The Power of Price

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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:

  1. 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.
  2. 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.
  3. 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.
  4. 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!
  5. 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.

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The Weekend 4/13/12~Pursuing Your Passions

“Do what you love and the money will follow.”

Who hasn’t heard that phrase with its promise and allure? But is it true?

We also know well the phrase “starving artist”.

Desire is all important. It will make you more creative, resourceful and propel you further faster. And when things get tough persistence is Key. There are so many obstacles you face when starting something new,  getting that business off the ground, or an unusual project, something  that you have never before attempted.

But the reality is that no amount of desire will guarantee success. Not in business, not in relationships and not in life.

So temper your passions with reality. If the thing you are passionate about won’t support your life, pay the bills, then No this great invention should not be your next career move. As the authors of Just Start: Take action, Embrace Uncertainty, create the future write, “every small step you take should leave you alive to take the next step. “ So the basic needs and survival should be first. A friend shared some valuable words of wisdom with me once. “It’s a job. You don’t need to love what you do. It just needs to support your life.”

At the time I was working for myself, a struggling entrepreneur. I regaled the fact that I could set my own schedule. The reality was I was working all the time, barely scrapping by and most months going further into debt. And mind you I argued with my friend ALOT. Fought the change, sure I was giving up on my dream.

I learned a valuable lesson, how wrong I was. And in my life this has made all the difference. Once I let go, heeded her sound advice and took a 9-5 in an industry that was not my passion I truly felt free to thrive. My basic needs were met and more.  This freed me up to pursue what I was passionate about.

For many there is never enough money. They never land at the place where they feel secure in their finances and everyone could probably tighten their belt in some place or another. I know I don’t have to have a latte every morning. Drip would be just as good and far better on my bottom line. So be realistic about your needs and wants and evaluate your spending.

Now I am not saying you won’t make a living engaged in your passions. People often do. Insights, inventions spark creations every day that sell. Look at Instagram!  So Act!  See what happens. Once you have met your basic needs all bets are off.

Make sure to pursue your passions even if only 15 minutes a day. Don’t let anything stop you.  If you do a little something towards what you care about every day and you will be more satisfied and fulfilled. Even the smallest step can change everything. So explains The Power of Small Wins. And I can attest that once I met my basic needs I found I had so much more time to dedicate to the things I am passionate about. I am happier for it.

So take those steps. Don’t worry about the outcome. You can’t predict the future and you will never be able to plan for every contingency. So don’t waste your precious creative energy trying to do just that. You may even be lucky enough that your passion will make you money. But even if it never does I promise you will be happier. And what’s wrong with that?


 

The Weekend Reading List:

 
Images: Here &  Here