There are several ways to choose prices for the products and services in your UK-based creative business. Let’s look at a few.
Cost-based bottom-up pricing
This looks at the cost of materials, time, overheads, and profit margin, and answers the question: What’s the minimum price I can charge and still be profitable, given that I’m using these materials?
This starts with the price you’re aiming for – maybe you want this product to be £30. This method answers the question: How much time and which materials can I use to make this product and be profitable selling it for this price?
Value-based pricing
This asks an altogether different question: How much value does this bring to my customers’ lives? Answering this question relies on a deep understanding of your ideal client’s needs, wants, hopes, aspirations, etc. The same vase is worth different amounts to the parent of a young child who only sees a breakable object vs the style-conscious single person for whom it’s the perfect finishing touch on the redecoration they’ve been pouring their heart and soul into. Who is your ideal client? Who is your marketing reaching?
In truth, you rarely want to use any of these methods in isolation. You may start with value pricing and conclude that your customer will value a product at £500. Great! Now, use cost-based bottom-up pricing to check that that’s a profitable price for you to sell it at. If it’s not, cost-based top-down pricing will be your go-to method for working out which materials to swap, or whether you need to find a quicker way of making it.Top Tips:
Never base your pricing decisions solely on what your competitors charge.
There’s no way to know that with your unique combination of suppliers and making process that you’ll be able to make a profit at that price. This is one of the quickest ways to a failed business.
Don’t price based on what your friends and family – or even yourself – would pay.
Your friends and family are not your ideal customer. You are not your ideal customer. After all, you can already make the thing you’re selling, so you would never buy it. We tend to undervalue our own skills and talents. Always remember to put your customer first – their needs, their budget, their way of valuing what you’re offering.
I know numbers probably aren’t your favourite thing in the world, and it’s so tempting to just slap a number on your work and get back to the fun bit, but getting your prices right will make or break your business. Take the time to be sure they’re right.
There is no one-size-fits-all answer to how to price. If you’d like a hand, I can help you get to grips with your pricing with my one-to-one services. Please get in touch.
Hi, I’m Sara-Jayne Slocombe of Amethyst Raccoon. I help your small business thrive using the power of your numbers, empowering you so that you have the confidence and knowledge to run your business profitably and achieve the goals you’re after.
I am a UK-based Business Insights Consultant, which means I look at your data and turn it into information and insights. I separate the noise from the signal and translate it all into actions that you can actually take in your business.
I also facilitate the Power Pod Roundtable, which is a business discussion group, and the AIM HIGH Mastermind, which is a small group of business owners who want to move their businesses forward.
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