Why reducing prices may not be the best idea

I met an artist at a design fair this summer who made beautiful miniature figurines encased in glass boxes. Each piece was a scene in a play and staged with obsessive detail. Well worth the $500 price. Maybe not a price that appeals to everyone which is probably why a customer who was browsing her art started backing away slowly after seeing the price tag. The artist stopped her and asked how much she would pay and even suggested a few prices…

"$100, $50…$25??"

$25?!? I thought she was kidding (and so did the customer). But no. She was serious.

As a pricing geek, I asked why she was offering such ridiculous discounts. Her answer was: "I'm just starting out and I just want to put as much of my art in people's homes."

That's a reasonable explanation. I make art and sometimes I've talked to the artist I partner with about ways to get our art into people's homes. We've toyed with the idea of reducing all our prices. The more we've talked the more it's sounded like desperation and insecurity. We stopped and asked ourselves, is price really the problem? What if it's something else?

Are we selling at the right venue?

Are we selling to the right audience?

And most importantly, if some pieces aren't getting any interest, is it because they're duds? (Oh yeah, we make a lot of duds.)

It's important to analyze that kind of stuff before reducing prices because once you do roll back, you send a few signals to your audience:

The most glaring of all is, previous customers who paid full price will feel cheated. Not even Apple fanboys can get over that hurt. Apple initially introduced the first iphone at $500 dollars, then dropped the price by $100 after a few weeks. For the first time, the fanboys blogged in anger. Apple hardly ever apologizes but in this instance, they did. They also returned $100 to everyone who bought at full price.

Another problem is, you're telling customers that they might be bringing a cheap product into their homes. This is a real turn off. To a customer dropping the price may not translate to "We're doing this because we want to get our art into your home." Rather "This isn't as valuable as we imagined."

Another side effect is, customers may start waiting for the price to drop even more. The car companies must have trunk loads of case studies to back this bit. Even video game enthusiasts waited for the Playstation3 price to drop (as always) and it never did, hurting sales.

If price is the problem—and in this tough economy sometimes it is—it may help to TEMPORARILY reduce prices to get stuff into people's homes. But how do you do that without hurting your brand?

All the best marketers I know use one tactic: Give people a GREAT REASON for lowering the price. The best reason is, you are doing for fun versus just to get them buy stuff. And by fun I mean customers have to feel like they've earned the discount.

A manager at new Ikea store in Sweden uploaded pictures of his store and asked his customers to tag their favorite pieces of furniture. The first person to tag an object got to take it home. Customers had fun and the promotion cost him nothing. Except the price of the furniture which he wanted to give away anyway.

Zappos keeps prices high but offers free shipping on sales and returns. We took a page out of the Zappos playbook. We just gave free shipping to a customer in Brazil. It cost us $40 to ship. But we got it into his home. We also said we'll give him another 50% off on his next purchase if he sent us a picture of the objects at his house with 5 friends. He wrote back saying he's throwing a party to gather some friends.

An artist we know offered a customer 50% off a San Francisco themed print if he could answer three questions about the city. The customer got all the answers right. He earned the reduced price only because he aced the quiz. Fun!

Sometimes lowering prices is a good idea but do it in a way that protects your brand. If you're a new artist, that may be a way to get your stuff into people's homes. I'd love to hear what you've tried. Go ahead and share it in the comments.

This is a monthly post of the touchiest of all subjects, pricing! See you again in November. For the October feature, "What's the price of garbage?", I've updated the post with the answer here. Thanks for all your comments!

Posted by Vinit (TheWhiteout)

The Renegade Craft Pricing Experiment

What happens when you invite strangers to appraise your work? Sounds like an invitation to some serious anxiety. At the Renegade Craft Fair in San Francisco, we decided to let visitors (and artists), price two of our pieces at our booth The Whiteout.

It was all done on an iPad version of a pricing app (The Pricerie) built in webkit. Users had to enter a value and at the end of the day we would have the final community price, which would be the sweet spot from all prices after dropping the outliers.

