some deal with the industry as a whole.

Trend #1:  Posting multiple pictures in a row of the same design/your work  – This drives me nuts,  mostly because it tends to reduce the impact of the work,  which may be great,  but isn’t going to hold people’s attention if they have to scroll past 13 pictures of the same or similar things.  Don’t flood people’s feed with images of your work.  Choose one picture that you think represents your best work, and provide a link where people can see more examples if they’re interested.

Trend #2: Under charging – This is a particularly insidious trend for new business owners.  Often people don’t really know what they should be earning per job or what they need to be earning per job.  Some decorators (women seem to have a particular problem with this) also undervalue their work because it’s “sewing” or “a hobby”.  If you’ve invested time and money in equipment and learning your craft, you’re a professional.  Set your rates accordingly.

Trend #3: Changing artwork to avoid copyright infringement – There is a long-standing myth that changing copyrighted artwork by a certain percentage will negate the possibility of copyright infringement,  but that’s not so.  There is no such rule.  The best way to avoid copyright infringement is to get permission to use artwork that you did not create,  or to create your own original works.

Trend #4: Video because you can – Facebook Live,  Snapchat, smartphones and sites offering video creation tools mean that almost anyone can be a star.  That’s great,  up to a point.   The thing, however, to ask yourself before making a video is whether or not you should.  Do you have a plan for content?  Do you know what you want to say?  Are you comfortable on camera?  Particularly for businesses who are talking to customers,  videos need to have a reason to exist.  Just because you can is not that reason.

Trend #5: Hard selling on social media – As I’ve said before in seminars,  the first word in the phrase “social media” is “social” for a reason.  Social media is not about selling,  it’s about creating community.  Despite this,  some decoration companies insist on setting up profiles where all they do is post links to product and pricing.  In order to sell on social media,  you have to build trust and a community.  Social media is about soft selling,  where the sales messages are mixed with value added features.  Doing nothing but a hard sell on your profiles will soon insure that you’re selling to no one.

Trend 6: Complaining about the “guy down the street” – It may literally be the competing shop down the street, or it may be an online site,  but there’s always that one business that seems to inexplicably do well while either using underhanded tactics, or doing shoddy work.  It’s tempting to blame those companies for the state of pricing,  or the fact that you didn’t get the big job,  and it’s equally tempting to complain that those companies should change. The reality is they won’t,  and another reality is that there will always probably be people who will buy from them.  What really matters,  however, is not what the other guy does,  it’s what you do.   If you do your best work,  offer fair pricing, and treat your customers honestly and with respect,  who cares what anyone else is doing?  Focus on how you can be better,  not on stopping these other companies from being worse.

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Wisdom Wednesday: Pondering Price

money-questions-198x300“How do I price this job?”

“How would you veterans price this job?”

“What would you charge to do this?”

The questions that are asked may differ,  but the intent behind them is the same,  someone please tell me how to price this stuff.  Make me feel that the price I want to charge is reasonable and correct.   Give me some guidance on how I should be pricing my work.  Let me know that what I do is valuable and worth what I want to ask people to pay for it.

We all know that setting a price for something can be difficult.  The dictionary defines price as “the sum or amount of money or its equivalent for which anything is bought, sold, or offered for sale”  which sounds pretty simple.   You want an embroidered hoodie.  I tell you the hoodie, decorated as you wish,  is $20.  You give me $20,  I give you the hoodie.  An easy transaction, right?

In reality,  it’s anything but easy.   First, you have the fact that decoration work is creative work, and creative work has, historically, been undervalued.  Second,  you have the fact that decoration businesses can range from a one head machine run out of a home to a company with multiple locations and hundreds of heads,  with each business having different income needs and pricing requirements. Third,  you have customers who are looking to get the best value for their money, and may have unrealistic expectations of what your work should cost.  Add in the problem of determining the value of one’s own work, let alone telling other people what you think that value to be,  and you end up with wildly fluctuating price scales,  and good decorators doing quality work who most likely aren’t making nearly what they should.

