The Business Chat - Raising prices

I think silver wholesalers need to install defibrillators in their shops for all those heart attacks that happen when shoppers look at the current prices. People, have you seen what happened to silver in the past month??? And could the timing be worse? Seriously, right before the holiday shopping season? ARGH! What’s a jewelry designer going to do? Are you raising your prices or not? This was the major topic of conversation in the aisles last week as precious metals hit record-breaking highs.

The bottom line is that in order for your bottom line to be healthy, or at least above water, you are going to have to raise your prices. Raising your prices is not pretty or pleasant yet the state of the world economy is not your fault and you should not lose money because of it.

As the holiday shopping season is just beginning I suggest that now is a good time to go over all your pricing and adjust where necessary. If you are using precious metals your prices will need to be adjusted. Upwards. All of them, not just the pieces that you make with your new expensive metals, all the pieces in your inventory regardless of what you paid for the metals.

Here’s an example. Lisa makes a lovely charm bracelet of crystals and pearls on a heavy silver chain. 2 years ago she thought of this design and purchased silver chain for 4 bracelets paying $0.85/gr. She finally made these bracelets last month and liked them so much she decided to make more. She purchased silver chain for 4 more bracelets last month (when the chain cost $1.15/gr) and still needs to make 4 more before her craft show next in 2 weeks. The silver chain now costs $1.45/gr. Each bracelet uses 12 grams of silver chain. 2 years ago the cost per bracelet for the chain was $10.20. Last month the cost per bracelet was $13.80. Today it is $17.40.
Translating this into a retail price (using your pricing formula) 2 years ago her retail price was $90, a month ago it was $101.40 and today it is $112.20. Lisa needs to charge $112 (stupid number, round down to $110 or up to $115) for all of her bracelets.

“But that makes my pieces so expensive, people won’t pay that! I can’t charge that much!” wails Lisa. Yes Lisa they will. People do understand that the price of raw silver is beyond your control. Metal is expensive. You can post a notice on your blog/website/newsletter informing your customers that your prices have increased due to the rising cost of silver. You can rethink some of your designs and see if you can use less silver or change to a cheaper metal (such as copper). What you cannot do is continue to price your work using outdated prices. That will sink your business and you won’t have to worry about this problem next year because you won’t be in the game.

“What if I charge $90 for the ones made with the older silver and $110 for the newer ones?” reasons Lisa. I actually heard a couple of makers discussing this as a viable strategy. As a customer I come into Lisa’s booth and see 2 bracelets that are almost identical (same design different colours of crystals). One is priced at $90 and one is $110. I ask her what the difference is. “Well, the $90 bracelet is made with metal I purchased 2 years ago.” Now as a bargain-hunting customer all I want to see is the old work you’ve got. There’s no point in even showing the new expensive work. And you know what this starts to feel like? Flea market.

“But I can’t charge the new price for silver I bought cheaper!” exclaims Lisa. Yes Lisa you can. Think of this as the interest accrued on your investment. For investing is what you have done. What if 2 years ago you had bought a bar of silver as an investment? Now you could sell it and make a profit. Instead of buying a bar of silver you bought finished chains. This is called business. What if instead of buying that silver chain you had put the money in the bank and collected interest? (OK bought stock or something that actually pays interest). Your money would have grown. Inventory sitting on your shelf is an investment and you are entitled to make a profit on that.

Lisa has also listed her bracelets online based on the original price she paid for the chain. “Well, I’ll just keep the ones online at the old price and sell the new ones at the craft show for the new price.” Wrong. Nothing is going to annoy a customer more than to buy a bracelet from you at a craft show and then visit your website to see what else you have and see that it’s cheaper online. Pricing must be consistent across the board. You set your online prices. If they need to be increased then do so. Stores raise their prices all the time. You can too.

Raising prices isn’t a pleasant task however sometimes it just has to be done. If you are selling your work you are a business no matter how small. Not paying yourself properly shows a lack of respect for your work. If you don’t respect yourself and your work, why would a customer?

The Business Chat - The price is firm

"How much is this bracelet?" asks the customer.
"Well, ummm.... it's.... um.... $95?" replies the maker. Her shoulders are hunched, she's squirming and her voice lifts at the end of her reply as if she's asking a question.
At this point our eagle-eyed customer has spotted an opportunity.
"I'll give you $50".
"Um... OK."

The maker now turns to her neighbour and bitterly complains that on one appreciates her work, it's so hard to sell and everyone is always trying to bargain.
Sound familiar?
I see this all the time, especially among those new to selling. With an attitude like this our maker will be out of the game very quickly. The problem is that she does not value her work.
As a maker, if you don't value your work and your pricing, why would a customer?
Back to our maker. The cost of raw materials for her bracelet is $20. Using the jewelry pricing formula she learnt in her Start Your Own Jewelry Business book her bracelet has a retail price of $95.
"But I can't charge that!" she sighs. "It only cost me $20 to make. People will know and feel ripped off."
First, people don't know what things cost. Second, a bracelet is more than the cost of the raw materials. It is time and energy. It is the sourcing of good quality wholesale materials, it is the design time and the labour to make it. Most of all it is magic. Just because you can wire-wrap and string well doesn't mean that a customer can. What seems simple to you is a complicated and foreign process to a customer. What you see is a pile of raw materials, what they see is a story, a piece of your soul, a piece of magic. Your magic is worth $95.
Pricing a piece of your work properly (and sticking to the price) guarantees that not only are you covering the cost of making a piece, you are paying the cost of labour, your overhead and making a small profit. This is called running a business. Constantly devaluing your work by thinking "I can't charge that much" is a defeatist attitude guaranteed to kill your business.
Get over it.
See the value in your work and stand tall.
When someone says "I'll give you half" try putting on your employee hat for a minute. You are standing in the booth as an employee of a company. Forget that it's your company and you are the only employee. The company policy is to remain firm on the price. Your boss would not be happy if you gave away the profits. What if it you were selling in someone else's booth? Would you drop the prices? No? Well why would you drop yours?
"I'll give you $50," says our bargain hunting customer to the maker.
She straightens her spine, squares her shoulders, looks the customer directly in the eye and with a pleasant smile states that the price is $95.
"But that's too expensive!"
This is the opportunity to explain a bit about the bracelet. What is it made of? Where did the inspiration come from? What's the story behind the piece? Show the customer the value of the work.
It is important to remember that you can't please everyone. No matter what there will always be people who think your work is too expensive. Sometimes it's tempting to snap a sarcastic remark about the location of the nearest Wal-Mart however it is best to rise above it and smile nicely. A line that's always worked nicely for me is "well, my work isn't for everyone".

Before you go to a show, or sell a piece online, know in advance what the price is. Know why it is that price. Tell yourself the story behind your work so that you can tell your customers. Most importantly, stand firm. You and your work are worth it.