💶 Pricing Guide
5 steps for how to set your craft product's prices when entering a new market
The first thing you need to do is place where on the accessible vs. premium scale your product lands.
- Plot out your product considering your target audience, the quality and cost of your inputs, your branding amd your target volumes.
- Use other products to reference the extreme ends of the scale for your product category.
- Consider most of the products in your category would hover around some average price.
These are products that are very similar to yours in terms of their quality, target audience (i.e. where they land on the accessible vs. premium scale) that already have established prices in your target market.
- List out 2-3 comparable products
- Find their B2C prices in the target market by checking their online shop, or any 3rd party online retailer
Take the lowest and highest prices amongst your comparables, this should provide a nice range to start analyzing your potential price.
- Plot out your range
- Make sure the range provides enough flexibility to play in (we like to have at least $5.00 to play within)
- Avoid too wide of a range
- Go back to the comparables stage if your range is inadequate
Time to crack open the spreadsheet to start playing with some numbers. Now lets test out the prices and see what resulting margins we get. You can use any spreadsheet software, or to make things simpler we’ve created an online calculator that you can access here. (Note: Online currently only available for B2B in France).
- Calculate your sales margin by subtracting from your sales price: taxes & duties, and all distribution costs (payment processing, warehousing fees, last mile logistics etc.)
- Use this sales margin to calculate your profit margin
- Play within the range until you find the right price that works for your business
This is probably the most critical step of all. Now that the leg work is done, its time to put your pricing in front of customers and validate that it works for your target audience.
- Get your prices in front of customers by updating all instances of your products sales materials (online and offline)
- If customers buy your products and do not complain about the prices, you’re prices work!
- If they do not buy them, or they complain then go back to the drawing board and speak to your customers and sales partners to diagnose where your analysis fell short and try again with a different price
- Develop a system to periodically revisit your pricing, particularly in times of high inflation