How to price handmade items is a question that many woodworkers have. There are essentially two pricing methods. One is based on price only, and the other is based on the availability of the product in the marketplace. Both have their advantages, and most people end up somewhere in the middle.
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Handmade Pricing Strategy One: The Lowest Price
Many woodworkers go for this strategy when they first start making projects that they intend to sell. Of all the sales strategies, the lowest price method is the easiest. Even similar items will tend to favor the seller with the lowest price, which is why this strategy is attractive.
The Lowest Price strategy simply means that no matter what the other costs are, your project will be priced lower than anything else in the market. It does not take your time commitment, materials cost, or any other factors into consideration.
While this pricing formula does make it easy to sell pieces, making a profit can be difficult. You will sell a ton of product, because people tend to go for the lowest prices, but your profit will be very thin. If you can crank out hundreds of projects very quickly, then having a thin profit margin is not much of a problem. You can overcome the margin with high volume. However, if it takes a whole day to make the project, there may be no way to make enough of them to bring in enough revenue.
For example, wooden rings are fairly inexpensive per piece. The wood cost is low, and the time commitment is low for a basic single species ring. If you were to set up a set of jigs and a nice lathe, you could crank out several per hour. If you sold them for a few dollars a piece, you could make enough money to overcome the time and materials cost. You would not be rich, but you would be turning a profit.
Handmade Pricing Strategy Two: One of a Kind Pricing
The second way to price handmade items is based on their rarity. If you are the only person in the world making something, they have to come to you to get it. This gives you the advantage in the sales process, because there are no other sources for the same product.
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Most woodworkers will not fall into the category of having zero competition. However, when you compare handmade items to mass produced items, your competition is still very small. With that in mind, the second pricing model simply means to price your product based on the perceived value, and the ability to find the same thing elsewhere. When you have something unique, you can charge more for the rarity.
For example, if you make high end pepper mills, there is not much competition. Sure, you can buy a pepper mill from any number of stores. However, you cannot buy a high end, exotic wood mill from very many places. Since you are making a unique product, you can charge above market prices.
There will be some people who decide not to buy because of the price. This is normal. The people that do buy will be doing so because you are the only place that has exactly what they want. You will sell less product, but you will make more on each sale.
Hobby Pricing Wrap-Up: How to Price Handmade Items
The majority of people price handmade items with a combination of both formulas. Making hundreds of projects like an elf at the north pole is not attractive to most woodworkers. Also, most of us do not have the reputation to charge $10,000 for a perfectly made single piece.
Going from the middle allows you to really get the perfect pricing model for your handmade projects. You can take advantage of not having the highest price, and also take advantage of having several pieces to sell.
This combination of price and value entices many customers, and converts more of them into buyers. The sales you miss based on price are made up by the extra money you make on each individual sale. The money you miss in the high end market is made up by the higher number of units that you will sell. In the end it is a delicate balance, and there is a perfect price what will give you the best combination of volume and revenue. You just have to experiment a little to find it.
I always recommend that woodworkers make something that is of higher value than other items in the market, and price it accordingly. Many woodworkers go for the lowest price model right away. Typically, this is because they are afraid they won’t sell anything, or they do not believe their product is very good. Sometimes, it’s just lack of confidence, but either way, you will be better off making a few nicer items than hundreds of inexpensive items.
If you have any questions on How to Price Handmade Items, please leave a comment and I will be glad to answer them. Happy building.
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