Crochet product pricing is one of the trickiest things we have to do as product sellers. And, when the customer flippantly states, “That’s too expensive”…our first instincts MIGHT not bring us the results we’re really working toward. Let’s take a look at what’s going on and how to fix it.
Oh, you know how the story goes…you found an amazing new pattern and you purchased all of the supplies. You made a lovely product and can’t wait to add it to your shop. Your customers are going to LOVE it!
Then, you sit down to calculate the price of your gorgeous finished product and discouragement sets in.
You made that product, listed it in your shop (or brought it to a craft fair) and Little Miss Know-it-all and walks by declaring under here voice, “Pfffft, I could get that at Walmart for half that price.”
Let’s talk about each of these scenarios and consider what to do about them.
TABLE OF CONTENTS
The Problem with Crochet Product Pricing
Conventional wisdom in the online crochet world says
“supplies + hourly wage + business expenses + profit = wholesale price x 2 = retail price.”
I know, right about now you’re wishing you had paid attention in algebra class, but let’s walk through it together.
OK, here we go calculating the price of a hypothetical summer top:
yarn $12, time 4 x $12, business expenses $2, profit 50% = $93 x 2 = $186
That’s right, $186 for a simple summer top!
Now, unless you sell to the boutique crowd, I’m guessing your heart just sank.
You know you’ll never be able to sell your product for that price!
This is where the magic of intentional, focused profit optimization cames in.
This happens all the time…we make something gorgeous and, then, realize we can’t sell it and actually make a profit.
Well, there might be a few things going on here.
First, your pricing strategy might be off. If you’re using the strategy, above, or (Heaven forbid) the “3X supplies = retail price” strategy, we need to get you using a strategy that ACTUALLY WORKS to formulate a fair price for the customer AND for you.
I suggest my win/win Balanced Pricing Strategy << take that link to my blog post on that topic and be sure to grab my Handmade Product Pricing Calculator while you’re there.
If we are going to run a profitable and thriving business, we are going to need to offer products at a price that will both sell and generate a profit and that strategy will work. BUT, if you’re still hearing from Little Miss Know-it-all that your prices are too high…you’ve got another problem…
The Problem of Mis-Perceived Value
Oftentimes, when a seller hears the grumblings of prospective customers saying things like,
“My Grandma could make that…why are you charging $X for that?”
“That’s way overpriced!”
or some such nonsesense…the seller’s first response is either anger or shame. But neither of these are helpful if you’re going to to thrive at this crochet selling business.
So, instead of getting mad, throwing in the towel, or lowering your prices for no reason, let’s take a look at some strategies you can use to fix any pricing/perceived value mismatch and get your products priced in a way that has your customers saying “Take my money!” while also bringing in a good profit so you can pay yourself and reinvest in your business.
In order to do that, we will need to work through the 3 Rs of profit optimization and pricing crochet products – Reduce, Raise and Review.
1. Reduce the cost of supplies – This can be accomplished by couponing, setting up a wholesale account with your favorite yarn producer, buying on sale or changing to a lower price yarn.
2. Reduce the time it takes to make the product – While it may require adjusting a pattern, switch to a larger hook or a bulkier yarn. Also, working your inventory in an assembly line fashion can significantly reduce time. I have found that I can reduce production time by approximately 20% working in this way rather than working each individual hat from start to finish in one fell swoop.
3. Reduce business expenses – While reducing general business expenses won’t make a huge dent per product, it will make a difference to your profit margin. Always consider business purchases wisely, seek out free online services rather than paid and eliminate unnecessary costs.
4. Reduce your profit margin – I understand this seems counterintuitive. However, if I determine that I can increase sales by reducing my profit margin by 15%, I may or may not do that.
5. Reduce your wholesale percentage – Yes, you can do this. When I first started researching wholesale opportunities, everything I found online said that you MUST price wholesale at 50% of retail. For my business, I found this to be unworkable. Instead, I price my wholesale products at 65% of my retail price and I’ve never had a buyer balk at that. For example, instead of wholesaling a $30 hat for $15, I would sell it to the buyer for just over $20 and we would both make a reasonable profit.
1. Raise the product’s perceived value – You can do this through both branding and copy. A lovely branded tag, matching tissue paper, box and stickers all raise the perceived value of the item. Yes, these things cost money, but you can work those expenses into the equation and still come out on top. Additionally, a well-turned phrase in your product listing or sales pitch can take a “crochet women’s hat” to “lovely women’s hat made of the finest and softest wool available – designed for both warmth and style, this hat is the perfect Mother’s Day gift and versatile accessory for a woman who loves fashion and flexibility.” And the best part about copy is that words are free. So, no hit to your expenses!
