How the public determines value, what your competition charges, and your costs are a few deciding factors. There’s a whole lot more to it, of course, but we’ll start there for now.

First of all, how do we determine the value of a product? I’ll use a painting as an example. You are an amazing painter, right? You know that you can sell a large painting for $500, and prints of the same painting go for $25. However, you then discover that another painter has priced her work for a lot more, but when you raise your prices, your work doesn’t sell. Why? 

A part of it could be the perceived value of your work. The other artist may be able to command a higher price because she has been around a lot longer than you and has a larger audience. Possibly she has exhibited her work in galleries across the country, and because she is more well known than you, people expect and are willing to pay more for that artist’s work. Even if you both paint vivid landscapes that bring a tear to the viewer’s eye, her work is deemed more valuable based on factors like reputation, a résumé featuring various galleries, or even a lot of good press. The public is willing to pay more because they feel they are getting more, even if the actual work is similar. 

But it’s not only having an established name that can raise the perceived value of your work. If you create knitted goods, you can explain that your work is worth the money you’re asking by talking up your process and materials. If you use only the best organic wool, dye and spin it yourself, then knit an original design, those elements could very well raise the value of your work in your customer’s eyes. Let people know why your work is valuable and how much work you put into what you make. 

You can get a good idea of your perceived value by checking out your competition and comparing your work with the work of others. Say you’re a maker of dog beds. Look at sizes, and see how they compare to yours in price. Or you can look for dog bed manufacturers who use the same types of materials as you or have the same look and feel as yours. Also look for products that have something in common with yours but aren’t too similar. By that I mean all dog beds, big and small and in between. Take note of what they are selling for, how many have been sold (if you can figure that out), and how their maker describes them. Plus read their feedback, and see what customers like or dislike about the products. 

Use this information to make sure your product is priced appropriately. Perhaps you’ll find you are underpricing your goods, or maybe your sales are slow because a similar product out there sells for a lot less than yours. Studying up on the competition can help you decide the best price for what you make. 

When you’re studying up on the competition ask yourself the following: 

1) What do my product and this one have in common? 

2) What sets mine apart? How is mine unique? Better? Worse? 

3) If I was a buyer comparing this other product with my own, what would strike me as the primary differences? What would be the choices I’d need to make between the two before I spent any money? 

4) What can my competitor’s feedback tell me about my own product? 

Knowing how much your product costs you to make and sell is essential in determining retail price. This includes everything that goes into what you make. For example, the cost of making a fabric wallet can be broken down in several ways, depending on how you source your supplies. 

These are:

1) Materials to construct the wallet, including:

- Fabric (includes delivery cost)

- Snaps

- Thread

- Interfacing Label (of your company name)

2) Selling costs for your wallet, including:

- Listing/advertising costs

- Online banking fees

- Shipping tissue paper, sealing stickers, etc.

- Padded envelope or mailing box 

- Postage

Note that this list does not include your time — neither actual crafting time nor the time you spent sourcing the supplies, the time you spent driving to the post office to mail it, and the time you spent uploading the article to your store. You must determine what your hourly worth is, and add that to your selling price. 

Now that you have a base cost for your product, you need to decide how much you can mark it up for retailing. 

If a spool of thread costs you $2, you shouldn’t charge the full two bucks to the cost of a single wallet. Try to make your best guess as to how much of the spool you use to actually sew the wallet. You may end up estimating the thread costs you somewhere around five cents per wallet. 

Let’s say you determine that the wallet costs you $5 to make. That five bucks covers your materials, your labor, and the basic costs of being in business. One formula you could use is a 2.5 formula: multiply your base cost by 2.5 and consider that your retail price. Multiplying $5 by 2.5 is $12.50, and you could think of the breakdown this way: the first $5 reimburses you for making the wallet, the second $5 makes you enough money to make another wallet and keep your business going, and the $2.50 is money you could put toward developing another product, like a matching business card holder. 

Now look at the market. When you find items like yours, how are they priced? If you find that wallets of a similar size and style are also priced at $12.50, you might want to drop your price a dollar or two to make them competitive. If your wallets feature something really unusual and stand out from the pack, you might want to raise your price.

Something else you’ll want to figure out is your wholesale price for doing business with retailers. A wholesale price is more than the base cost, but less than the retail price. In case of your wallets, you’ll want to sell them to retailers for more than $5 and less than $12.50. That means you’ll get less money than if you sell them yourself, but in return, someone else has taken on the responsibility of advertising and selling your wallets — leaving you free to create and make more!

This example is just one method to figure out what you should charge. Talk to your crafty community for more ideas. 

Do not underestimate the value of your work. If you ­undercharge, you hurt not only yourself but other ­crafters who are a part of your community.