Day 1
On Saturday July 9, we picked a popular product ‘Fruit Fly’. This piece is made from a tree ornament salvaged from Urban Ore. It’s been primed and painted white with an original pen and ink illustration signed by the artist.

When we invited people to price, we told them the story behind the product and to use their best judgement... “Use your gut. No pressure.” We didn't linger around to see what price they entered.

52 people priced it. The final community price was $28.

This price point is interesting because we sold a similar piece earlier for $20, lower than what the community suggested. We artists always tend to underprice our work, don't we?

Day 2

The next day, we thought let's switch things up and and use a polarizing meme. Charlie Sheen '#Winning'.

This piece is made from a plaque salvaged from the Goodwill Store. It’s been sanded, primed and painted white, with a freehand illustration of Charlie Sheen with the once-upon-a-trending topic ‘winning’.

Not everyone got the cultural reference. Some said they wouldn’t pay 5 cents for Charlie Sheen because he’s a ‘total scum bag’. Fans said they would pay $150. Some people decided not to price it stating they wouldn't be the best judge. It was nice to know people chose to abstain versus throwing out some random number just for the heck of it.

The final community price was $68 with a total 22 people pricing it.

That's only half the people compared to Fruit Fly. We hadn't really set any price in our heads for this piece since it was a wild card.

What did we learn?
For items with a general theme, the pricing behavior is not only similar between people, it's also higher than what we predict. Our previous tests produced similar results.

For products that are niche and polarizing, like '#winning' it’s better to keep the pricing closed to a niche audience—in this case internet nerds. The highest entered price was $150. The data suggested this piece could easily go for $90-100.

We’d be better off selling a piece like this online and appealing to a specific audience like the Charlie Sheen fan group, if it exists (of course it does). Or if we sell at a craft fair, we’ll put it under a section like 'Memes'.

Overall people had a lot of fun pricing. I guess it was also empowering. A few were embarrassed that they priced lower than everyone else, but we said well this is art, there is no right answer.

Hopefully this experiment will be a step towards taking the guesswork out of pricing. Once we stress test the idea a bit more, we'll open it up to more artists who want to participate. It would be especially useful to new artists for test marketing ideas and introducing new products.

Next month, I'll speak to three artists with different approaches to pricing and what they do to take the pain out of the process. If you have have thoughts on how to make the pricing process fun, please do share! We could all use any help we get.

This is part of a monthly post on the touchiest of all subjects, pricing! See you again in August.

-Vinit

Pricing handmade with 'Pay-as-you-go': Autumn Wiggins

Here's a novel approach to pricing handmade. Don't price it at all. Autumn Wiggins, owner of Upcycled Exchange Materials Market in St Louis, proves it's in fact a great way to run a business. I thought I'd pick her brains and get to the bottom of this unusual approach. She was kind enough to oblige.

What made you go with a pay-as-you-go business model versus the traditional one?

We have a couple restaurants in St. Louis that use this model successfully. It made sense in my scenario, since I’m not paying for the inventory. It saves me a lot of time and angst since I don’t have to tag and price things. I can handle running the store - sorting out stuff and taking care of customers by myself with time to spare for working on freelance websites and other projects.

Shock? Wonder? What were some initial reactions from the community?

People seem to love it! It’s a totally different shopping experience when you aren’t focused on getting a deal or stressing because what you need is expensive. Some have described it as the feeling of getting to treasure hunt in your grandma’s attic(as in, there’s all this neat stuff, and you can take anything you like), only instead of junk, it’s really well organized craft supplies. I try to make it feel more like a spa than an attic.

Let's say a business owner decides to go pay-as-you-wish. What are some rules or guidelines to keep in mind?

Having a suggested price is necessary, but the broader the better. I have one section by volume and another by weight. I am very dismissive of the suggested prices though. When I show new customers around, I emphasize that it’s totally up to them - I’m not going to measure or go through what they buy.

Presentation is everything. I like to think that I give our materials dignity just by having the shop in a beautiful space and making it very organized. You want to add value however you can, and visual perception is very important.

