The key to pricing=Not too low, not to high. Just right!
If you set your prices too high you’ll drive your buyers away, too low they will question the value of your goods. And ultimately if your offering various pricing packages the majority of your clients will purchase the one in the middle. In my product development class I taught various methods for pricing. Here are just a few basics:
- Cost Plus– The quick dirty version of this is to take your total costs and then double them. The longer explanation is take the BOM (Bill of Materials/hard goods) + CMP (cut, make, pack or the cost of manufacturing) + your markup. Anywhere between 50-100%. Some stores go even higher these days based on their overheads.
- Buyer’s based– This is based on the buyers perception of value. Often times luxury goods made of leather have a higher perceived value then cotton. Trust me people pay more for brand recognition. Heck even look at the craze Cabbage Patch Dolls caused.
- Competition based– Keeping in line with your competitors. Stores need to maintain a close proximity in pricing in order to prevent their buyers from going to their competitors. So often their markups are similar. Ebay is another good example of this particular model.
- Psychological Based– Pricing using .99 cents or rounding up to whole numbers for high end goods. Most people see $9.99 and think they’re getting a deal. I always round up in my head, so to me it’s $10. And trust me you’ll never see a diamond necklace priced at $9000.99. Though car dealers sure like to use $29,999. Tricky. Not!
- Dynamic pricing– Ecommerce, this is the newest pricing method. Offering different prices depending on the time of day, purchase 2 get one free, refer a friend. All sorts of new and interesting options.
But the greatest marketing and pricing lessons I’ve learned over the years have come from various garage sales. These trade secrets are vital to success at least in my arsenal.
1) People relate to your story
First there was my college roommate. She posted signs around town for our upcoming garage sale. My boyfriend left selling his stuff cheap. I think you get the picture. Saturday rolled around and we were inundated with buyers. I’ve never been part of a more successful garage sale. She even had her picture in the paper as the forlorn jilted girlfriend, angry girl power. The worst part was she hadn’t gone through a break-up not yet at least. The breakup was mine. So this is a cautionary tale. Beware of what you believe is true just because it’s printed doesn’t make it so and there are a lot of people who relate to being angry with an EX.
Ultimately for me the lesson was that it is human nature to want to connect. It showed me people were draw to one another’s stories. They could relate to the feeling having been there themselves. So when creating and marketing make sure to put the “real you” out there. And then be ready to meet the crowd.
2) Simple rearranging and staging items helps them sell.
Next I had a garage sale with the help of another friend of mine. We had tables and blankets laid out over the lawn in front of my duplex. After the initial flurry of professional garage-salers subsided I began to see a pattern emerge. People would arrive and mull about buying nothing. But the minute my friend rearranged the merchandise into staged displays, spacing things out, creating silly vignettes, decorating the lawn blankets- well, people began snatching things up.
So how it looks is important. It translates into dollars. Trust me they’re not kidding when they tell you to have good Photos on Etsy. The human brain notices when things are even slightly off and can reject it. And if you can do it in a way the entertains or inspires all the better. Seriously I think she worked magic that day.
3) Perceived Value-When it comes to price make feel they are getting a deal.
Finally my Ex’s marketing genius. When we first moved in with one another we had duplicate of everything, both having lived on our own for quite a while. Needless to say there was plenty to get rid of including two futons. Both were in good shape and we priced them at $75 each. Well half the day passed and they just sat there. Not a nibble. I feared we were going to have to store them or figure out how to haul them away. I much preferred to sell them and have a little extra cash.
So my Ex gets up and pulls out a marker. Above the price he writes $150 and then crosses it out. Now it appears as if both futons had been marked down by 50% from their original price. They were both sold and gone within a half an hour. No haggling. So by doubling the price and then marking them down he created a perceived value they hadn’t previously held. This lesson has stayed with me to today.
So there you have it- the power of pricing your products. And here are a few good reads related specifically to pricing and money in fashion and art. Good luck in your endeavors.
Image: Lily Donaldson for Harper’s Bazaar Brazil March 2012. Editorial shot by Terry Richardson in New York. Styling by Pedro Sales.