So I just came across a Tumblr post where someone was attempting to call out Relatively Internet Famous Person (won’t say who, if only because this happens to multiple people) for being “scammy” because they were selling their work for significantly higher than the cost of the individual components.
people.
people.
that is LITERALLY how business is MEANT to WORK
jfc
If you sell something exactly at materials cost, you’re losing money because you’re not including the cost of your time, overhead, marketing, postage, etc etc. Even if you do take those costs into consideration in your pricing, you won’t be able to earn enough to reinvest into your business, which means that unless you get the rest of your money elsewhere (e.g. loans, equity from someone else, mysterious benefactor, etc) you’re not going to be able to grow or improve your business, e.g. by using higher-quality but more expensive materials or getting more training.
People tend to assume that Price = Cost + Some Arbitrary Markup, as though that’s the only good way to price something. But there’s also a thing called Willingness to Pay, which is basically the highest amount your customers are willing to pay for your product. There isn’t just one number, it’s a curve, and you’d want to hit the price in the middle of the curve because that gives you the most profits overall – too high and you don’t get enough customers, too low and you don’t earn enough. Look up demand curves for more info.
Anyway. WTP is why you often see things with a high markup – because customers are willing to pay a lot more for a product that costs relatively little to make. You find that out through research: learning what similar products are priced, how much your ideal customers earn, how much they tend to spend on similar things, etc etc. There’s a lot of techniques. And what you’ll find is that while there are going to be tons of people that want something for free/below cost/cheap, there will still be quite a few people that’ll pay you quite a bit more than what it cost you – and it could actually benefit you to target those people.
Think about it. Suppose you make art, and the sort of people who buy the kind of art you make are willing to pay around $50 for a piece of your caliber (and honestly, a lot of y’all out there make work that could be priced a hell of a lot more). The art costs you $15 to make all up. You could sell it at $15 but that doesn’t help you in the long run. You could sell it at $50, then you get maximum value out of that customer and that’s still fine. Hell, you could even sell it at $30, you make 2x profit and the customer feels like they got a hell of a deal.
Could this be exploitative? Sure, it has been for some things. But that’s why you research! You learn what your costs are. You find out what similar things are priced. You find out what your ideal customers earn and what they’re willing to pay for something like yours. You find ways to either bring costs low enough so you can compete, or find a way to differentiate yourself so you can justify a higher price (not just “I’m better!”). You think about your future goals with your income – do you want to take more classes so you can make better things? Do you want to be able to afford a holiday? Do you want fancier material? Do you want to spend time in another city so you can be more inspired? Do you want to exhibit at a local convention? And then you price accordingly.
Maybe your customers are generally underpaid students who genuinely cannot afford anything more than $10. That’s cool – if it doesn’t cost you more than $10 to make something then you’ll still be doing ok. Maybe you have a significant number of people who’d pay you $50, and concentrating on them by charging, say, $45 would earn you way more money than charging $10 even though charging $10 got you more customers. Maybe you believe that having your product or service be accessible even to the lowest incomes is your highest priority, and that’s totally fine too! Just make sure you’re resourced enough to be able to take care of yourself and keep going. It’s up to you and what you research.
There’s nothing wrong per se with a relatively high markup. It all depends on your market, your strategy, your costs, your goals. If your market can afford to, if your market wants to throw money at you, why not let them? You could put that money to such good use and your customers will still feel like they got great value. You don’t have to stick to pricing at cost – dare to ask for more, if that feels good to you. You and only you can decide what your trade-offs are.
#business#i am sure someone is going to yell CAPITALISM at me#which would be fair#but i wonder how many people are being taken advantage of#or struggling to get by#because they’re worried about doing something that seems capitalistic#as though that has to be a terrible thing#so many struggling artists on tumblr who could stand to charge more#and ok that means quite a few people will be less able to afford your art#so you decide what the trade-off is#more affordable art for more people or more expensive work that supports you financially?#or you could find a happy medium that both helps take care of you and is affordable by your customers#RESEARCH RESEARCH RESEARCH
I love when people in a CAPITALIST society yell CAPITALISM to get out of paying already disadvantaged people what they’re worth
TBH, I almost feel like our economy has gotten to the point of obscuring how even business works.