- Apt: very appropriate: especially suited to the circumstances
- Appraise: to make or give an estimate of how much money something is worth
This week seems like fertile ground to talk about value, value proposition, work and worth. Every time I turn around, it seems I bump into a creative business or business owner that is struggling with pricing their product(s) and/ or service(s).
Just yesterday, a member of my Amen Corner* reached out to me because her business is growing faster than she can keep up with due to her current situation as a part time working stiff and part time entrepreneur. What a good problem to have, right? Her business began to require more time- time to build her inventory to meet growing demand, Woohoo! Every entrepreneur’s dream, right? Not, exactly!
Her business recently got a major boost as online retail sales surged and the coup of landing multiple wholesale clients. She crunched the numbers, crunched the numbers again, it didn’t makes sense– the numbers just weren’t adding up. By now, you must be thinking what I was thinking, how could that be?
Once she calculated all of her profit from the wholesale and retail revenue streams she would barely break even, despite the fact that her brand is H-A-U-T-E and H-O-T, hot right now! Why you ask? After a little digging, I uncovered that her pricing strategy discarded the cost of her labor as well as an accurate portrayal of her overhead expenses including product materials, marketing, and promotion.
Then this morning, I was trolling through my email as usual and happened upon a Livingsocial email. I am a fan of Livingsocial.com and Groupon.com, I have had some really good dinners and excursions from deals they’ve featured. However, as a business owner, the concept of some of the deals offered through these sites imply a bit of desperation on the part of the companies but that is a different post altogether. I digress, I was stopped in my tracks by an offer by a local illustrator offering personalized children’s books at a rate of $12 per book.
As an illustrator myself, I know how much time and energy goes into the production of images alone for children’s books and I can tell you that even if that poor sap sold a thousand of those $12 books, S/he will make little profit. Profit that when weighed against the aggravation will amount to nothing and/or drive them either out of business or to the nearest loony bin. As my ever so wise, boyfriend says “the juice would not have been worth the squeeze”.
When someone buys your product they aren’t just buying a shirt, bar of soap, or piece of art, they are buying your brand. This must be a consideration in your pricing strategy and value proposition.
When you price your product, you are essentially assigning a quality value to it. The price, along with the packaging, and pitch tells your customer just how much your product is worth to them and their everyday life. If your packaging is sexy, the pitch is agreeable, and your price is bargain basement–something just doesn’t add up. Not only is it disingenuous to the consumer but you are actively placing yourself, your company and product at a disadvantage. It is impossible to maintain a business when your costs continually out weigh your revenue.
My advice to my friend, poor sap illustrator, and to you- KEEP CALM and RAISE PRICES. Better yet, start off with a mutually beneficial value proposition. What does this mean?
When pitching your product to clients, underscore the superior quality, time investment, labor, and your persnickety attention to detail (aptly appraise your time and labor). Explain how these factors make for a better product and how the cost associated with the product is a direct reflection of it’s quality. Your consumer will rise to the occasion–every consumer is not a fit for your brand. Remember that ‘your consumer’ will appreciate your brand and product for what it offers and does not offer.
I’ll be holding myself to this same model as I prepare for an upcoming exhibition this weekend and grapple with keeping my price point where the level of labor, time, commitment, and study demand!
My fave explanation just in case you are grappling with it: “It took me a lifetime [of study to produce that]”- Pablo Picasso
*=The initial 3-5 people that an entrepreneur confides in when launching a new product, or business. One’s inner circle.