So, how do we reverse this trend?

Reversing the trend,  in my opinion,  comes down to playing the twin roles of educator and advocate.  Education starts with your company’s customers and,  really, continues anywhere your work is discussed either verbally or in writing.   The goal is to inform your customers and potential customers about what it costs to make the items you make,  cost not only in actual dollars,  but also in time and training.  Your work should always be presented as something done by a skilled craftsperson,  someone who has dedicated time and effort to learning their craft and who should be paid accordingly.     The more the general public understands what goes into the work that is being done,  the more likely it is that they will value the work more,  and expect to pay a higher price for it.

Advocacy also starts at home,  or in your shop,  and extends out to the rest of the world.   Being an advocate for the decoration community means charging a fair price for your work,  charging artificially low prices depresses the rates that all decorators can charge, and also teaches the marketplace to expect quality, painstaking work for mere pennies.   Advocacy also extends to how you talk about what you do.   Emphasize the skills involved and the work it takes to learn the craft.  Speak out when you hear or see people complaining about the price of a decorated garment,  explaining why the cost that is being charged is fair.   Be aware of those who will try to get you to do work for exposure,  as exposure can’t pay the mortgage or keep the lights on.  Make it a point to call out the people who underestimate the value of what we,  as an industry, do,  and keep pushing for the respect,  and the fair pricing structure that the industry deserves.

Pricing is always going to be a controversial issue.  A fair price for you might not seem like a fair price to me; there will always be differences in how things are priced by different decorators,  just as there are differences in where and how individual decorators do their work.   The thing to remember is that a rising tide lifts all boats,  and doing a little pricing research in your market before setting prices can help assure that every decorator gets a fair price for the work that they do.

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How to: Order from EnMart

order-onlineIt occurred to me the other day that we put tools in place to make it easier for our customers to order and to take advantage of pricing levels and other incentives,  but what we think is easier might not appear the same way to those who are buying from us.   So,  I started looking at the site through the eyes of a customer,  and trying to figure out,  if I were new to the site,  what I could grasp easily and what might be harder to figure out.  Once I had my list,  I decided to put a blog post together,  to help those of you who buy from us get the most of your EnMart experience.

Wholesale Pricing:  Wholesale pricing is available to those businesses that have a tax i.d. number and who apply for a wholesale account.   If you do not apply and your account is not set up for wholesale pricing,  you will not see those prices nor receive them at checkout.  To apply for a business log-in,  you can click the “I Need A Business Log-in” button on the home page,  or click the “Wholesale” button in the top menu on any other page of the site.   You must submit your tax i.d. number to be considered for wholesale pricing.  Once your application is received,  it generally is approved quickly.   You will be notified by e-mail when your wholesale account is activated.   To see wholesale pricing,  make sure you log-in before you shop.

Pricing Levels: There are some products which only have one tier of pricing,  which is wholesale pricing.   Often this is because it is a product which wouldn’t interest the general public,  is one that can’t be seen by the general public,  or is a product that has an industry wide or manufacturer mandated price that we need to meet.  Things like thread,   backingblank patches and bobbins do have both public and wholesale pricing,  so having a wholesale log-in if you’re qualified for one is a good option.

Shipment Times: Our goal is always to ship every order as quickly as we can.  Most orders,  if they contain goods we can simply pull off a shelf will ship same day,  if placed before 2 p.m. Eastern Standard Time.  Things that need to be made,  like blank patches,  have longer lead times for shipping.  When there is a lead time,  it will be noted on the page for the item.   Order shipment speed may also be impacted by the volume of orders received.

Sales Tax: By law,  EnMart is required to charge sales tax in Michigan,  Illinois,  California,  Nevada,  Georgia and New Jersey.  When someone applies for a business log-in,  if they are in one of those states,  the approval e-mail will also contain an attached form,  which must be completed and submitted back to EnMart for an account to be made tax exempt.   If the form is not completed and on file,  we must charge sales tax.

