Posted by learntobead on August 1, 2014
Question: How do you go about figuring how to price your jewelry?
I teach a class on how to best price your jewelry, and I have posted a video tutorial on the CraftArtEdu.com website.
There are different kinds of pricing strategies.
(1) One type of pricing strategy is called “Keystoning”.
Keystoning is where you multiply your costs by 2, to arrive at your price.
If your costs were $10.00, then your price would be $20.00.
In the Jewelry Industry, you will hear a lot about Triple Keystoning.
Here you multiply your costs by 3. To arrive at your price.
So, if your costs were $10.00, then your price would be $30.00.
Keystoning works well if you are a boutique or gift store buying finished jewelry. You would double (keystone) or triple (triple keystone) the costs of each finished piece. Keystoning, as a pricing strategy, works well when you are dealing with finished goods. The price is simply a multiple of the cost of the Parts. Keystoning assumes that Labor and Overhead costs have already been factored into the cost of the jewelry.
Keystoning is a little more awkward to use, when dealing with manufacturing goods, like most jewelry designers do. Keystoning tends to over-account for the cost of the Parts, but under-account for the costs of your Labor.
Keystoning works well for jewelry stores. Keystoning does not work as well for jewelry designers.
(2) A second type of pricing strategy is called “What The Market Will Bear”
Here, based on your gut feelings, you would set the price at the highest price you think someone might pay for your piece.
You will see this strategy employed in a lot of tourist areas. Businesses in tourist areas usually pay very high rental rates. They are often dependent on making their money in a very defined seasonal timeframe. They assume they will they will never see these customers again.
What happens with a What-The-Market-Will-Bear strategy…
At the point of sale, the customer goes away happy and the business goes away happy. However, when the customer goes home, and they show their purchase to their friends or family, or shop around, they begin to realize they overpaid. So, over the medium and long term, the customer is no longer happy. An unhappy customer can spread bad word of mouth. While that particular customer may never revisit that tourist area. They might convince their friends and families, who may plan a visit, to avoid that particular shop.
(3) The third type of strategy is called “Fair Value”.
This is what I teach in my class, and is detailed in my video tutorial. ‘.
A Fair Price is set, using a formula. This formula requires that the artist manage all the types of costs she or he confronts, when setting a price. These costs include,
COST OF PARTS (P)
Overhead costs include things like rent, electricity, wear and tear on tools and equipment, telephone, travel – basically everything else associated with making and selling your jewelry.
The basic formula:
MINIMUM FAIR PRICE = (2 times P) + L + O
MAXIMUM FAIR PRICE = 1.5 times the Minimum Fair Price
You gather cost information on your Parts and your Labor. You estimate the Overhead costs based on percentage of your Labor and Parts costs.
This gives you a range of fair prices from which to choose.
With a Fair Price, you may not get the highest amount you possibly can get, but you will get an amount that more than covers your costs, and leaves some money left over to spend on yourself, or re-invest in your business.
With a Fair Price, when you sell that piece of jewelry, both you and your customer go away happy.
And both of you stay happy.