Pricing... Again.
Originally Posted by
ps_bond
Nope, but there is the minimum price at which it should be sold in order to cover costs. The formula is there to demonstrate that. The markup is nothing more than a convenient way to capture the cost of selling, as I keep saying.
This assumes that every item must be sold at a price necessary to recover costs.
A low price invariably means low quality for new goods;
So the NEW car I just bought at a heavily discounted price is in some way inferior to the same car if I had paid full price??
Specific to the field of handmade jewellery .... If you understand that and want to do it regardless then go ahead.
.. And if the hours X rate that you calculate makes the item so expensive that you cannot sell it? You will have to reduce the price or write off the total costs.
All that can be done is to try and encourage people to recognise that they are undercharging for their work; if they can't or won't understand that by doing so they devalue the market as a whole
and that in turn will damage their longer term prospects then that is exceedingly short-term and narrow focus thinking. Again, this is not (just) me saying this - this is basic marketing theory.
They may fully understand what you say but in the geographical area, economic circumstances of their potential customer base and other factors they may have no choice but to sell at a lower price than the formula suggests.
If you can sell your products at 10x cost, then go for it and good luck to you if you can do it. But only an idiot sells for less than the actual cost; if you want to do that, charge properly and give the money to a charity, you'll do yourself less damage in the long term. Loss-leaders very rarely actually make a loss; break-even is the usual base price.
Depends what you mean by ACTUAL cost - I am a retired Logistics Consultant - my daily rate was £500, if I charged that I would sell nothing, so what is my hourly rate?? What if I am happy to recover my material costs plus a small amount for labour, am I still an idiot??
Hobby makers - or more accurately part time makers - overlap with the full-time makers, particularly in silver jewellery. If you are selling any jewellery, you are a professional - you get paid for it (and pay tax on it). The jewellery market splits down into a number of sectors, of which the mass produced stuff is just one.
Semantics - I think we all understand that in this context a "hobby jeweller" is one who does NOT rely on jewellery making as their main source of income, or indeed to make any significant income at all.
The issue is not buying the cheap imported tat, it is tarring handmade jewellery with the same brush.
Agreed.
Hmm. Interesting idea, so all marketing theory can be binned then? Producers can and do both influence and control markets wherever possible - they create demand and then fulfil it. CF Apple (again!).
Not at all, but economic theory will agree that in a free market the sale price of an item is determined by what price the customer is prepared to pay, not by what the supplier wants to charge. This does not mean that the producer cannot influence the customer as to the value of a product by good marketing and advertising, but in the absence of a billion dollar plus marketing budget I do not see any global Apple equivalents in the Jewellery market.
In essence Peter I do not disagree that individually and for the whole market it is not helpful to deliberately underprice the value of your products, whether a full-time, part-time or very occasional jeweller. Personally I sell at a few fairs in the year with items I have "made for stock" which I sell at attractive prices (some not much above material cost) BUT this generates a growing amount of commission business where I charge considerably more - as time goes on the commission business grows whilst the fair business is more or less static.
This is a deliberate tactic for which I make no apology as it works for me. It is NOT my responsibility to support the prices of competitors.
As an example at a recent fair I sold 35 items in a day and, after material costs, they made me a not very brilliant £200 gross profit. However the commission business resulting directly has already done twice that for 12 items. Works for me.
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Last edited by BarryM; 17-12-2015 at 11:42 AM.
Barry the Flying Silversmith👍
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