Let’s talk about Profitable Product Pricing and why it’s easier said than done

Pricing products of course involves doing the numbers.

But pricing products profitably involves maths, marketing and mindset.

By the way, when I talk about products, I actually mean products and services... whatever it is that you do or sell.

Before we move on, let's cover the obvious - but one that is easily forgotten when you actually sit down to workout your product prices.

You need to be pricing your products profitably - if you don't, you won't have a business for very long. 

And to price your products profitably you start with the numbers, or the maths.

The final price you choose sets your positioning in the marketplace - whether you are going for high quality and high price, or low quality and low price or something in between.  (If low quality and low pricing is your thing, then this probably isn't the article for you.) This then impacts on your future marketing from photography, to description, to banding and your entire online prescence.

And then your mind starts telling tales.... 

Today I want to address the main tales that I have have helped creators and creative business owners with over the last decade.  These are the ones that can send you down a rabbit hole of financial hardship, which we want to avoid.

1. Our own money mindset clouds our judgement about what others will pay for our products.

We tend to project our own perceptions of  value onto others. We assume  they will share our opinions on what constitutes a fair price.

However, like most assumptions, this is flawed as everyone has their own unique circumstances, priorities, and financial constraints that influence their willingness to pay.

Therefore, relying solely on our own money mindset can result in mispricing and underpricing which hurts your bottom line and can turn away potential customers.

Instead, approach pricing decisions with an open mind and consider various factors such as market demand, competition, and consumer behaviour, rather than being swayed by our own biases and assumptions.

And finally, remember you are not your own customer because you have the skills, time and means to create your products, your customers don't!

2. We get overwhelmed by media coverage telling us everyone is struggling financially so no-one has the funds to spend on anything nice at all.

 It's important to keep in mind that media coverage often focuses on extreme cases and may not be representative of the whole population.   So while there are certainly individuals and communities that are facing financial difficulties, many people still have disposable income and are willing to spend it on products or services that they value.

And consumer spending is complex. It's is influenced by factors far beyond just income including lifestyle preferences, personal values, and social pressures.

Sidenote: I've personally known someone who lived off supermarket own brand baked beans and soup to be able to afford a very luxurious, 5 star three week holiday.  If you'd asked them they would have said 'I'm skint' because they were saving  nearly all of their money for something which was important for them.   You can't always predict human behaviour.

Therefore, it's important to avoid making assumptions based solely on media coverage and instead conduct thorough market research to understand the needs, behaviours, and preferences of your target audience.

3. Others are selling similar products or services at  silly low prices and we wonder how on earth we can compete.

Seeing others selling similar products or services at a much lower price can be disheartening.

However, it's important to remember that price is not the only factor that consumers consider when making purchasing decisions. Many consumers are willing to pay a higher price for a product or service that offers unique features, superior quality, or exceptional customer service. And sometimes because it's handmade by you!

Remember, it's possible that the "competitors" selling at low prices are cutting corners in other areas, such as using inferior materials or neglecting customer support.

Therefore, it's important to focus on building a strong value proposition that sets your product or service apart from the competition and justifies a higher price point. This can include highlighting unique features or benefits, leveraging customer testimonials or reviews, or emphasising your commitment to quality or sustainability.

4. We convince ourselves that price is the only factor that turns browsers to buyers.

It's easy to assume that consumers are solely motivated by getting the best deal possible, and that lower prices will always lead to higher sales. However, the reality is much more complex as we've already discovered.

Consumers consider a variety of factors, including product quality, brand reputation, customer service,  value proposition all topped off with ethical and value driven considerations too.

So, while price is certainly an important consideration, it shouldn't be the only factor that we consider when pricing our products or services.

In fact, setting our prices too low can even undermine the perceived value of our offerings and impacting on our ability to create sustainable products.

Ultimately, it's important to strike a balance between pricing competitively and ensuring that our offerings deliver the quality, features, and benefits that our target audience values without solely focusing on price.

Sidenote:  If price was the ONLY factor, then you would only see the cheapest cars on the road.

5. We forget that customers choose what they buy on way more than price alone.

In reality, there are a myriad of factors that come into play when a customer chooses what to spend their money on.

