Pricing your products can make or break your business. Just check out the scenarios below.
It's midnight and you're still frantically editing photos. Your client wanted the photos YESTERDAY and you're struggling to keep up. You have 3 more sessions booked for this week, but by the time you calculate out the number of hours you spend on the shoot, hours traveling, hours editing, and of course, hours dealing with less-than-happy customers, your rate will come out to a whopping $3.15/hour. This isn't what you had in mind when you first dreamed of owning your own photography business. What went wrong?
Here's another sad scenario that is far too common.
It's 4 AM and you've finally finished packaging all of your orders for the day. In two more hours, you'll be up with your kids — rushing to get them off to school and then the jungle of orders will start again. There's no time to interact with customers or answer questions; you are simply trying to stay afloat and make sure everyone's items arrive in time for Christmas. Your shop announcement includes these bitter opening lines: ALL ORDERS MUST BE MADE BY DECEMBER 15th – NO EXCEPTIONS! NO CUSTOM ORDER REQUESTS AT THIS TIME. ALL ITEMS LISTED ARE WHAT IS AVAILABLE!!! When you finally sit down after Christmas and count the number of hours you spent on orders and your final profit, again, you are falling abysmally short. Not only did you miss out on precious time with your family, but you're barely squeaking in above minimum wage.
It kind of destroys the image of the successful mom entrepreneur — designing in her studio while she chats with her husband or setting work aside to play on the floor with her kids.
Where did the dream go? Does it even exist?
What if I told you that you could shift your mindset to make MORE money while working LESS?
What if I told you that by charging MORE for your products and services, the end result would be more satisfied customers, raving fans, and the ability to create meaningful work and grow your business?
Well, it's not just a “What-if”. It's actually true. Listen to hear 5 tips (most backed by research!) on pricing your products (and positioning them) to help you increase sales and revenue for your business.
- Focus on Time instead of Money
A study by Stanford Graduate School of Business researchers Jennifer Aaker and Cassie Mogilner, tested the idea that when time is mentioned in relation to a product, consumers have a more positive opinion of the product because time is personal to them. Individuals generally place far more value on how they spend their time compared to how they spend their money.
Aaker and Mogilner surveyed individuals at an outdoor concert in San Francisco. The concert was free, but people had to wait in line for long periods of time to secure their seats. Aaker and Mogilner asked random individuals: “How much time will you have spent to see the concert today?” or “How much money will you have spent to see the concert today?” Asking specifically about time increased participants' favorable attitudes toward the concert.
What's even more interesting is that people who stood in line longer—who actually incurred a higher cost in terms of time spent—rated their satisfaction with the concert higher. So increased time spent led to increased satisfaction with the “product”.
Read the full study to see two other examples of this principle in play.
How can you utilize this advice when you are pricing your products? Focus on the experience your product provides rather than it being a “deal” compared to another similar product. DIY products are all the rage these days, and I believe a huge part of this is the experience they provide. Customers make memories as they work on projects with their children or friends. The priceless memory and time spent is worth so much more than the price of the product.
The exception to this rule? The prestige market in which people place high personal identity in how much they spend on products such as luxury cars or homes.
2. Make it Personal
More and more, individuals are connecting to other individuals rather than brands when they decide whether or not to purchase a product. You may not be able to compete with all the money and resources that a big brand has, but you bring something unique to the table that they cannot compete with either…. YOU. On Etsy this phenomenon is widespread. People connect with individual sellers. Their stories resonate with them. They connect on the basis of being moms or knitters or eco-friendly clean-eaters from the Pacific Northwest.
This same phenomenon happens with bloggers when they first begin to sell products. Our sister-in-law Abby recently experienced this with the sale of her book, Building a Framework. She and her husband Donnie incorporated Pay What You Want Pricing. I won't go into all the details here because you can check them out on Donnie's blog, but one of the points Donnie made was that although every single person could have chosen to spend just $1 for Abby's e-book, instead several spent MORE than the suggested priced of $24. Why? They connect with Abby as a person. They've followed her blog for a while, perhaps they've collaborated on other projects, and there's a good chance that Abby has offered them helpful advice in the past. They know and like Abby, and they are more than happy to give her money for her product.
The same can be true for every mom entrepreneur. Tell your story. Connect with others. You could create a following of loyal customers and fans who continue to buy from you for years to come.
3. Context Matters. There is a Perceived Value Based on Price.
There is a case study from the book Influence, where Robert Cialdini tells the story of a local jeweler who sold out of turquoise jewelry because it was accidentally priced at double its initial price, instead of half.
Prior to the price increase, the jewelry was ignored. There was nothing particularly special or unique about the style or color. With the price increase, the jewelry became far more popular among buyers.
The raised price signaled to buyers that the jewelry had a high value. There was no explanation as to why the jewelry warranted that price; no long lists stating superior quality and craftmanship. A simple price-tag difference meant that higher value was assigned to the product and sales dramatically INCREASED as a result!
