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I’m off to the Buyer’s Market of American Craft today, but I’ve got a great guest post to share from Eleanor Mayrhofer of e. m. papers. When Eleanor mentioned in The Creative Empire forums that after raising her prices she sold MORE product, I immediately asked her to share the story with CMBA readers. If you’ve been wavering when it comes to raising prices, I hope Eleanor’s story gives you the confidence you need to just do it! Thanks, Eleanor!
In the fall of last year I decided to raise prices on my flagship products, printable wedding invitation kit templates. As an entrepreneur, it was one of the scariest things I’ve done in my business yet. Here’s a rundown of the why, what and consequences of my decision.
1. The market started to validate what I had to offer – When I launched my products, I wasn’t sure if people were really going to go for form-based printable wedding invitations. After offering a free black and white version of one of my kits that almost crashed our site last April, and then hitting the four-figure revenue mark in July, I realized there was a market for what I was offering.
2. Market feedback and more research revealed that my pricing was too low – I had done some initial research to get a ball-park idea of what the market would bear, but after awhile I realized that I was pricing to low. I noticed that the blogs that reviewed my products kept mentioning how ‘outrageously affordable’ they were, which was ok. Part of my value-proposition is that DIY printable templates are a more affordable option for wedding stationery. It surprised me though. Like many new indie-business owners, I half-expected to hear ‘She’s charging how much for her stuff?! What nerve!’ But once I took a closer look, I noticed small-business competitors that I admired were offering similar products and services at much higher prices. It occurred to me that low pricing just creates a race to the bottom for a lot of female-owned indie businesses, and I didn’t want to contribute to that. I didn’t want to undercut my competition! Ultimately I feel a sense of solidarity with other indie businesses and believe there is enough work for everyone.
3. The thought of losing up to 19% of my profits forced me to make a decision – I’m in the process of scaling my business into the European market. That means I will have to charge a whopping 19% value added tax on all of my products. Since this tax is built into the display price of items, I would have to price my items at least that much higher, so that taxes wouldn’t completely eat away my profits. I also wanted to sell my items on other online marketplaces so, to avoid an administration nightmare (updating prices on a zillion different platforms) I realized I had to just make a decision and execute on it.
1. I applied what I learned in my professional career – I figured out how much income I need and I determined what a fair hourly rate is considering my skill and experience. I also ran some basic business calculations: realistically projecting sales, profit margins, taxes, business expenses, and in my case – the impact of exchange rates between the Dollar and the Euro. Finally, I applied the best advice I ever got when negotiating for a salary: You should feel uncomfortable about how much you’re asking for.
2. I priced on value – I took a look at the product ecosystem in my niche to help determine what a fair price is for what my customer receives. I considered the external cost and effort the customer contributes (paper costs and time) as well as the benefits (ability to produce as many invites as desired, ‘one-stop-shop’ bundling of all wedding paper goods, the uniqueness and quality of my visual designs)
3. I refined my price points and customization pricing – I developed three packages at different price points with customization options. I’m still perfecting this, but the exercise alone helped me clarify how to price my products and define a sensible pricing structure for custom work.
4. I just did it – Then I took a deep breath and just ‘flipped the switch’, changing all the prices in the back-end of my E-commerce platform and Etsy shop. I didn’t send a mail out to my mailing list or blog about it, or in any other way make an ‘announcement’. Then, I went to bed and promptly had an insomnia – mental hamster wheel freak-out.
Despite my internal freak out, my business did not come to a screeching halt, in fact just the opposite happened. January has been my biggest month ever. I made more revenue in the first week of January then I did in all of July, 2010 which had previously been my highest grossing month. And after all of this, last week I discovered my products had been blogged about by a photographer who described them as the ‘most affordable wedding paper goods I’ve seen’! So I’m sure this won’t be the last time I go through this process.
So, I know I said I was going to talk about crafting an economic recovery this week, but this week kind of blew up in my face. So today I’m just going to take care of a little housekeeping.
1. Guest posts wanted!
My August is insane (vacation, two trade shows, the launch of The Creative Empire, and the start of the semester, plus I’m sure a few more things thrown in). But even though I’ll be running around like a crazy person, I still want to make sure you get your regular dose of business thinking. Which means I could really use some guest posts. Do you have a business story, lesson, or tip that you think would be great for CMBA? Drop me a line with your guest post proposal at megan(at)craftMBA.com
2. What do you want to see more of on Crafting an MBA?
I want this site to be as much about helping you grow your business as possible. So today, I thought I’d ask, what do you want to see more of on Crafting an MBA?
You can leave your thoughts, ideas, suggestions, etc., in the comments, or email them to me at megan(at)craftMBA.com.
Yesterday, I shared some of my thoughts on why your craft business gets stuck. And many of you chimed in to talk about the issues you were dealing with. But I wanted to ask a little more directly:
What do you need to grow your business?
What kind of time, money*, help, resources, services, or information would allow you to take your business to the next level?
And how can I help?
*If you’re answering the time or money part of the question, feel free to be as concrete as possible. If you think it would take $20,000 to get your business where you want it to be, it’s ok to say that. We’re all friends here.
A weekly roundup of craft, design, and business related news and links:
Should You Make Your Niche Smaller? – Why a focused niche is more successful then a broad approach.
The Three Surprisingly Simple Keys to Success – “You need talent, luck, and persistence. Pick any two.”
Big Brand Copycats – Eye-opening article from the Etsy blog about one designer’s struggle to fight a big brand for copyright infringement.
How to Convert Your Facebook Superfans into Brand Ambassadors – A more structured way to get your biggest fans to evangelize your brand. Jess of Jess LC is doing something similar.
Why Are Women-Owned Companies Smaller Than Men-Owned Companies? – An incredibly fascinating article from the Wall Street Journal that asks “what’s holding back women business owners?”