Pedddle Founder Nicki recently spoke to Catherine from Resilient Retail Club about product pricing & profit confidence in an Instagram Live chat.
Catherine has over 17 years’ experience of working in the corporate retail industry, managing budgets of over 6 figures, so she knows a thing or two about product pricing & profit confidence. She has now formed the Resilient Retail Club, a membership for creative product businesses. She is passionate about helping small businesses get into the money mindset and grow their confidence to make their businesses truly profitable.
You can watch the IGTV below (which is now on the PedddleUK Instagram), but these are the main highlights:
Main take-aways from the IGTV Live chat:
Growing pricing confidence
‘I’m not a business person – but I do have a business’ is a phrase I hear a lot. It’s about growing your confidence and believing that you can make a really profitable business. You need to get into the ‘money mindset’ – the idea that you can make a good income from doing something you love.
Don’t apologise for making a profit – products can be ‘reassuringly expensive’
Many creatives are emotionally invested in the products they make, and because they’ve poured their heart and soul into it they worry about pricing properly for it. Almost always, people won’t even notice if you raise your prices – repeat customers come back to you because they love the product, the ethos of your company, and you as a maker. A pound or two extra won’t be noticeable.
There is such a thing as ‘reassuringly expensive’; people assume something is better quality or more exclusive because it’s of a higher price.
Once you’ve decided to raise your product prices, don’t assume it will put off customers – for every sale you may lose due to your higher pricing, the higher cost point should make up the difference.
When it comes to product pricing & profit confidence, also remember that people don’t know your prices as accurately as you think they do – often, people won’t remember what they’ve paid beforehand for an item.
What are the main reasons people underprice themselves?
There are 4 common reasons that people undersell:
- Self confidence. Do you call yourself a business person? Believe in yourself and your products! If you have a business, you can make it profitable.
- They feel bad charging for something they love doing. Ultimately, if you want to grow and scale your business then you need to consider that you may need to employ people in future – and they will want a real wage, not to work for a passion project! If you undersell, there will never be enough of a margin to do this and to scale up your operations.
- You want your product to help people. It’s common for business owners, especially those in the wellness industry, to want to help people. This makes charging for the service or product harder, as you want your customers to truly benefit. Ultimately, you can’t run a business for more than a certain period of time without making money from it. If you want to truly help people, you need to be profitable so that you can help more people. Another thing to remember that (as harsh as it can sound), your customer’s ability to afford things is none of your business – it’s up to them to make a decision on what they can afford.
- People worry about negative feedback. As long as it’s not your ideal customer that you are out pricing, then it’s fine to charge more. Many people worry about receiving negative feedback if they raise their prices – but there’s always going to be someone who says something’s too expensive and they could make it cheaper themselves!
What are the ‘pillars of profit’ and how do they work?
Pricing – This is one of the biggest profit pillars. You need to make enough money every time to make a sale. This means knowing your exact profit margins and being assured that each time you sell an item you are hitting your bottom line.
If you can make something for £2 and sell it for £10 then you have an 80% profit margin – but remember that all of your marketing expenses, your website, your time, account’s fees, business registration, market selling costs, your salary and so on, all come out of this profit.
If you want to make any profit in your business, the first place to look is assessing your profit margin.
Think like a customer – It’s time to put your customer hat on and think like a buyer. What do you think when you pass a market stall? Does the difference between £23.50 and £25 matter to you? Sometimes you can eke up prices without it being too noticeable, as long as you don’t cross the psychological barrier price points we all hold – for example, £9.99 sounds much cheaper than £11.99. ‘Gifts under £5’ or ‘Gifts under £10’ have a phycological impact, so it’s important to stay within these thresholds.
Loyalty – Reward customer loyalty e.g singing up to your mailing list for a percentage off, or buy-2-get-1-free offers. Think more in terms in incentivising customers to buy more and spend up rather than discounting your items, where possible, to encourage higher purchase values.
How do I know how much stock to take to a market?
This isn’t just a general question for a product business but is also relevant to particular events, and you want to ensure you’re covered for both of these circumstances.
The amount of stock you need is always related to how much stock you think you’re going to sell. Consider your stall layout and how much stock you’ll need to fill it, but also ask how much you’ll actually sell. If you’ve been to the event before then you’ll be able to estimate this, but if you’ve never sold at a market or that particular event before, then it’s more down to trial and error. Try and be logical. How many sales do you think you’ll make an hour? Times this by the amount of hours you’re at a market, so you have a rough idea of how many sales you want to make for your goal, and how much stock you’ll need accordingly.
This allows you to have a sales plan, and then you’ll be able to work out how much stock to take. Remember, you don’t want to completely empty your stall as this could be unappealing for the last people, you want to have a healthy amount of stock so that you sell well but your stall also looks appealing and you can replenish stock. For example, if you want to sell £500 worth of stock then bring £600 worth so you have enough to replenish.
How can I set goals for profit?
Working out your target is the most important thing for product pricing & profit confidence. It’s like hitting a real target – once you know precisely what your goal is, it’s much easier to hit it and it will help you celebrate either achieving it or nearly getting there.
Speaking of how many sales you should make an hour, it’s a good idea to have something to work towards. If you know that you have say 3 more sales to make before the end of the day, or order to achieve your goal, it may make you work that little bit harder to persuade customers to make a purchase from you and will ultimately make you a better sales person.
Nicki spoke to Emily Harvey in another IG Live chat about this – click here to find more. You can also download a free sales tracker from Emily Harvey here, which will help you with those goals.
Don’t forget to celebrate those wins! Don’t be apologietic for making sales and be proud of making profit!
Want to know more about Catherine’s work and how she can help you be more profitable?
Click here for free toolkits on starting and growing a business.
Click here to find out more about working with Catherine. She offers 1-2-1 one services too, so there’ll definitely be something that’s right for you!
Watch the full IGTV Live:
We hope this helps you to grow your confidence with pricing further, and make your business more profitable in 2022. Good luck! Check out our other blogs for further small business tips.