The Pricing Decision 3: Price and Percieved value
By Ellen O’Hara, Head of Business Development at Cockpit Arts
There’s no doubt that getting your pricing right is a crucial part of your marketing and business strategy as a designer-maker.
As part of the Pricing Decision series I am looking at three key areas: Cost, Market and Value, as well as how different pricing strategies fit with the overall goals, for your practice and business.
Last week my post looked at price and the market. This week I will explain how percieved value affects price.
As a designer-maker creating unique work for a niche market, pricing should be most influenced by the value received by your customer.
Your customers will tend to buy from you because your work is different from the other options available. That difference is your value and it can be worth a premium price. So when it comes to price setting, it’s the customer’s perception of value that counts.
Taking a value based approach to your pricing means:
- identifying what your customers value and
- determining what they are willing to pay
The value of your work is derived from the many features and benefits that buying a piece of your work can offer.
So think about what benefits a customer receives by engaging with you and purchasing your work. For instance, some customers may value the prestige that owning a piece of work provides. For others it may be high the quality finish or the technical skill that your work displays.
For other customers, the experience of commissioning work from a maker, being able to meet with them in their studio and co-create a piece of work that is highly personal to them might be what they prize. And they might be willing to pay more than you think!
Large companies use survey methods to help them evaluate customer values. As a maker, you can get to know your customers by engaging with them at shows, exhibitions and other events. Ask questions and solicit feedback. Ask existing customers why they buy from you, what they value and in what order of priority.
If you sell through galleries or other retailers, find out who is buying your work. What kind of customer are they and why does the gallery or shop owner think they like your work? You may have to experiment a little with price levels to begin with, but be bold and don’t undervalue yourself.
Remember that how you price your work sends out messages to your audience about its value. Similarly, knowing what your customers value the most helps to inform how you market and sell yourself. Value is, of course, subjective and not every customer will need your work and its unique benefits. A relatively high price may well deter some potential consumers. However, it will also attract others who truly value what you have to offer. And in the long term, it is these customers that you want to be cultivating.
Next week we’ll be looking at how price relates to your goals in the final of the pricing decision series.
Let us know how you get on by leaving a comment on your experiences in making your own pricing decisions.
See more top-tips on finance from Ellen and other industry experts.
Or check our resources section for a worksheet on Calculating Your Costs and Budgeting.
And if your doing some financial planning this summer, come along to our workshop: Financial Planning for Growth on 11 August.
Filed under: Finances, Top Tips | 2 Comments
Tags: cashflow, Finances, goals, market, pricing, sales, top tip, Workshops
I think ellen is correct. Often I feel my products are too highly priced and I should be lowering them, however, recently it really paid off to stick to my guns; a friend said she was looking at wallpaper and asked how much mine were priced at, when I told her the price she screeched and protested that she couldn’t afford it. Nevertheless I gave her a sample. Once she has seen the wallpaper and compared it to the designs and quality offered on the high street, she did not bat an eyelid at my prices. She was impressed by the quality and the bespoke service offered to her.
Hi Amy. That’s a really good example – demonstrating that it is value for money and being able to respond to a customer’s needs that matters, not just the absolute price.
Ellen