2. Raise actual value – Increase the actual value by using a higher quality yarn (yes, you pay more for this, but the boost to the value is exponential…like refinishing the kitchen before selling the home), adding embellishments, or offering customization.
3. Raise demand – Now, this can be tricky but there are sellers who do this quite well. You can increase demand by creating a unique product, by focusing on a niche market, and by limiting available product. Being the first and/or best to produce a particular item will also increase demand for your product over someone else’s and when your product is in demand, you get to raise the price without chasing off customers.
4. Raise your brand’s image – Often, when we first start selling, we are so focused on being known the handmadeness (crafty quality) of our brand that we forget that this might not be what really draws in our ideal customer and create demand. Instead, I recommend branding your business as quality, professional, artisan handmades rather than ‘crafty’ or ‘home made’. Creating an artisan-quality brand will instantly elevate your products in the eyes of your customers and help you charge what you’re worth. To learn more about this concept, check out my post, “Why You Need to Stop Selling Crochet if you Want Your Business to Succeed.”
1. Review the viability of the product. As mentioned in my previous post “How to Price Crochet Products for Profit“, if a product simply isn’t viable, meaning that I can not sell it for a reasonable profit, I simply drop it from my line.
Business is business and, ultimately, the bottom line matters.
2. Review your own mindset. When customers complain about our prices, our first instinct MIGHT be to start questioning our worth, questioning our skill. And, while I do think it is important to be honest about the quality of the work, more often than not what we need to be questioning is “Why did I attract that person? Are they right? Does that matter? and What will I do about this?”
What does this look like? Well, let’s take a look at the case of the woman stating, “I could buy that for half the price at Walmart.”
A. Why did I attract that person?
- Is there something about my brand, my shop, or my booth that would entice that person to shop with me and then be disappointed by my prices? Or was this just happenstance? If it’s the former, then consider how you might increase the perceived value of your products by creating a more professional brand, by highlighting the artisan quality of your goods, and by informing the customer about the difference between slow and fast fashion.
B. Is the customer right?
- Is it true that they can purchase the product for half the price at Walmart? This is a simple yes or no. In all likelihood, they can probably purchase it for a quarter of the price!
C. Does it matter?
D. What will I do about this?
- My hope is that your answer here isn’t “I will beat myself up,” “I will hold a grudge against this customer and let that negative energy impact my feelings about having a handmade business,” or “I will lower my prices.” Instead, consider how you might reduce, raise, and review in order to really take back control your pricing and know when the customer is wrong…own your awesome, let the customer go, and be strategic about any changes that you’re willing to make (or not make).
Bonus – Build a Product Line with Profit-Optimized Crochet Patterns
After implementing some of these strategies and using my Balance Pricing Strategy, let’s see how the price of our hypothetical summer top is effected. We’ll use this calculation:
Supplies + Hourly Rate + Business Expenses x 1.75 (75% Markup) = Retail Price
and assume that we reduced the cost of our supplies and our production time. We also adjusted retail markup (profit margin), In the end, the calculation looks like this:
yarn $8, time 3.2 hours x $12, business expenses $2, profit 1.75 (75% markup) = $84.70
You see here that my retail price is $84.70 or rounded up to $85. With this calculation, I am able to pay myself (or my employee) $38.40 for 3.2 hours of work, reinvest my supplies and business expenses of $10, and I still have a profit of $36.60.
And, the best part is that my customer gets an amazing top at a price that is reasonable for a handmade, quality branded summer top.
That’s a win/win.
But…what if our price came out WAY more than we could actually sell the product for?
Well, again, I would drop the product from my line and focus on finding designs that already optimized to bring in the profit I need
Introducing Profit-Optimized Patterns
On the design-side of my business, Made with a Twist, I focus on creating patterns that are exclusively designed to fit into this profit-optimized model…they are inexpensive to make, take between 45-minutes to 2-hours to complete, and have proven to be great sellers in both my own Etsy shop and at craft fairs.
You can find these designs inside my Etsy shop at Made with a Twist by Crochetpreneur – you’ll find that many of them include a chart with the suggested retail pricing already worked out for you so you don’t even have to think about that step!
Once you start using the strategies above and taking advantage of the profit-optimized patterns from Made with a Twist, I hope you find that creating a product line that brings maximum profit becomes second nature.
I look forward to hearing from you – please let me know how I can continue to help you to grow your crochet business. Comment below and I’ll get back to you as quickly as I can. Until then, stay cozy and keep on yarning. Pam
Price Your Products Like the Pros
Includes: the exact formula I use to price my products for maximum sales and profit while attracting my ideal customer.