Dave Finkelnburg on thu 27 jun 02
Hi all!
I have been pondering the recent thread on pricing. Seeking the right
price is a never-ending quest, I fear. It is important, though. If you
price too high you go broke. If you price too low, you destroy economic
value. Destroy enough and you go broke! :-(
What do I mean by "economic value?" It's a critical concept, and it
reveals the weakness of basing price on the cost of production. I learned
about this back in 1996 when I had the extremely good fortune to spend a
month studying finance and economics at Carnegie-Mellon University. The
instructors were top drawer, from all over the U.S. and abroad. They all
agreed on two points: know exactly what each step of your production
process really costs; and, base your prices on what you know about your
market.
IF, said these folks, your total cost of doing business is above the
market price for your product, you're in the wrong market. You've got no
choice but to cut costs, close up shop, or move to a better market.
It's only common sense than no business should be selling it's products
for less than they cost to make. However, IF you are selling your product
below what the market will pay, you are destroying economic value. You are
taking something the market says is worth $X and selling it for less than
$X.
Why would you do that? In most cases, they said, businesses sell below
the market because they don't know the market well enough. Such firms
frequently focus so strongly on costs, that they lose sight of market
prices.
Seattle potter Neil Berkowitz did a great job of explaining his personal
approach to market-based pricing, and his attempt to differentiate his work
from the low-end market (see Re: Underselling other artists because you
can--was payment for pots, June 21, in the Archives).
Mel Jacobson has lectured us more than once on his market research --
looking at bridal registry pottery in upscale stores. That's the market he
feels he competes with, not the mass marketers selling $2.50, Made in China,
mugs.
By all means, know what it costs in time and materials to make a mug, a
pitcher or whatever clay art you make. And when you set your price, set it
as high as your market will allow.
Not only does pricing below the market destroy economic value for other
potters, it also destroys the economic value available to you and yours.
Dave Finkelnburg listening to a pleasant chorus of crickets on a
warm summer evening in Idaho
Millie Carpenter on sun 30 jun 02
Microsoft is a good example of setting it as high as the market will
allow. Gates has also factored in planned obsolescence, something that
our consumers don't accept, hand made ware is expected to last forever,
even when they use it improperly. and perhaps we should think of a
way to get them to pay us more if more than one person uses a mug.
Millie in Md trying to decide on the least amount of clothing allowable
to wear in DC as I get ready to go back to the silkroad folklife
festival on the nations mall. And except for the food which is
reasonable, it is all free.....is this a great country or what?
>
> By all means, know what it costs in time and materials to make a mug, a
>pitcher or whatever clay art you make. And when you set your price, set it
>as high as your market will allow.
> Not only does pricing below the market destroy economic value for other
>potters, it also destroys the economic value available to you and yours.
> Dave Finkelnburg listening to a pleasant chorus of crickets on a
>warm summer evening in Idaho
>
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