The nice thing about the catalog orders is that you aren’t making anything until it’s ordered.  That keeps down on the number of items you have on hand.

For a few suggestions on types of parties you might do, have a look at craft parties.

• A company has a small number of products
• It has a limited number of customers
• Overhead costs were relatively small and totally
  unrelated to the products sold or customers served

"When these three conditions exist," says Tom, "gross margin pricing works well".

Ok, so what’s an example of it then?  The formula looks something like this:

Cost to manufacture product / 1 - (% of over head cost + % of profit)

 That’s nice, but what does it really mean?  Here’s some numbers to make it a bit more real.

• Let’s say that you have a product that costs you $10 to make.  This is your cost to manufacture your product.
• Next, let’s assume that you have an overhead cost of 30% of your revenue sales.  These are costs like what you pay to rent booth space, or hotel costs, gas, office supplies, etc.  Things you pay for that aren’t directly related to making your product.
• Last, let’s assume you want to make 7% profit.  Now you have what you need to figure a price.

  10/ 1-(.3 + .07) = $15.87 (approximately)

Now you have a sale price you can work with.  Of course, the trick is to get a good idea of your overhead costs.  This isn’t easy to do if you’re just starting out.  You should sit down and try to figure out all of what your expenses will really be.  This is where a lot of people fall short.  Many people will figure the cost of materials, but not things like gas to drive to the show, money for hotel, meals, rental space, office supplies and lots of other little things people pay for but don’t include.

Once you have an idea of what your costs are going to run you, you then need to try and consider how many items you will be selling over the year.  This too is going to be a challenge.  How do you know how many you’re going to sell?  You may have to start with a bit of a guess.  You may have to start with a number and adjust that number after you’ve done some shows.  Once you start getting some data, then your projections will get better.

If there are other products similar to yours, then you can use that as a guage as to what you should be pricing your product for.  You certainly will need to be competitive.  If you can’t sell yours as cheap, then you will need to find ways to make your item or sale more valuable to the customer.

You can also ask other crafters what their expenses run.  How they are figuring their overhead expense.  There are a lot of helpful people that will share their knowlege.

Once you get some numbers, you will be able to try them and make adjustments as needed.

There are a number of approaches you can take to accomplish your goal.  Which one you choose greatly depends on the goal you’re trying to reach.  So when you think about it, our real discussion is about goals and what you want to end up with as a result of your product price.

What I will cover in these posts isn’t unique by any stretch of the imagination.  I came across a this summary of product pricing and thought it was pretty good.  I hope to go into more detail over the next several posts on this subject, but it’s a good way to get your feet wet and familiar with the terms.

Before I really dive into the different strategies you can take with your pricing let me say something about costs.  No matter what approach you take with your pricing, the ultimate goal is to have money left over after you pay your bills.  You need to be as acurate as possible when it comes to calculating your costs.  Guesstimating just won’t cut it.  You need to know you’re going to come out on the right end of the stick.

It’s true that in some cases you may have to estimate, but get as close as you can.  Being way high will result in high prices and fewer sales.  Too low and you’re giving away the farm.  So one of your first exerciese needs to be figuring out your costs.  This includes all the costs.  Many people will do a good job of figuring supply costs, but forget to include things like gas for the car, phone bill, fees and things like that.  The fixed costs of the business.

The better your understanding of your costs, the more confident you will be about pricing.

I came across an article written by Entrepreneur magazine that gave some great ideas for shipping.  They took the time to interview Skip McGrath who is an Ebay Powerseller.

As you might expect, McGrath says much of what you decide to do will depend on volume.  If you’re not doing a lot of shipping, then just doing your own labels and postage is not a big problem.  However, McGrath goes on to say that when you get to ten or more items a day you’re going to need to consider expanding your operation.

You’ll need to start thinking about things like a label printer, a scale and setting up an account with a shipper.  Setting up an account with a shipper is suggested by McGrath when you hit the 30 packages a month mark.

Don’t panic though, you can find some of this equipment around used.  McGrath gives the suggestion of looking on Ebay.

McGrath also makes the point as to what kinds of products you’re shipping.  If they’re delicate and expensive, or speed is important, then who you pick for a shipper will really make a difference.

The last tid bit I thought was really helpful was McGrath’s suggestion on how to save some on shipping supplies.  First he notes that if you are shipping with USPS using Priority Mail, their supplies such as boxes, tape, envelopes and labels are free.  A real bargain to be sure.  The second thing he suggests I thought was really helpful is to drop by your local retailer. 

Many cities require retailers to recycle their shipping supplies, so you can arrange to pick up items from them.  He suggests trying kitchen stores, hardware stores and gift shops.  Just give them a call and see if you can arrange something.  It’s a real win win.

Unfortunately for us, we didn’t find much there. I got a few tools I needed, but that was about it. What I did notice is that there were more than just your average people there with booths. There were crafters there as well.

I stopped and spoke with a couple of gals to find out how things were going. Neither of them reported anything great. One of them was selling yard decorations and another was selling her paintings.

The question I would ask is, “Was this really the place for them to be”? After all, were people really expecting to come and find items that were a bit higher priced at an event like this?

The yard decoration gal said she thought things would pick up. She thought that all the early people had come through just looking for bargains. My thought was, “Well, this was advertised as a garage sale”. Cheap is exactly what a lot of the people there would be looking for.

