Marketing Cost and Perceived Value
Pricing your jewellery is non-trivial and there are many factors to take into consideration. Our last article considered the cost of your time and materials, which are the easiest costs to calculate. Now we’re going to delve into something a little more complicated; Marketing Cost and Perceived Value.
Something often forgotten by the designer and client alike is travel and sales costs. It costs money to set up a booth at the trade show or market, and it costs time and gas money to travel to sales appointments. Rent and time costs must be factored into each event and the estimated number of units you will sell. As a rule of thumb, from my personal wholesaling experience, the sales cost should not be more than 25% of total sales. For simplicity, if it cost you $250 in terms of gas, time, rent etc … you should be selling at least $1000. If you’re not, then either it is the wrong venue for you or you’re not seeing enough clients during your road trip. More investigation is needed to determine if you want to continue.
For those who are thinking of wholesaling, note also that retailers demand a “keystone markup” ( two times markup on their cost of goods ) and many ask for a 2.2 markup ( the item that retails for $22 in their boutique was sold to them by the artist for only $10 ), a few chain stores ask for a 2.5 markup. The whopper is the department and major chain store. Included in the fine print of the Supplier Contract may be such things as “contribution to marketing and advertising, warehousing, in-store markdowns…”, their mark up can be up to 3.5 times their cost of purchasing the item ( this means something that retails for $10 cost them no more than $2.20 ).
How much you can price your jewellery piece for is effectively how much customers are willing to pay for it. This can be hard to gauge for the novice designer, and it is difficult to be objective and remove ‘personal attachment’ from the process. This is where shopping around and doing reconnaissance work helps. Note: if just you’re starting out, you’ve not yet built up the brand name recognition required to leverage the high prices commanded by Tiffany’s for their similar looking charm bracelet. Only surveying and trial and error can give you a clearer idea of what the perceived value is for your piece. Even then, it is in the eye of the beholder and dependent on the venue through which the piece will be marketed.
In next week’s part 3 of ‘Pricing Strategy for your Jewellery Designs’; we’ll discuss how to manoeuvre the ever changing jewellery market.