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Thread: Pricing... Again.

  1. #41
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    Default Pricing... Again.

    Quote Originally Posted by ps_bond View Post
    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👍

  2. #42
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    Genuine question.
    I've just popped my figures into the formula you use Peter.
    My wholesale figure for a small gold fingerprint pendant comes out as £450 (currently priced at £320, going up to £360 in the new year, simply to cover my costs).

    Problem is that a sterling or argentium silver one comes out at just over £200. Is anyone seriously going to pay that when you can buy a similar design in silver clay for £90???
    Are people really going to understand the difference in quality, or will they just do what BarryM was saying earlier:

    "Quality and longevity are less important than price and availability. "I want it now and I want it cheap" rather than "I'll wait and also pay a high price for exactly what I want".

  3. #43
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    Quote Originally Posted by BarryM View Post
    It is not the responsibility of anyone to preserve a price point "for the good of the market" - a market by definition is a competitive environment. If it suits me to sell my products at cost or even lower or at 10 times the cost then that is MY decision and mine alone - we all have different drivers and motivation.
    I agree, and I have to challenge again the notion of "devaluing the market as a whole". It's one thing to urge people to take proper account of their actual costs, so they don't unwittingly do themselves down by undercharging. It's quite another to suggest they have a responsibility to the rest of the market at large, unless it's a closed/controlled market (and I'm not an economist so I might not be using precisely the right terms) in which case they should abide by the rules set by other members or those in authority.

    Another glass working example...

    Silver-cored big-hole "European Charm" beads are in fashion at present and the market is huge. If you want something ordinary with a brand name, like Pandora or Chamilia, they cost around £25-40 each, or on eBay you can bid for 10 unbranded ones from China with "silver tone" grommets for cores, starting price 1p including postage. For more discerning buyers, there's a thriving artisan-made market (eg on Etsy) with prices ranging from a few quid up to £60-70. My partner sells a lot in this market - I fit the cores for her and sell a few of my own. She isn't VAT registered and she doesn't pay income tax, because her turnover and income are below the relevant thresholds, but she keeps proper accounts and does honest tax returns. Her quality and range are better than average, though her prices are lower than average and she could undoubtedly charge more if she wanted to. She's a significant seller on Etsy so it could be argued that she helps to keep prices down, having an impact on those who want to charge more. Would you argue, Peter, that she is devaluing their market?

    Quote Originally Posted by BarryM View Post
    Hobby makers (such as myself) are a tiny, tiny fraction of the total jewellery market and will not offer serious competition to a professional jeweller
    Again, I agree, and I don't understand why professionals feel threatened by the "hobby brigade". If hobby makers undercharge to the extent that they're making a loss, they probably aren't big enough players in the market to have any effect at all and/or they're unlikely to remain in business for long - unless, of course, they are secret millionaires who like to play on a large scale... but how many of those are out there?

    Alan

  4. #44
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    Glad Barry has had his say, because mine is almost exactly the same. You cannot force a buyer to purchase your jewellery, however nice it is. They will only buy what they can afford, and if they cant afford it, simple, they dont buy it. If you were able to find an outlet that you could put 1k on a silver bracelet and get away with it, good for you, but most of us cant get that venue. In the South West, where I am, people rely on tourist trade during the summer, thats ok if the weather is hot and people come down here but its cheaper to go abroad for a holiday. Plus of course during the winter months there is a lot of unemployment for the same reason. I attended a craft fair in a school for their xmas carol festivities last night and sold two items of jewellery, paid £10 for 3 hours for the table and came home with £75, some of which of course was materials, labour and profit. If I had put my prices up to a realistic amount, I wouldnt have sold anything. It is only a hobby for me, but I still have to buy silver, stones, gas etc and everyone said its lovely jewellery and took business cards with them.

  5. #45
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    Quote Originally Posted by BarryM View Post
    This assumes that every item must be sold at a price necessary to recover costs.
    Not an unreasonable assumption for small businesses.

    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??
    Quite possibly, yes. Was it last year's colour? Is there a newer model coming out next year? Has it been used as a demonstrator? All of these things are regarded by some as defects.
    Alternatively, did someone need to make up sales figures to hit a bonus target and the hit on the commission was more than offset by the bonus?
    Either way, firstly the car salesman is extremely unlikely to have done badly out of the deal - there had to be some benefit to them - and secondly, I can be pretty sure you weren't buying a new Aston Martin (or other luxury marque).

    .. 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.
    Then with the best will in the world, you've screwed up. Hang onto it as a gallery piece, maybe.

    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.

    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??
    Your daily rate - yours, or what you were charged out at by an employer? That would also cover overheads, presumably? If your work is such that you've got the precision, speed and flair to charge that for jewellery then hell yes.

    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.
    Not quite the same scale, but there's plenty of similar strategies - Rolex, Bulgari and so on.

    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.
    Fair enough. Do the commissions cover the unfulfilled costs on the 35 items?

  6. #46
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    Quote Originally Posted by ps_bond View Post
    Not an unreasonable assumption for small businesses.
    An assumption, not a rule then.
    Quite possibly, yes. Was it last year's colour? Is there a newer model coming out next year? Has it been used as a demonstrator?
    None of the above - new car, current model, I chose colour and extras.
    Alternatively, did someone need to make up sales figures to hit a bonus target and the hit on the commission was more than offset by the bonus?
    Quite possibly, but I don't see how that makes the car inferior than if I paid full price - which was your claim.
    Either way, firstly the car salesman is extremely unlikely to have done badly out of the deal - there had to be some benefit to them - and secondly, I can be pretty sure you weren't buying a new Aston Martin (or other luxury marque).
    See my answer above.
    Then with the best will in the world, you've screwed up. Hang onto it as a gallery piece, maybe.
    Only if I follow your rules, no screw-up if it attracts customers who then buy something as well with a higher margin - such as a commission.

