The Psychology of Pricing
In the psychology of pricing, many buyers have a preconceived idea of how much an item should cost. The customer does not worry about the costs of the materials, labor, overhead, etc., but only what price she is willing to pay in order to own an item.
He or she usually is unaware of your pricing problems and can only estimate an item's worth by how much she likes it and how she imagines it will look with her new outfit. There are of course many people who do appreciate handcrafted jewelry and do have some idea of the time, materials, and skill needed to produce them. These people are usually much more willing to pay the price because they appreciate what you have made.
What Will The Customer Pay?
When we discuss the psychology of pricing, every customer has a an acceptable price range for any product— a price that he or she will pay if it is within reason. If your asking price is outside of his or her range, then they will not buy. This also goes for a product which is priced below his or her estimated price range—the customer will wonder what is wrong with your product and again will not buy.
If you have a jewelry item that costs you much less in both materials and labor to produce, you should still charge what "the going price" of an item similar to yours is selling for. Because, this is what the customer feels the item should cost and if it is much less than that, they may automatically assume that there is something wrong with it. Do not feel guilty about taking a larger profit on something you have designed and produced easily and quickly, because sooner or later you will have to take a loss on something that should be priced higher, but cannot be, for one reason or another.
The customer's decision to not buy an item may not be because you have overpriced your work but merely because it is out of her budget. If she can only afford a Hyundai, it doesn't matter how reasonable the price of a Cadillac is; she simply can't afford to buy it.
The same goes for handcrafted jewelry, if you produce a beautiful one-of-a-kind free form necklace which sells for three hundred dollars, and a buyer can only afford to spend between fifty and one hundred then you should steer her to a less expensive piece of work such as a beaded bracelet which is still a beautiful piece of wearable art and yet she is able to stay within her budget, that is part of the psychology of pricing.
With the psychology of pricing, when selling directly to the public, avoid creating a bargain-basement atmosphere around your price tag by odd pricing your work. Don't for example, mark an item $9.99 instead of $10.00. Although off-pricing is a common practice in retailing it is just plain bad for handcraft jewelry for which prices should reflect prestige, originality, creativity, and other similar attributes; not an amount one might expect to pay for items in a discount house.
If you feel that your products will sell better marked at odd pricing, then at least price amounts under a dollar in twenty-five-cent denominations. For example, $9.75, $18.25, $22.50, $49.50, and so on.
Another psychology of pricing scheme used by many retailers is a practice called "trading up". The basic objective is to give the buyer a price advantage in buying a larger quantity. Prices are slightly lower for sets than they would be for a similar number of single pieces. The principle is that selling more volume will increase your profits, even at slightly lower prices.
For example, if the price tag on a pair of earrings is eight dollars, offer three pairs for twenty dollars. In addition to selling a necklace, bracelet and earrings separately: give your customers an option to purchase them as a set at a slightly reduced price.
Many jewelry designers feel that by trading up they are cutting into their profits, but you must realize that many of the basic costs such as rent, telephone, utilities, booth fees, etc., remain constant whether your sales are fifty dollars or five thousand dollars. If this pricing scheme can induce more customers to buy in logical quantities at special prices, it is worth the slight decrease in the profit of each individual product in order to build up your total dollar volume.
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