I have a rule of one purchase per person per day, only what you can carry out the door on your own(besides bulk sized items). Now, so far, no one has even come close to that limit. My intention with that rule is to make sure some smart ass that just wants to put me out of business can’t come rolling up to my door with a Uhaul.

You also have an online store with a subscription model for ordering supplies. That's brilliant, but also new concept. Do people get how it works?

The commodities idea is really in it’s infancy, and people don’t quite get it yet. I’ve been so busy just getting the shop open and all that, I haven’t had much of a chance to promote it, but I think it will evolve. If other people who start Upcycle programs had it in place from the get-go, it might be a little easier to integrate.

Too many artists tend to underprice because they believe that's how they'll move merchandise. Do you have any advice?

They probably have nothing to lose by trying a pay-as-you-wish setup in person and gauging what they should charge in their online shops from that. Back in my crafty hayday, a really nice lady paid twice my asking price for a sewn zipper pouch. She was very upfront about me not charging enough, but most people would never question your asking price. If you put the ball in their court though, they will be really open to assessing the value for themselves. You just have to give them permission to.

I would be terrified to have a pay-as-you-wish model at my Etsy store. Am I being paranoid?

I don’t think that’s even possible on Etsy, but what an interesting tangent. Someone should start a pay-as-you-wish handmade market. Although, I think it would work much better in person. The anonymity of the internet doesn’t lend well to this model. You could easily do it at any craft show, but keep in mind people do like a reference point. Simply saying “suggested price” on your tags might be a way to test the water.

Before money, bartering was huge. Now I hear about a lot of bartering (swaps) happening around the bay area. Should the treasury department be concerned?

In the immortal words of Bork, “Start your own currency!”

I think the treasury department is pretty concerned with Bitcoins right now, actually.

You know though, bartering evolved into money because it was inconvenient. I think we are still a long way off from bartering being universally convenient, but the internet is beginning to facilitate that.

You organize the Strange Folk Festival? Can you tell us what it is and what makes it unique?

It’s just a little ‘ol indie craft show I started 6 years ago! I guess the gnome with no legs is unique, but Strange Folk is in the suburbs, and it’s pretty eclectic compared to urban shows. We have a lot of kids activities on one end of the spectrum, and people in period costumes doing demos of blacksmithing and such on the other.

What are some other innovations is brewing in Autumn's mind?

I am really focused on open sourcing Upcycle as a franchise right now. That’s #1, but it does segue towards my interest in seeing crafters experiment more with open source concepts in general. I think there is a lot of needless angst right now within the handmade community over intellectual property, and I have a few ideas I’d like to experiment with in that realm.

Thank you Autumn, plenty of new thinking here and you may have just inspired a few stores in the East Bay to give 'Pay-as-you-wish' a try. Wish you best luck for all your future projects.

Store Details

Upcycled Materials Market Exchange

3309 Meramec Street, St Louis

upxchange.com

This post is part of a monthly series on the touchiest of all subjects, pricing! See you again in July.

Vinit

5 Triggers that Influence Price

We’ve all seen the pricing formulas.

They're usually some combination of materials and time. They can get a little confusing too. Should we add the cost of wasted materials? How about the time we spent marketing ourselves on social networks? As an artist I feel, why not? Our time is precious. Our materials are precious. We’re precious.

However, after a little digging, it seems like what's important to me—the artist—isn't quite as important to me, the customer...why, that insensitive twit!

While I care about the logical stuff like time, materials, and effort, the customer is guided by intuition and other nebulous triggers. Which is why the relationship between artists and customers can feel a lot like “You’re from Mars / I’m from Venus” (don’t think anyone has used a John Gray reference since the nineties).

In short, each look at pricing with a totally different lens. So what influences price in the customer’s mind? Here are five triggers I have identified:

Status

The definition of status has changed. It’s not about expensive cars and diamond studded necklaces. Today, the question is:

“If I posted this item as a status update, would it get a reaction?”