    Your daily rate - yours, or what you were charged out at by an employer? That would also cover overheads, presumably?
    No it was my rate as a self-employed WMS Consultant working from home and excluded travel and subsistence, which were charged at cost.
    Not quite the same scale, but there's plenty of similar strategies - Rolex, Bulgari and so on.
    Indeed but the average marketing budget for the hobby, sorry part-time, jeweller would be what? Probably less than £500 per year - hardly enough to influence the market.
    Fair enough. Do the commissions cover the unfulfilled costs on the 35 items?
    Probably close, but that isn't the point is it? If I make an OVERALL decent margin that is because that is how I market my products. It is NOT done by using a fixed formula to determine the price of individual items which is what you are proposing.

    Peter I completely agree that we should avoid undervaluing our products where possible but using some "correct" formula to determine the sale price of individual items, is not the way I chose to do it or want to do it. I chose to sell some items at very marginal profit (or even a loss) if I am happy with my overall return on effort and investment.
    If others think that I am devaluing the market by selling some items at lower prices than they do - well tough on them. My efforts, my products, my choice, my decision.




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  7. #47
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    I say get if you are happy with your profits that's OK. I made a good living from my trade over the years making unique pieces and only charging a 55% profit and am now enjoying a nice retirement.

    James

  8. #48
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    James, you are in a bit of a different league from the rest of us. There arent many people in the world that can say they made things for the Royal family let alone all the other wonderful people you have made things for. I haven't the skill or the connections to make money, you have worked for one of the best companies in the world and your expectations because of your training andskill, not to mention the life long career are a lot higher than mine would ever have been. I know my limits (I think) and the main thing is I have fun making, most of the time !!!! and I sell enough to enable me to replace the silver I use and cover my costs. I would love to be able to make more money but you have to have customers who will pay that sort of money for an item of jewellery, and the circles that I mix in, i.e local craft fairs dont have that sort of disposable income.

  9. #49
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    Quote Originally Posted by BarryM View Post
    An assumption, not a rule then.
    An assumption that if a business wishes not to go into bankruptcy then it'll follow that. Pretty basic, really.

    Quite possibly, but I don't see how that makes the car inferior than if I paid full price - which was your claim.
    Not really. You're conflating the price of your car with what you paid - the price of the car stayed the same, you negotiated a discount. And it was your strawman, not mine.

    Indeed but the average marketing budget for the hobby, sorry part-time, jeweller would be what? Probably less than £500 per year - hardly enough to influence the market.
    Probably close, but that isn't the point is it? If I make an OVERALL decent margin that is because that is how I market my products. It is NOT done by using a fixed formula to determine the price of individual items which is what you are proposing.
    Actually, I think you'll find that it's not my proposal - it's a well established method for pricing that I follow and strongly encourage others to do so. Much as I'd like to take credit for revealing the One True Way of not pricing yourself into insignificance, it's not mine.

    Peter I completely agree that we should avoid undervaluing our products where possible but using some "correct" formula to determine the sale price of individual items, is not the way I chose to do it or want to do it. I chose to sell some items at very marginal profit (or even a loss) if I am happy with my overall return on effort and investment.
    If others think that I am devaluing the market by selling some items at lower prices than they do - well tough on them. My efforts, my products, my choice, my decision.
    Again, very shortsighted. If you aren't going to recognise that your work is perceived as much lower value than it is because of your pricing strategy, then that's your problem. But if you want to grow as a jeweller then that's going to hinder things - not least of which if you wanted to exhibit alongside full-time jewellers. And - as I think I've already pointed out - this "correct" formula ensures that the costs are covered.

    Just so we're clear -

    Profit: What is left after all costs are accounted for, including (but not limited to) time to manufacture, materials, overheads. The formula I use factors in 20% profit.
    Loss: When not all costs are paid for. Often obfuscated as "negative profit" by economists.
    Cost of sales: Whether it's a gallery taking a proportion of the sale price, photography, website, time spent at a show, time spent posting things, exhibition costs, phone time/sketching time for commissions - these are all aspects of the cost of sales. These costs have to be covered or... See previous item.
    Veblen goods: Oh sod it, here's a Wiki link, it's quicker. Nothing mystical or theoretical about this, it happens.
    Notional income: In the specific case of tax credits, income that a claimant should have, but does not - for example, by undercharging for services - is deemed to be part of their overall income. http://www.legislation.gov.uk/uksi/2002/2006/made S17. Only a matter of time before that ends up enshrined elsewhere (although no idea how they'd police it).

    None of this is rocket science.
    Last edited by ps_bond; 18-12-2015 at 08:41 AM.

  10. #50
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    If & when I make up something for fun to sell (not relying on it to survive)..I have a system of % for stones at least
    A 1pt diamond could have 100% markup but a +ct diamond might only have 1%.
    I think automatically keystoning prices is abit off which is why I don't wholesale stuff anymore.
    I remember James having the same problem in bond st?
    A lot of products are way too expensive for what they are due to added expenses which are then multiplied automatically for no good reason.
    Personally I'll spend a fair bit more time/cost on details doing my thing & not adding much to materials that I haven't had to do much with (finished mount) for example.
    Least I have a clear conscience that way
    It's abit like all these 50% off sales, all they are doing is selling at abit more reasonable price & making a tidy profit rather than ripping people off...most likely they'd do better in the long run not being so greedy in the first place.
    Last edited by Gemsetterchris; 18-12-2015 at 09:35 AM.

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