If you ever have questions about anything pertaining to EnMart,  you can always feel free to contact us. We want your shopping experience with EnMart to be a good one,  so feel free to reach out if you need any assistance.

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Time Travel Tuesday: “That’s Your Price?”

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I’ve been mulling over writing a post about pricing creative work for a while,  but it seemed especially appropriate to write it on “Time Travel Tuesday” since the problem with prices,  for most people anyway,  probably started back when their business started.   When you’re first starting out as a business owner, it can be tough to sit down and compose a price list.   First,  you may not have any idea of how long a job will take.   Second,  you may not be conversant with the prices your competitors are charging,  or the costs of purchasing supplies.  Most likely,  you haven’t yet heard the tired tropes of “do this small order for cheap and I’ll bring you a huge order”,  or “if you do this cheaply for me,  my husband, club president,  soccer league etc. will give you tons of work”.  Finally,  when you’re just starting,  you may be so unsure of your work’s value,  and so eager to bring in business,  that you’ll do work at almost any price,  simply to be doing the work.

Doing the work is important,  but even more important is doing the work at a price that makes you a profit.   If your shop is constantly busy,  but you’re struggling to keep the lights on and the bills paid,  then your pricing structure is not doing you any favors.   There are always going to be people who will tell you your prices are too high,  who will ask for a favor,  who will trot out the tired “do this for me and I’ll bring you orders bigger than you ever dreamed”,  who will expect a friends and family discount,  something they would never ask for at the grocery or the hardware store.  There will always be people who say decoration is a hobby,  not a business,  who will think that the time and effort you put in to making their shirt or bag or quilt shouldn’t cost them anything.   There will always be people,  and that’s the important thing.   The trick is to find the people who understand what you do and are willing to pay for the investment of skill and effort and time you make to do it.

So,  if you’re new to the business,  or even if you’ve been in the business a while,  but have realized your pricing structure isn’t where it should be,  here are some things to consider when setting new pricing.

  1. Calculate what you need to bring in not only to keep the business open,  but to pay yourself a decent salary.   Make sure you calculate all your costs,  business expenses like machine leases and maintenance,  electric,  supplies,  education,  as well as personal expenses like mortgages,  food, clothing,  car payments, entertainment etc.  Don’t forget to set a value on your time as well. Get a clear picture of what you need to make to have the sort of lifestyle and business you want.
  2. Do some research on what your competition charges.   Some of that can be done on social media,  following your competition can be a marvelous source of intel.  Don’t rely on what your customers say your competitors charge,  try to get info from as close to the original source as possible.   Customers may sometimes embellish the truth to try and gain an advantage.
  3. Next, spend some time figuring out what makes your shop special.  What skills do you have that your competitors can’t match?  Do you offer superior customer service or exceedingly fast turn around times?  What makes it worth doing business with you and why will customers be willing to pay the prices you’re going to set?  Make sure you preserve this list in writing,  because you will,  at some point,  most likely use it to explain why you charge what you charge.
  4. Finally,  set your prices.   Keep in mind you want to find a balance between fairly compensating yourself and pricing yourself out of the market.   Make sure you’re clear on why your setting your prices at the levels you’re choosing,  and make sure you also set a rock bottom price beyond which you won’t go.   Once you have your prices set,  sit down with a friend or family member and explain why your prices are what they are.   Do a little role play, and have the other participant in the discussion throw some common pricing objections at you.  The idea is to be able to concisely,  clearly and smoothly explain what your price structure is and why,  without hesitation.

Setting pricing is as much a matter of belief,  in yourself and in the work that you do,  as much as it is a function of supply and demand,  or the marketplace.   If you take the time to figure out what you need and want,  and take the time to understand why your work has worth and what that worth is,  you’ll be prepared the next time a customer asks incredulously “That’s your price”?

You’ll know why your price is your price,  and that there’s really only one answer to that question.

Yes.