When people say “I can afford this”, they are lying. If you dare to ask, someone will pay for it, but that person may not be right in front of you when you ask.
How much should my time cost? How much should my emotion cost? Does this price fair to me as a creator and fair to the consumer? As an artist, I struggle with questions like these all the time. Two years ago, I realized I have been thinking it all wrong.
When it comes to pricing a piece of work, the mathematical mind says
Price = material cost + time spent creating it x hourly rate + marketing cost + length of the average sales cycle in days x how much do I spend each day on average + any cost of post-sale customer service cost
Your version of the formula may be slightly different, but the logic behind it is the same. When I use this formula, I hate myself. No matter what number I plug into the variables, I still feel I undervalue myself.
In addition to material and time cost, there is also emotional cost, which can be difficult to calculate. Supposed I have to create a design by a certain date. Because of that, I had to postpone the trip to the waterpark with my son. If I had to add a price on father & son time, that can make my work very expensive.
In 2018, I did an experiment. I was selling a draft version of my HappyOki series at an event. I didn’t make a price tag for the artwork. Instead, I ask how much each customer is willing to pay for it. If the customer thinks it is worth $1, I will happily accept it. If the customer hands me a $100, I will take it too. As a result, the highest I received on that day was $25, and the lowest was $5. I sold all 10 of them, and I got about $180. If you do the math, on average people pay $18 for a piece of paper with my design on it.
I was happy with the result, not the $180, but the assurance that I could move that product for $18/copy. With a little background story and Japanese business manner added when I greet each customer, I set the price for a slightly upgraded version at $25. The cash started to come in.
Is $25/copy a good deal as far as a business concern?
Absolutely, that’s 1000% profit margin.
Is that a good idea for me with all the time and emotion I spent on creating it?
It doesn’t matter. What matters is customers are happy to pay $25. As for me, $25 is MUCH less than the emotional cost I put in those late night hours and stress before the deadline. But in the long run, as long as there are people happy to pay me $25 for that print, I will make the money back.
The lesson I have learned is that it is NOT up to me to set the price, it is up to the market. If the price is too low, instead of raising the price or getting upset about the quality of the customer, I should find a different market. We no longer live in a world where there is only one marketplace in town and everyone nearby trades there. When my mom was 14 years old, the family budget was tight. On weekends she took a four-hour bus ride to a remote village to buy a type of locally grown fungus that is valued highly in the city. She will haul them back and sell them in the market near her house in the city. If one day the products don’t sell well. She loses money, and then she will have to go back to that same market the next day to try again. She had no choice because that was the only market she could buy the fungus, and the only market she can sell without traveling out of town. We don’t live in that age anymore. Within clicks, we have access to so many markets, and everyone is working so hard to build more markets and bring people to them.
By the way, if you have competitions, and you fail to differentiate your products from theirs. You need to deploy other pricing strategies. I will talk about that in a later day.
My pricing strategy is to let the customer tell me how much they are willing to spend on my products, and I find a way to control cost so I can make a profit in the long run. The focus of this blog is to help you build scalable and consistent income streams so you can spend time creating while your business continues to grow. In my opinion, there is nothing scarier than creating expensive masterpieces and then spinning long sales cycle trying to move them. I can’t set my mind in creative mode if I had to worry about when my next cheque is going to come in. If I don’t like how much I am getting paid, I move on to find a better market where I feel appreciated and valued.
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