While price is certainly important, customers also consider the quality of the product or service, its features and benefits, the reputation of the brand, and the overall shopping experience.

For instance, a customer may be willing to pay a higher price for speedy delivery, convenience of buying local, accessibility, or for other personal preferences inlcuding the specific type of materials used.

Again it proves,  it's important to focus on building a strong value proposition that takes into account all of these factors, rather than simply trying to compete on price alone.

And the best part is, by focusing on the whole package, including price,  we can attract and retain customers who are looking for more than just a bargain.   Looking after those who a quality or unique product or service that meets their needs and exceeds their expectations.

6. We forget that while some customers want 'a bargain'. Others want to feel good about their purchase for other reasons.

For example, a customer may be willing to pay a higher price for a product if it aligns with their personal values, supports a cause they care about, or is produced in an environmentally sustainable manner.

Additionally, customers may choose to support a particular brand or business based on factors such as its reputation for quality, ethical business practices, or exceptional customer service.

By focusing solely on offering bargains or low prices, businesses risk missing out on the segment of the market that is willing to pay a premium for products or services that align with their values and priorities.

Meaning, it's important to consider these other factors when developing pricing strategies and marketing efforts. And to communicate the benefits of your products or services beyond just their price point.

This is how you differentiate your offerings and attract customers who are looking for more than just a bargain, but a meaningful and satisfying purchasing experience.

7. It's time to be proud of our profitable prices and standby the reasons we charge that amount. #stopapologising

As entrepreneurs, it's easy to fall into the trap of apologising for our prices, or feeling guilty for charging what we're worth. However, it's time to be proud of our profitable prices and stand by the reasons we charge that amount.

One way to overcome the inevitable objections of "it's too expensive" is to highlight why your product or service is worth the price.

For example, a product can be more expensive because it aligns with personal values such as sustainability, fair labour practices, or ethical sourcing. By communicating these values, we can attract customers who share our values and are willing to pay more for products that align with them.

A product can be more expensive because it supports a cause, such as donating a portion of profits to charity or supporting a local community organisation. By highlighting these aspects, we can appeal to customers who want to make a positive impact with their purchases.

Buying ethically can also be a reason for a product to be more expensive. For example, products that are made with sustainable materials or eco-friendly manufacturing processes may be more expensive, but can attract customers who prioritise sustainability.

Supporting a local independent business can also be a reason for a product to be more expensive, as customers may be willing to pay more to support small businesses in their community.

Lastly, exceptional customer service can also be a reason for a product to be more expensive, as customers are willing to pay more for a high-quality customer experience. By communicating these value propositions, we can justify our prices and attract customers who are looking for more than just a bargain.

An example of a business who does this is https://www.elvisandkresse.com/ who state on their homepage

'Elvis & Kresse was established in 2005 to save London's decommissioned fire-hose, ones that had become too damaged to repair and were going to landfill. Elvis & Kresse fell in love with these brave retired fire-hoses and mounted a rescue. Today, Elvis & Kresse's highly skilled craftspeople make beautifully designed bags and homeware from 15 different reclaimed materials. 50% of profits from the Fire-hose Collection go to The Fire Fighters Charity and 50% of profits from the Fire & Hide Collection go to Barefoot College International.'

If you're a maker or artist selling handmade products, pricing can be a challenge. You want to make a profit, but you also don't want to price yourself out of the market.

That's why it all starts with the maths.  Tip:  Use a product pricing calculator to ensure that your prices are profitable and sustainable. Using a product pricing calculator can be a game-changer for handmade sellers. It takes the guesswork out of pricing, and allows you to focus on creating high-quality products that customers will love. By pricing your products profitably, you can ensure that your business is sustainable in the long-term, and that you're able to continue doing what you love. So, if you're a handmade seller struggling with pricing, take the time to use a pricing calculator and see the difference it can make. You can find A Handcrafted Business  free product pricing calculator at https://app.ahandcraftedbusiness.com/pricing

And once you've sorted the numbers, it's onto the marketing... 

We'll talk about that another day! For now, go and review your pricing. 

You need and deserve to make a profit!