Devising a pricing strategy? Let’s go back to class. Math and psychology, specifically.
Create a formula
Designer and craftswoman Megan Auman uses a formula to determine the minimum to charge:
Materials + time/labor + expenses + profit
(The “profit” element lets you pay yourself when you’re also paying an employee to help you handle volume.)
Get in their heads
If you want to be profitable, you need to understand perceived value: what your potential customer thinks your product or service is worth.
“You have to recognize the value you bring over your customers’ best alternatives,” says Robin Pinkley, PhD, a business professor at Southern Methodist University and co-author of “Get Paid What You’re Worth.”
Your price has to be defensible–but don’t under-value. Auman had a mantra for when a boutique’s buyer balked: “I’d say, ‘It’s okay. It’s too high for them, but other stores are buying at this price.”