Last week I received an email from a reader that I’ll call L. L had gone through the worksheets in Pricing for Profit and in order to make the kind of profit she was hoping for, she realized she’d need to double her prices. In her words:
“This brings my pieces to double what I’m charging retail now and I’m in line with the going market rate.” (Emphasis mine.)
L concluded that she would have to charge $85 retail, while her competitors where charging around $35 to $40 retail.
When I pressed L a little more about her competitors, she sent me links to two Etsy shops selling the same type of product for $35 to $40 retail, and the link to one other company, who is “Not really a competitor – they own the market.” That company, a small, eco-conscios, design oriented company (according to their website), was selling the same type of product for between $140 and $160 retail.
L’s perception is that this company isn’t really her competitor because they’ve been around for a while, and have lots of press and a celebrity following. But if I were in L’s case, I would WANT to make this company my competitor. I would WANT to look like a credible brand with a big following. I would WANT to raise my prices.
Thinking about L’s situation led me to create the incredibly unscientific graph you see below:
We tend to think that the only concern that people have when it comes to price is that it’s low. But your prices go a long way in influencing the way your customers perceive your brand.
On the lower ends of the pricing spectrum, customers are apt to think one of two things. Either you’re a hobbyist, just doing this for fun. Or you’re a major company, mass producing products overseas.
But in the middle of the graph (what actually amounts to the highest prices) is the SWEET SPOT. These prices communicate any number of things about your brand. That you are an artist. A visionary. A designer. A craftsman. That you are creating products worth valuing.
L’s competitors fall in the hobbyist section of the graph. Her non-competitor? They’re in the sweet spot.
Now price isn’t the only way customers perceive your brand. L’s non-competitor does a great job of giving the customer other reasons to value their product. They have a professional looking website that also shares the designers’ personal stories. It’s the sweet spot of websites, if you will. They communicate the story and meaning behind their pieces. And they have those celebrity fans and press.
But how did this company have the time and money to go after such press? It wasn’t by charging $35 for their pieces.
There are no numbers on my chart because the numbers that get you to the sweet spot will look drastically different for every type of product. L probably doesn’t have to move to $150 a piece to get to the sweet spot, but there’s no reason she can’t situate herself nicely in the $100 to $120 range.