Use Pricing Strategies Based on Worth - Not Cost - Digital Scrapbook Designer Professionals

Use Pricing Strategies Based on Worth - Not Cost

By PChip | Category: Business Management |

When it comes to pricing your products and services are you like so many other digi-art professionals who struggle with the challenges of this issue? Answering the question of, “How much should I charge?” is one of the most important things you’ll ever do for your business. If you answer it wrong you’ll find yourself frustrated and broke… or at least not very happy with your income level. Answer it right and your competitors will be eating your dust.

Rationalize From the Right Perspective

Many business articles (including the written works of business consultant and author, Joe Love) point out that business owners look at this as a decision between the choice to create great sales volume at small markup or create less volume at a higher markup. Alot of digi-scrap business owners fall into this thinking trap. Such entreprenuers carry the thought that they have to sell at bargain prices or with minimum markup in order to maximize their sales.

This is a misunderstanding. One that, I dare say is hurting our industry, as much as if not more than the huge numbers of free digi-art products we compete with. It’s not just me who sees this either. According to the folks at JLM and Associates studies show businesses that offer the lowest prices, don’t necessarily realize the highest sales volumes. Why? Because there are more factors involved in a buying decision than price alone.

How Does your Customer Shop?

Many of your customers will be comparison shoppers – those that are always looking for the lowest price and they will buy only at that price. However, there is another set of customers who are actually attracted to the higher priced products – many times because the higher price comes with the perception of value for these customers.

Then there are customers who rarely shop based on price. Instead they use recommendations from friends or they become loyal to a particular designer because of similar interests in style.

I’m sure you also know digi-scrappers who don’t buy at all. Instead they will simply scourer the web for the freebies and “collect” products from all around the web without ever placing an order or even considering product quality. This group of consumers I don’t even consider to be “customers.”

Rest assured that no matter which customer shopping habits you are dealing with, price always fits into the picture somewhere.

The Tricky Trick of Pricing

As an entrepreneur you want to maximize sales, while also turning the maximum profit on those sales. This situation can really stunt your business progress if you get too caught up in figuring out the “how to” behind setting prices. Then decide to just give in and set your prices the same way your competition does.

The trick is to price your product/services based on their worth to your customer. Not based on your costs. Does that sound like backwards advice? It’s not. It’s true that one of the most popular pricing models is based on adding up your cost, determining the profit margin you wish to make, then pricing accordingly. That however, IS NOT the business plan that’s most profitable for digital-art professionals.

Put a Finger on Your Product Type

If you want to set the best prices for highest income possibilities, know exactly what you are selling. It’s not just a piece of scrapbook paper that eventually gets used and needs to be replaced. It’s not just a set of printed pages bound together in an album that gets used and then tossed away for a newer, better one later. What you provide is a product or service that has a lifetime worth.

This is an important fact for you to accept when pricing your packages. To explain this concept further, you’ll need to understand the difference between a “price-shopped” product/service and one that is “results-shopped.”

Price-shopped items are those that are commodities – things that a person eventually “runs out of”. No need to look any further than your local scrapbooking store to see price-shopped items. Walk into a scrapbook supply store and you’ll find tons of paper, elements, glues, tapes, inks, and many other supplies that the artist will eventually need to re-purchase.

Results-shopped items are those products/services customers shop for when they are looking for a particular long-lasting result. They have a certain expectation for a sense of fulfillment. Almost every digi-art business endeavor falls into the results-shopper category. Digi-art pieces and memory albums are all long lasting and never totally consumed by the customer. Memory albums are handed down from generation to generation. Digi-art can be used over and over again without degrading and as often as wanted. There’s no need for the customer to buy another file exactly like the one they just used after they created their project. When choosing which digi-art products and services to purchase, the customers are looking for a certain feeling – a sense of inner satisfaction. They are shopping for a particular result.

Price on Perceived Worth and Results

When you are delivering this type of product/service, you have more flexibility and better chances to make a nice profit when setting your prices. That is if you can see the long-term worth of your offerings. Don’t follow the masses digi-professionals who make the mistake of treating their product/service as a commodity.

My advice to you is that if you aren’t selling a paper scrapbooking product – then don’t price yourself as if you are.

There’s no doubt that even with a results-shopper type product, pricing digi-art low can prove to be beneficial… in the short term. In a “immediate gratification” type way that doesn’t offer long-term benefits to your business stability. The thing to keep in mind when using this method of pricing is to make sure your low price is contingent upon the customer buying additional products/services that offer you an improved profit margin.

Recognize that you might have to sell yourself as a commodity during the first part of the transaction – and also remember you don’t want to ALWAYS sell as a commodity to your customer.

Bargain Shopping for Commodities

Another thing to keep in mind when you are forced into the commodity situation is that you want your commodity to stand out from the competition in a way that the consumer will perceive yours to be a better bargain. Leave them feeling like they are getting more for their money. You could achieve this with package quantity or product/service mix.

Test, Test, Test

If you follow no other advice I offer you today, at a minimum do this one very important step. Test your pricing. Trust that the market will tell you whether or not you’ve priced your product or service correctly.

Wouldn’t you just kick yourself if your testing showed that you’ve been denying yourself 50% more profit on most of your products/services, just because you were afraid to ask customers to pay what the items were worth to them? Yeah, it might be a bummer to find that out. So many times entrepreneurs learn that they were under pricing themselves from nothing more than intimidation of their competitor’s prices. If you’re test shows you fall into that category – then it was a good lesson to learn. With so much to lose or gain do you really want to leave your pricing to chance?

Pick Your Battles Wisely

At some point in your career you are going to come face to face with a price war. But like any other fight, it takes more than one to force a battle. I recommend you not even go there. Many businesses fight price wars simply to generate customer traffic. However, unless you have a really good action plan behind what you’re doing - you most likely won’t experience much profit from one. Instead you’ll end up losing money and possibly lose customers too. Few people or businesses ever win in a war.

A much better business strategy is to position your customers so they make repeat purchases from you. After that first sale, make sure the additional things they buy from you aren’t being sold for pennies when they are worth dollars.

Treat Yourself To Higher Profits

Customers will rarely deny you the opportunity to make a profit. It’s not the customer that is driving your prices down. More often than not, I have found it was the digi-scrap professional who has psyched them self out of the right price.

For more information about pricing your products and other business decisions check out Joes website.

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