How To Set Your Price And Get It
Here's a case study in how an art supply company trained me to NEVER pay full price.
People who know me know I'm in Internet shopper and a paper crafter. I'm always feeding my habit of new and different papers, inks, stamps, and embellishments. One business I used to frequent (notice the past tense there) was a paper art supply house that offers many specialty items. But their constant e-mails with constant sales actually cost them a steady customer -- me!
Let's look at why. A while ago, I saved some of their e-mails so that I can show you this company's fatal error. Take a look at these e-mail titles:
Exclusive 30% Storewide* Savings Holiday Sale - Final 24 Hours (12/8/07)
25% Holiday Savings - Still Time for Delivery by Christmas (12/13/07)
Still Time for 25% Storewide* Savings & Delivery by Christmas (12/18/07)
Year End Inventory Clearance Sale 35% off (12/27/07)
Prices Slashed - up to 50% Storewide Savings (1/3/08
Prices Slashed - up to 50% Storewide Savings (1/6/08)
Embellishments Blow-Out Sale - Save up to 35% Department Wide (1/15/08)
Winter Sale - up to 50% Savings & Free Shipping Offer (1/17/08)
Craft Tools Sale - Save up to 50%* + Free Shipping Offer (1/22/08)
Craft Adhesives Sale - Save up to 50%* + Free Shipping Offer (1/24/08)
Inventory Reduction Sale - up to 50% Savings + Free Shipping Offer (2/10/08)
I actually didn't list all the e-mails I received during this period of time. But as you can see, they were frequent!
Here's my question. Should I ever, for any reason, order from this company and pay full price? My answer is - NO! This business has trained me not only wait for a sale, but wait for a super sale with deep discounts and free shipping. The company would probably die to know that they are regularly referred to on paper artist's chat sites with the comment "oh, just wait, the sale will get better."
Not only has this business (which is a neat business with lots of goodies for artists) trained me to wait for a GREAT sale, they also have me wondering a few things.
Do they have such a horribly high mark-up that half price is actually what I would pay every day elsewhere? Should I just go shop elsewhere?
Is this company desperate for sales and going down the tubes? Will they ship what they promise quickly?
I don't know who heads up their marketing, but if I was that person's boss I would be beating him (or her) with a big stick. WHAT ARE YOU DOING?? You are training every customer on your e-mail distribution list that they should EXPECT to regularly pay less than full price.
Pricing your product and services is part science, part art. You know what your goods cost. If you sell for less than they cost you, you won't be taking that vacation in Rio anytime soon. That's the science part - cost out, cost in, total it up.
The art part is harder to quantify but every bit as important. What is the perceived value of what you offer? If you perceive your service as worth $100 per hour and people are snickering behind your back then you've got a perceived value problem. On the other hand, I've had marketing students price their stuff so low that they will never make a decent income.
Pricing well means that your ego has not inflated what your product or service is worth, you know your costs cold and pay attention to them, you discern a fair price based on customer input, your experience, and demand for what you offer. Make note that if you have to CREATE demand you will not be able to price your product or service as highly as YOU might think it is worth. However, if you price wisely, educate potential customers, and build a business from that base you will one day be able to charge more. Why? Because, you have successfully and faithfully created MORE perceived value.
I realize there are strategies for "loss leaders" and getting people into the marketing funnel. But as a small business you do not have the deep pockets of a Wal-Mart or a Sam's to offer super-low cost and freebies in order to gain customers. If you decide to do this, be cautious, wise, and infrequent.
Keep in mind that if YOU don't value what you do, your customers won't, either! Aim for a fair price, give outstandingly fantastic customer service, work consistently, and your business will grow.
(c) Sue Painter
by: Sue Painter
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