The gal with the paintings hadn’t had much interest at all. Her paintings looked really nice. She is obviously very talented. But for all that, no interest.

To me it just underscored once again the need to pick the right event for your products. Go where people are going to expect to be finding your items. Then you will see the kind of interest you are hoping for.

In contrast, a friend of mine was there selling Legos. He buys, sells and trades them. They were well priced along with a bunch of other odds and ends he had. After just a few hours he had sold $500 worth. The booth cost him $40. Needless to say he was already happy. I would expect by days end he did pretty well.

Just make sure that you aren’t out of context. Take the time to find out what the show is really going to be about, what other vendors are going to be there, and how the event will be advertised. It will make all the difference.

http://www.hslda.org/docs/news/200902100.asp

You know the quality isn’t near what yours is. You know the items won’t last. Yet, you find yourself struggling to compete with them. There’s no way you could sell your items for that price. You’d take a serious loss. What do you do? Just figure you have to tough it out and figure that it’s a loss?

To that I would say "No Way!". Sometimes it can be hard to see past the frustration. However, the challenge of competing with cheaper products has been around ever since there has been commerce. There are a lot of companies being very successful at beating the cheaper product. I’d like to start a discussion here as to how you can successfully beat the cheap booth. One of my readers referred to it as the KMart booth. That’s how this post got it’s name.

To start let me encourage you to post your thoughts. Take a minute and add a comment or frustration to the list. It really helps others to know they’re not the only ones struggling with a given issue. If you have some ideas and some success stories please feel free to share those too.

So what can you do to sell your products when you’re competing against cheaper products? The first key I’d like to highlight is that you shouldn’t be competing on price. At first that might not make sense to you. You might be used to thinking that the only thing that matters to a customer is price. But, that just isn’t the case.

Consider these three items from the article Value-pricing strategy: "We’re not the cheapest but…".

• Customers are value conscious rather than price conscious e.g. some customers will pay extra for prompt delivery.
• Customers assign a personal value to a product or service e.g. a teenager is willing to pay a premium price for a concert performed by his idol.
• The selling price is based on customers’ perceived value rather than on the vendor’s costs e.g. an ebook costs less to produce than a paperback but readers will pay more for it because of the value placed on format and instant delivery.

The idea is that you should be competing not on the price of your product, but on the value of your product. People aren’t just buying the other product because they see it as cheaper. They buy it because they think they are getting the value they want.

They might even know that the product in that other booth isn’t as good as yours. They have it in their mind that for what they are paying the cheaper product is good enough. It is better than paying the higher price even for a better product.

So what you are competing against isn’t price. It’s value. You’re competing against the mindset that they are getting something good enough for what they paid. This is often times called perceived value. What you need to do is change that perception. You need to change what they perceive the value of your product to be. You need them to compare what they get from purchasing your product with what they get from purchasing a cheaper product and see yours as giving them more of what they want.

So just how do you do that? How do you change that perception? This is exactly what we are going to talk about. So stay tuned, and jump in with your comments at any time.

Search Terms:

Value Based Selling
Value Added Sales

For someone selling their products at a craft show or some other venue, this is a critical skill. You need to feel comfortable with meeting people and getting a conversation going. But how do you do that? How can you get a conversation going from stone cold, to something resembling a warm crackling fire?

Mostly it is a matter of preparation. You need to just get some ideas for subjects to start with, and then practice them. Go over them in your mind and then give them a whirl with some potential customers. Most of these suggestions are common sense ideas that you’ll find floating around the web.

• Brush Up On Current Events - One thing you can do to get ideas for things to say is to be somewhat current on what is going on. Just do some reading of the newspaper or some magazines just to have a flavor for the latest news.
• The Weather - I know you probably just rolled your eyes. But the weather is something common everyone is aware of. Remarking about an especially hot day, cold day or rainy day can certainly get things going.
• Notice Something To Compliment - Here’s one of my own ideas. Let’s say you sell baskets. A very nice middle-aged woman walks into your booth to browse your stock. You notice the cutest handbag you’ve ever seen, swinging from her forearm. Say something about it. Tell her you really like it (who doesn’t like a compliment). Ask her where she got it. Most of the time I think you’ll find people very receptive about conversing about something their wearing or have purchased.
• Notice The Family - As a father of five children, I’ve never minded people saying something about my children. Which one of use doesn’t like someone telling us how cute our kids are. And who doesn’t like to talk about their kids or grandkids? We all do.

These are just a few suggestions to consider. Maybe others have some ideas they’d like to add, something that has really worked well for them.

One thing to keep in mind during all of your conversation starting. Whatever you do, be genuine. If you’re just trying to start a conversation with people so you can get them to buy something, it will show. And you will find no quicker way to loose a customer.

On the flip side, if you are genuine, people will note that as well. You’ll end up showing them that you’re just a regular person like they are and not some booth mugger (I just made that up. Is that funny or just dumb? Sounded funny at the time.). And if they feel that you are like them, they will be much more receptive to hearing about your products, and more likely to buy.

Here are a couple of links to some articles that talk about your body language and what your customers might be thinking. Share with us some of your experiences with customers that illustrate or disregard the point. Maybe you have a funny story of how you made a sale despite your body language, or your customers.

http://www.salesmba.com/articles1/ssrl01.htm
http://www.salesmba.com/articles1/ssrl02.htm