Could the same be true for your business? Are you pricing your products or handmade goods at the same level as other artisans? Try increasing the price and see what happens! If you end up with more sales or the same amount, you will come out AHEAD and have more resources and opportunities to improve your business and therefore improve what you can offer to your customers.
4. Given the choice between Lowering Your Price and Adding Value, ADD VALUE.
So sales are slow. So you're not sure why you can justify a higher price compared to the guy down the street selling neon widgets that look just like yours. Should you cave and lower your price?
No. Don't do it!
Lowering your price means that you will spend more time making less money. Lowering your price means that even if (and that's a big IF) more orders go out the door, your revenue is lower so you will no longer have the option to hire the extra help that you need or have the time to provide exceptional customer service and continue to innovate and improve upon your product.
Add value instead. There is always something that you can offer to sweeten the deal. Perhaps you're a photographer and you are THE baby whisperer. Your photos always turn out gorgeous because babies love you and cooperate so much more. Perhaps you're just really good at teaching and so you prepare new parents with every possible tip and trick and extra thing they should bring to make the photo shoot a smashing success. Let's say neither of these is your strength and you're more of an introvert with loads of talent but a little short on people skills. Why not offer a bonus brag book for the new grandparents as part of your print package?
I see this principle of adding value happening all over Etsy. Vintage sellers throw in a vintage postcard or old photo in their order to you – just for fun. Sellers who make their products include a tiny bonus or simply wrap your gift to perfection with the most beautiful ribbons that you can't help but save. The customer service and personal attention given to each order is incredible.
As a mom entrepreneur, there are so many ways to add value and find your own way to be a Purple Cow. Don't sell yourself short by pricing your products at the bare minimum number to get by. Add value and keep your prices high enough to keep adding MORE value.
5. Avoid Option Overload
The biggest issue with option overload is that it can often lead to a phenomenon called Analysis Paralysis, aka “my dad in the parking lot syndrome” My dad will circle and circle, comparing and contrasting different options. “This one is in the same aisle as the door, but this one is closer as the crow flies. This one is free of puddles and perhaps is worth the walk.” By the time a decision has been made, 20 minutes have passed and it's really a moot point. I would have gladly walked into a puddle a foot deep to avoid the time-suck that is my dad in the parking lot! P.S. Dad, I love you dearly and your analysis skills come in handy as an engineer, I'm sure!
In the same way, too many options for a potential customer leave her unable to make a decision. This inability to choose the “best” option causes stress and wastes time. Ultimately, the decision is too stressful and too difficult to make, so the customer chooses instead to make NO decision. This is bad news for the seller, especially when the customer walked into their door or their online shop ready to buy!
This principle is illustrated by a study by S.S. Iyengar and M. R. Lepper. Consumers at a grocery store were presented with either 6 jam options to taste or 24 jams. While 60% of consumers stopped to sample jams when presented with 24 choices, only 40% stopped for the table with 6 choices. This suggested that initially, customers were more attracted to more options offered. However, all customers regardless of group received a coupon for $1 off jam. 30% of the customers presented with only 6 jam choices purchased a jar of jam (from the brand sampled) versus only 3% of the 24-choice group! 3%…. that's almost insane how low that number is!
Make it EASY for your customer to make a decision. The general rule is to lump your products into 3-5 groups or packages. This seems pretty standard for a photographer who may offer a “half day package” or “full day rate” with a certain number of prints included in the price.
For an Etsy seller who is clawing her way to as many new ways to be found as possible by creating every iteration of a new product that they can think of, this process might seem a bit more difficult. It can be done, however! If you hand-make home decor items perhaps you can group them by pillows, curtains, for the table, and one-of-a-kind items (yes, this is a bit of a catch-all but just having everything else grouped into this one category will make the shopping process more predictable for your customer!)
Another option I see often on etsy is grouping by number. There may be a listing titled, “Any five graphic prints for X price” Again, you could get your customer stuck on analysis paralysis, but by knowing that they can choose five for a certain deal, the pressure is off to pick just one.
To wrap up, keep these 5 tips in mind when pricing your product:
- Focus on Time instead of Money
- Make it Personal
- Context Matters. Increase the Perceived Value by Increasing Price.
- Add Value instead of Lowering Price
- Avoid Option Overload
Mom entrepreneurs, you are the most talented, motivated group of people on the planet. However, I think many of us (Sarah and I included!) undervalue ourselves. We work so hard for so very little. We believe that we have to be “nice” by offering as low a price as possible. These beliefs are misguided. I hope you will keep the above tips in mind as you price your products and in so doing, grow your business, increase the value given, and create raving fans who will buy anything you create.
Resources and Studies Cited in this Episode:
Have you learned something new today? Are you going to change the way your price your products as a result? I'd love to hear about it in the comments! (And I'd especially love to hear about increased sales and revenue as a result of your new mindset!)
~ Beth Anne
P.S. Another great way to increase your sales, is to get found in search results. If you're an Etsy seller, check out our Get Found Guide to Etsy which will help you get found more often in Etsy search, and therefore increase your sales and revenue!
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