#2 – Let’s take a look at YOUR COSTS

Reducing your costs has an important effect on the final price of your products, if the costs of creating your products are too high, it’s going to be hard to charge less without really compromising your profit margin. That’s just math.

There are 3 things to look at when considering if you can reduce your costs: 

1. Can you reduce your cost of goods sold, your supplies costs?

    

   • Where are you buying them? If you are buying them at the local craft store, you’re buying supplies that already have been marked up for retail and then you’re marking that up again as part of your own pricing calculation. Whenever possible, buy in bulk and at wholesale prices.

      

   • Are some of your supplies too high quality? This is a sore point because I know the majority of you have “quality” as one of your main values when you’re creating products, and I am certainly not saying you should compromise on quality, BUT unless you’re going for a luxury brand positioning, sometimes good enough is just that… good enough. If you are using paracord, you know that rope rock-climbers use to make a baby swing, you definitely want that rope to be really strong, but if you’re using paracord to make a keychain – you don’t need to be buying paracord that can hold up to like 300kgs, because no one has keys that are that heavy. And that’s not just for safety reasons with the baby swing by the way but because the cost of that more expensive rope can be reflected on the final price without any issue. The end customer (parents) understand the value of it. It’s justified. If a supply or material you’re using is “valuable” but not in the eyes of your customers – you’re paying too much for OR you need to communicate that value more efficiently to justify the higher price.
     
     
2. Still in the realm of “looking at how to reduce costs” – you want to take a look at your overhead next: what’s included in there? Is there anything you can do to make your overhead expenses more cost-effective?

    

3. And finally, time! The one thing you are NOT allowed to do here (unless of course you set this to a crazy high amount which I doubt you did) is to think straight away that you can just lower your hourly rate. Instead, do an honest review of your actual creation process and ask yourself: how long does it take me to make this product? Which part of the process is taking me the longest? Can I organize it differently so it isn’t that time-consuming? If you are using a technique that you learned only recently – can you improve those skills to become a little faster at it? Are you going above and beyond and maybe because you know your craft so well, almost spending too much time on some technical details that the end-customer will not understand/that will not increase the perceived value of your products? Speaking of… this is a great segue to point #3, which is your product’s perceived value.
   
   

#3 – YOUR PRODUCTS PERCEIVED VALUE

There are also many cases where the value of your products IS the level of care and attention to details you put into it, the craftsmanship and the process itself, the quality of your materials – and sometimes you just can’t cut corners on those. That’s not what your brand and the positioning you’re going for are about.