Clutch-Me.Com

“What should I price my clutches at?”

Pricing is one key topic where many new clutch makers ask my opinion about.  The questions and comments that I get include:

*”How much should I price my clutches?

*”Is $XX too much?”

*”I saw other shops with clutches priced at $XX and that’s just too expensive considering how cheap the supplies used to make it are!”

*”Is $XX for YY-sized clutch priced too low?”

So let’s jump right in!

First, I am obligated to tell you that you can, and should, price it any level you wish and that I do not have a suggested price.
Second, Pricing 101 says that as you lower the prices, the quantity sold will increase.  We all know the price elasticity of demand but of course, there are other factors that will effect the relative elasticity of the demand such as brand loyalty and the availability of like clutches, but in general, when you lower your price, you will see an increase in demand.  However, and there’s always a “however”, if you price it too low, consumers will perceive it as poor quality, and your sales will decrease!

Source: Cornell.edu

Let’s look long-term at your shop:
*What is your brand identity?
*What is your creative aesthetics?

*How do you differentiate your shop, your goods, your service from others?

The easy thing to do is to look for clutches similar to what you create and price accordingly.
But before you can price it, you have to find out how much it cost you to buy the materials to make it.

So, let’s do it from the cost of materials* perspective first:
(1) 8×3 nickel-free kisslock frame $5.99
(1/5) tube of glue $2.20
fabric $2.50
interface $.50
Total = $11.19

Etsy listing fee $.20

So if you price it at $30

Other fees based on selling price: Paypal ($0.30 + 2.9%) = $1.17, Etsy commission (3.5%) = $1.05

Other fees to complete the sale that falls under your overall admin costs: tissue, paper, ink, box, tape ….

NOT including your admin fees that you will deduct from the overall profit, you will net around $13.61 on the sale of a clutch priced at $30.00 retail.

Disclaimers: you can lower your cost of the frames by ordering in bulk so a set of (20) 8×3 frames LOWERS your cost of frames to $4.50 each, and a set of 4 tubes of glue LOWERS your cost of the glue to $9.5 per tube (vs. $10.99 for one tube) so the glue portion would cost $1.90. The fabric varies wildly depending on how many cuts you can get per yard, how much a yard costs, and this is the same as with the cost of the interface. The above are just estimates using cotton.

Now, as you get better at making clutches, you will be quicker in getting them done and you may make them in batches. You can realistically expect to make 1 clutch (on average) in 30 minutes. So you are essentially making $27.22 per hour ($13.61 x 2) — that is if you sell 2 per hour.

We know that owning your own handmade goods business is NOT paid this way, but another way to look at that is, you are asking the customer to pay you to make, from scratch, a hand-made, one-of-a-kind clutch for $13.61.

Realize that you will never make more than 2 clutches per hour at the rate of 30 minutes per clutch.

And consumer behavior research has shown that once you offer a lower price, it’s VERY hard to increase that price unless you offer them something dramatically and noticeably better: better quality, better service, better materials, bigger product offering …  Once a price has been set, buyers get used to that price point and perceive that to be a “fair price”.

Source: http://www.freecoupons.com

Remember, you can always LOWER your prices. EVERYONE loves a good deal. Give a coupon discount. Give a VIP treat. If you start at $30, you can only go lower.

Hope that helps!
Winn

August 15, 2011 Posted by Thy K | Helpful Tips | admin costs., brand loyalty, elasticity of demand, how to price clutches, price elasticity of demand, pricing | Leave a comment