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Solving the Pricing Problem
What is the right price to charge for what you make? As artists, we ask ourselves this (usually when things aren't going so well). We consider what we'd like to be paid for our time, add up the cost of our materials, and - if we're ambitious - factor in our overhead expenses.
This conversation is fun the first time, when it feels like you are creating your future and it seems like the logic of your pricing will almost create your own reality. You are willing to squeeze by on a low six-figure income. No need to rush things or be greedy, that can wait until next year.
Then, about the same time your credit card bill shows up in the mail, you start to notice some cracks in your plan. Your pricing worked in the spreadsheet, so why isn't your bank account cooperating? Maybe you'll give it another year or another credit card… maybe both.
I think any conversation (even an imaginary one with myself about pricing) goes better with a glass of wine, so let's imagine one in front of us. Or, even better, let's imagine two glasses: One is an expensive 15-year-old port, and the other is an inexpensive Beaujolais Nouveau that was still just grapes six weeks ago.
It's easy to consider the differences between the vintners. Hopefully they both love what they do and are very good at it. What drove them to one kind of wine production or the other informs us as to who they are. Some may feel the port is all about pretension or just a stale thing to make, while others feel it reflects history, commitment, and integrity. The Beaujolais might seem watered down or cheap to some, just as to others it seems fresh and exciting to produce and market. While both vintners work with grapes, the personality for the two types of wine is much different, as would be the marketing and pricing. They will react differently when faced with exactly the same problem. It's all grape juice, but with the right maker and the right audience, you end up with something wonderful.
As an artist, raising your prices to have more profit per piece or lowering them to have more volume and steady cash flow can fail just as easily as succeed. And just because someone sells something for a lot of money doesn't mean they keep it as profit, and high volume can mean spinning wheels just as easily as not. It's who you are as a person that will determine sustainable business practices and shape how you can best make a living. Only you know your work ethic and aspirations, whether you should make port or Beaujolais.
There isn't one right way to be successful, but if you take the approach that fits your personality then you have matched who you are to what you do. And when what you make is lined up with who you are, then your problem solving is integrated with how your business was built, your efforts will more likely be effective, and you'll be happier.
Sure there are dynamics that need attention, and one of them is understanding the value of your piece. For your customer, value can mean getting a lot for what is paid, and to the maker it can mean the piece has value, so you should get paid a lot for what you make. In a way it’s like putting a humidifier in the same room as a dehumidifier and letting them battle it out.
So, what is the right price - the one you have to stand behind in your booth and that will provide for your business and personal growth, as well as cover your responsibilities at home? It's simply whatever you want it to be. You can’t project your preconceptions about what you think are other artists’ pricing structures on what you make. Your work isn't interchangeable with anyone else's. Neither are you. So make your price your own.
Keith Lewis has created and run several craft businesses in the last 30-plus years, as well as a game manufacturing venture involving more than 100 employees and contractors in three countries. His jewelry is carried by craft galleries and museum stores across the country, including the Smithsonian Museum Shops, but he is most gratified to be in the collection of each craft-event participant who has chosen his work over the years.
From the Studio features ACC artists discussing the business side of craft, life as a craft artist, the ins and outs of craft shows, and more. Read more From the Studio posts.
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This article tells us nothing!
Nov 28, 2012 1:00AM — James AaronsNo! No! No! Pricing is not “simply whatever you want it to be”. Pricing is a pragmatic balance of costs and efforts.
To say that factoring in overhead expenses is “ambitious” is ludicrous. Any businessperson MUST factor in overhead or the business will fail. I cannot imagine, for example, exhibiting at an ACC show without factoring in the very real cost of booth space, transportation, shipping, drayage, electricity, meals, lodging, etc to the price of my work. I would be irresponsible to ignore these expenses when calculating my prices. Sure, it’s wise to look at a year’s total expenses, not just the costs associated with one event, but each event is part and parcel to the cost of doing business during the year just as is insurance, rent, utilities etc.
Stylistically, the artist may decide to make Beaujolais or port, or both, or more probably something between these two polarities. The cost of producing the work, including materials, labor (other than one’s self) overhead, etc is measurable and should be handled as such. The artist’s time is the only figure with any real flexibility. While his/her experience and chutzpah may be factored in to determine its value, it must be done in combination with a realistic view of what the market can bare and with the very real needs of the individual for their financial health.
In terms of perceived value, who can say where any person’s work fits between port and Beaujolais? It’s completely subjective. There is awful port and earth-stopping Beaujolais. So the artist would be wise to observe the market and define the quality and value of his/her work in as a realistic a manner as possible. Leaving it to personality and ego (making your price your own) is a recipe for disaster.
Response to "THIS ARTICLE...!"
Dec 4, 2012 8:56AM — Keith Lewis“I’m sorry the letter was so long, I didn’t have time to write a short one”. Many people have a quote similar to this attributed to them. In this case, I wrote a six page blog and then kept simplifying it. It was important to me to show a side of the pricing problem not addressed in any business theory class I’ve taken, discussed in any conversation with entrepreneurs I’ve had, or appraised in any business analysis chart I’ve seen. I removed references to breakeven analysis or other standard formal approaches to pricing, replaced loaded craft world references with winemaking references, and did my best to keep it focussed on the person, not the textbook. I took the time, a lot of time, to write “a short letter”. It was not a BLOT, or Bottom Line On Top article, and it required a little participation in the analogy to get the message. As for the “if we’re ambitious, factor in our overhead expenses” line that you felt was ludicrous; I have to wonder if my attempt at being light-hearted was really that well disguised, or if you just felt I was being cavalier or unprofessional. Remember I’m writing about the price you want, and if what you want is to lose money, well, go for it! I didn’t feel it was necessary to mention one needs to charge more than it costs.
The bottom line is that yes, really, the pricing you want is what is important, not what others feel is right. Many of us will be at the Baltimore craft show in February, and examples of this point will be hard to miss. One person will charge 20$ for a bowl, another will charge $200. That’s not a 10% variance, that’s someone charging 1000% of the price of the other’s bowl. Can you understand now how someone wondering where they fit in the pricing strata might benefit from looking inward?
If we all made a commodity, then sure, I’d consider how much a wall piece should cost per pound, or inch, or whatever. Thankfully, we do not make a commodity. Much more importantly, we as small businesspeople are exposed to such extremes that many standard ways of looking at business just yield false information. What sense does considering your overhead make in how profitable a show needs to be when you don’t even know if you’re getting in the show? If you’ve not been rejected, you’re not stretching your business. The math alone says that no actor can plan on getting that film role, and neither can we be sure to get in that show. And the ones we get in…have you heard about snow? Or recession/inflation/deflation/stagflation/tornados/othershowatthesametime/ bankingcrisis/younameit? I’ve walked to my outdoor booth one Sunday morning to find it missing. It had been blown away, and was upside down in a nearby parking lot, right between two new cars, concrete weights still attached. Let’s see, where do I pragmatically categorize that in my pricing spreadsheet?
It’s not that cost of goods, overhead, compensation and profit aren’t important. We all know they are and I only make fun of not considering them. That isn’t what will make you happy to create your work or to be in your booth, though. When who you are lines up with what you do, what could be a job can remain a passion. When problems or opportunities arise, and you know they will, the pricing of your work is the recipe for how you’ve decided you’ll respond. Your enthusiasm and your inertia, your goals as well as your responsibilities, all get mixed together and that strengthens your studio and supports your creative life.
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