Social currency influences real world currency. And that can determine if a customer is willing to pay more. There’s no bulletproof formula for acquiring status. Sometimes, the least likely product will capture our imagination.

Here a pencil takes a stand against digital dorkery. Nobody cares that it only takes a few cents to manufacture. Since it is status worthy, people are ready to pay an unusually high markup.

Scarcity

This is one trigger we as artists address by default. There are only so many items one artist can make at their studio, which naturally creates scarcity. But if too many people start making similar stuff, then the price automatically drops in the customer’s mind irrespective of how expensive the raw materials may be. It's the same reason limited run items work better.

Relevance

What is important to people right this moment? It could be a certain style that's trending. Or a certain material. Expensive items may lose some cache during a recession. Or it's possible that items made in the US or even made locally within a 50-mile radius might be what people are looking for.

These wallets by Heathered are made from old maps. They're relevant to me as an East Bay resident. But I may also look for maps of places I've visited in the past or plan on visiting. The wallets are also very well executed.

Story

Can the product carry a three-minute conservation? The speaking points would have to extend beyond the product. What inspired it? Who made it? Why? These are bike earrings by Kendra of Girl on Bike. Clearly the artist rides a bike. The story is authentic which gives the product a lot of depth.

To top it off, they're original (never seen earrings made of bike tubes). And relevant. There's a lot to talk about. How much time went into making these and the costs of materials take a backseat (no pun intended).

Practicality

This is the most rational of all triggers. We all want something we can use. If an item covers some of the triggers mentioned above, AND it's practical then looks like you just climbed a few notches up the value curve.

So how do we set a price when most of these triggers are beyond our control?

Here are a few steps that may work.

Ask

Ask your target audience and other artists. If you ask the right audience, you will get the right answer. But you must give them permission to tell you the truth. If the price I hear from them isn’t worth my time and cost of materials, I’ll move on and make something else. However If it's an item I enjoy making, for the pure fun of it, their opinion on price doesn't matter as much.

Test it

Some artists test market their stuff at a few different price points and see what moves the product. It may take a lot of trial and error, but at least it's accurate.

Trust yourself

Whenever I am torn, I give my artist side a timeout and channel the customer in me. He's available 24/7 and can bring a refreshing amount of objectivity to the whole process.

Try it out. It may just work. And please share what works for you. Thanks!

Posted by Vinit
The Whiteout (Junk Rescue)
Kaamchor (Art from Stolen Office Supplies)

This is part of a monthly series on the touchiest of all subjects, pricing! The first post can be found here.

What is it really worth?

Should you charge $27 or $39?

Hard to say. Well, unless you’re Ryan McGinness. Then it doesn't matter. You can eschew all formulas and charge whatever you like.

For the rest of us, here's my monthly attempt at making sense of pricing handmade.

Once a month, I will be covering pricing tips and strategies, unusual pricing tactics, interviews with artists (with a focus on pricing), social pricing experiments and pricing advice from around the web. Let me caveat this by saying I'm no economist (lucky me) or expert on pricing (seriously, who is?) but I am obsessed with the psychology of valuation, especially for something that’s hard to quantify, like creativity.

Thought I’d kick off this first post with a unique pricing strategy employed by New York artist Justin Gignac of wantsforsale.

Justin and his wife Christine think about what they want, paint it and charge the exact amount the item is worth.

A painting of a pizza slice $3, Nintendo Wii $239

'Buffalo wings' costs $12.99

'To see showgirls in Vegas' costs $250

Same canvas. Same whimsy illustration style. Wildly different prices. Blows my mind.

While Justin doesn't think he can use this strategy to make a living in New York City, his intent is to kick off conversations. Pricing for story telling. He has painted a check for a million dollars which he hopes to sell some day. Now that would make a great story.

Next month I'll share more thoughts on pricing and we can deconstruct, discuss, and debate. Fun times!

Vinit

The Whiteout (Junk Rescue)

Kaamchor (Art from stolen office supplies)