In the first installment of the Pricing Your Work series, we looked at how adopting an hourly rate pricing structure is actually keeping you from making a better profit from your passion by becoming a slave to the clock.
In this second part, I want to reveal to you an often overlooked pricing technique that does indeed allow greater freedom in your work and keeps you from being a slave to the demands of the clock.
Oh, and it helps with the profit end of things too!
Are you charging for the process or the product?
When you use per hour pricing, you’re basically charging people for the process of making their furniture. Seems logical right?
We need to cover our costs and time. Yes, but you’re overlooking the end result.
The final product is a combination of your design expertise, artistic vision, refined skills, and the client’s desperate needs and fantasies. So, what you end up with is more than a table. It’s a collaboration of skill, desire, and need. So what you really end up with is an object that brings value to the customer.
Whether it was commissioned or a speculative piece, there is an inherent value that the final product possesses. It’s a value that occurs on several levels. So, when most woodworkers set out to price their work, they often overlook or outright ignore the end value that the furniture will have and provide.
How do you even begin to price this…value?
It’s pretty obvious this can get a bit foggy because we’re not dealing with the usual concrete steps that most woodworkers are used to.
So to begin to understand this value, you have to understand the one person who truly determines it – your customer.
You see, when people buy, especially luxury items like hand made furniture, they have price as a secondary concern. Actually most folks have it further down the list of importance.
What is at the forefront of the buying decision is what’s known as perceived value.
This is the value that the customer places on that beautiful piece of furniture. But the perceived value isn’t just about the piece itself. It comes from other factors like, the ease of transaction, overall experience with you and your work, and not to mention what your furniture can and will do for them.
So , where do these customers get the idea of perceived value? Guess what? It’s you.
It’s all in how you communicate.
Marketing is simple communication – communicating benefits and offering solutions in ways that really hit home with your ideal client.
Everything you do regarding your furniture and your business is a form of communication, so therefore it’s really a form of marketing.
Design, construction methods, wood species, finishes…these all are a part of marketing, believe it or not. And these areas that you think are just part of the process, are really areas that add benefits to your final product.
Perceived value is also based on the benefits of using and having your products. The customer has to see these clearly over and over in order for the perceived value to be obvious and worth their precious time of acquiring your pieces. That’s where you come in.
It’s up to you to communicate those benefits clearly and often so that the ideal customer sees you have them in mind. Communicating these benefits is what builds the perceived value of you and your work.
So now to the pricing. Obviously, the better you are at telling ideal customers about the benefits they receive working with you, the higher your prices can go…to a certain degree.
Just because perceived value is at the top of most customer’s lists, doesn’t mean price isn’t a factor. Your prices need to match the value people recieve and that can’t happen unless your work is up to the highest standards it could possibly be.
The worst thing that can happen is for a customer to become disenchanted with you and your work because the level of craftsmanship didn’t meet the level of price they paid. FAIL!
So when setting your prices, you have to have a clear understanding of who you serve, how you serve them, and how good your work is. It’s a gut check for most woodworkers because we’re famous for undervaluing ourselves…constantly. But, it’s worth the time to get very clear on your true value and worth as a craftsperson and stop selling yourself short.
You’re not being humble when you devalue yourself. You’re selfishly denying your customers, your business, and yourself the benefits and long term rewards that come from knowing your true worth and going out and getting it.
By taking a long look at the value and benefits your work provides, you can then begin to see where your prices need to fall.
I’m willing to bet for most of you, it’s higher than you thought (and if your first response to this is that your customers would never pay what you think you should charge, then you need to fire your existing customers and get better ones. But that’s a different topic).
As you can see, in order to understand how to price for value, you have to begin understanding yourself and your customer.
Gaining clarity on these two individuals opens up the doors for you to grow and fulfill not only the customer’s desires, but yours as well.
What overlooked value does your work bring to the customer? Have you been factoring that into your pricing?
