Why I'm raising my prices...

17 Mar 2010

I offered a free online class last week, called Value 101. And, as so often happens when I'm teaching, I learned some extremely valuable lessons.

In one of the live chat sessions, a group of very kind and caring women began counseling me on the prices I'm charging for online classes and educational ebooks.

This is not a new conversation, by the way. K has been after me about my pricing for two years now. And I've had similar feedback from several other kind and savvier-than-me crafters. I've historically been really good at avoiding this discussion. Like so many crafters, I know the work is worth more, but it's so hard to ask more for it.

But then I had an email from Mandi, who said something that hit me right in the gut:

"BTW, people will be following your example and pricing structure, and you wouldn't want them to undervalue their ebooks and classes, would you?"

She's absolutely right. By charging as little as I am, I'm setting a terrible example for other crafters. If you decide to branch out into teaching or publishing, I do not want to be the cause of you working too hard for too little money.

I so appreciate everyone's perspectives. And I'm learning that operating a successful business is a constant process of listening and adjustments.

So, in seven days I will be raising my prices on my online classes, and on my blogging and social media ebooks. The new prices aren't etched in stone yet, so if you have some input, I would love to hear it - feel free to comment or email me.

(I'm leaving the crafty ebooks priced as is for the moment. There's lots more to say about this, but I'll save that for another post.)

For right now, I just wanted you to have some fair warning. A big part of me also wants to go into long-winded explanations to try and justify this change, but instead, I'm sitting on my hands and taking deep breaths.

Comments

Deep breaths Diane - it's all going to be okay! Clearly from the comments below, you have plenty of support on this issue.


I have listened to your podcast and read your blog since the beginning. I trust what you say and really want to make sure I help you in your crafty lifestyle. We may not have a lot of money, but we do try to help each other. No matter what you raise your prices to, I know the products will be top notch and worth every penny.

thank you for all your inspiration and help over the years.


All I've got to say is bravo and best wishes! You don't need to do anything but sit on your hands; your students are doing just fine, here and elsewhere, at saying why your classes are worth the investment.


I certainly thought the ebooks I bought were exceptionally good value for the amount of effort that clearly went into them. Don't undervalue yourself!


I got more out of your FREE Value 101 course, than I did from a different online course where I paid a whopping 85 bucks! I am currently enrolled in your blog tune-up class, which started today, and I have already gotten more out of it than I expected. You deserve to charge the price you want because you put a ton of work into both of those courses I have been in. (ps- please don't raise your prices to $85 - I'm still kicking myself for taking that course!)


I struggle with this issue too. Congrats for facing it head-on. You are an inspiration and deserve EVERY penny (and more) that you charge.


Mandi is absolutely right, and so are you in raising the prices. You know I've bought I read three of your e-books, and I would have definitely paid more for them (by the way, converting the US dollars to euros, the price of the e-books is ridiculously low - even in a not-that-rich-country as Portugal)...


I definitely think it's a step in the right direction, to charge what you feel the work is worth and set an example for all of us... anxious to see how it all goes - if you don't mind sharing more in the future :)


Whelp, just to prove the value of your content... I took your free Value 101 course and indicated in there that I would be buying a couple of your ebooks. I came online today to do so, and saw this post.
I could purchase them today, but I'm going to wait until the prices go up. The Miser in me is all, "But I could SAVE $$ if I buy it NOW!" But I'm buying these books because I trust your content, I think you're really smart and can help me out. And I want you to be able to continue to do that.

If it means I have to spend a little more money to ensure future excellent content from you, so be it. I'm thinking about this as an investment. (I'm beginning to sound like those PBS pledge drives!) I have so little money to spend these I want to make educated decisions about where I choose to spend my money. And more and more these days I end up choosing to spend money because I really like the people behind the product and I want to support them and the awesome stuff that they do that also has the added benefit of giving me something that I need.

Win-Win!


good for you. never undervalue yourself.


Number One: I think Mandi's point is a good one. You are a trailblazer in this arena (as far as I know ...), so it's good for you to set a realistic example. In fact, newbies will look at your site and say, "Well, if Diane is charging a buck-three-eighty [which is my word for a fake, low amount] then I need to charge even less, because I'm a newbie." So maybe set your prices a couple dollars higher than you think you should. Really.

Number Two: I know exactly why you charge less than you should. You are a wonderful, generous person who would like to feel like you give more than you take. That is admirable. But no matter how much you charge, you will be undercharging. Really.

Number One: *#%@ yeah! Really.


I say more power to you! When it comes down to it, we all want to see each other succeed in our crafty businesses. I personally see the price raise as just another way you can continue giving all the other great things for free! Keep doing what you're doing, I think it's great and you are such a great resource for all of us!


Good for you!! I know, it's hard to put prices on stuff you do yourself.


You should definitely raise your prices. And just so we're clear, this is coming from someone who already can't afford your e-books or online classes because I'm so unemployed and broke. You're always the first person that comes to mind when I think of crafty media mavens in the Portland area, so if you're setting the pricing standard here you would ultimately be doing much more good by raising your prices than you would be if you left them the way are. Your success will help others by setting an example, so hike up those prices and don't look back!

Last but not least, please let me know when you'll be offering the free Value 101 class online again. I couldn't make it to the library that day to log on. Keep up the good work!


All I have to say is that I'm glad I sent that rambling email, because I almost didn't :0 Seems many people feel the same way I do and I meant every word I said in my "essay"


I think that everyone giving you advice is correct. People Who Create continue to undervalue their creations. I have been researching things lately in order to open an Etsy shop, and am shocked at the prices people are charging for such amazing work. Keep sitting on your hands. Take deep breaths. And know you are worth it!

P.S. Thanks for pointing out Knittn' Kitten to your readers- I recently moved to the area and have such fun making a monthly craft supply trip there!


Anyone who takes a few minutes to get to know you, by even just browsing through your blog, will see your dedication to helping others, and the insane amount of effort you put into your work. You have given plenty and deserve to be compensated for it, without an explanation.

When I first looked into to starting a blog, I remember telling my boyfriend one night. "There is this one lady online that must read a million blog posts a day, she knows what's going on everywhere! I don't know how she does it!"
I'll give you one guess who I was talking about. I saw you everywhere and was amazed at the time you give to others. You are an asset to the crafting community and a great teacher. Don't sell yourself short...literally! =)


I am so pleased to see all the support in these comments for your decision to raise your e-book prices. The decision to do this was a huge step for you! I should know!

I also know, as your student, that you are a superb, gifted teacher and everything you put out there is of great value. You have proved your worth to the community of craters and I am so proud that you are recognizing your worth as well.


I believe in you.
I invest in what I believe in.


Good for you, Diane; you do wonderful work and should get paid accordingly!


ok, while I don't disagree that you should raise your prices, I did want to point out what a lot of people seem to be missing in this whole pricing conversation (putting my MBA hat on, yes, I do have one.)

Let me give you guys a crafty example, then apply it to Diane's example

Everyone knows what fixed and variable costs are, right?
Fixed costs are the cost you have no matter how many items you sell
Variable costs are the cost per item.

So, if I buy a screen printing rig to make t-shirts and it costs me $100, that's a fixed cost. Although not technically a fixed cost, lets assume I also value my labor to do design and to burn the screen at $100 (Assuming I sell 100 t-shirts, that's a fixed cost per shirt of $2)
Each T-shirt costs me say $5 to make for materials, and $5 for my own labor. So each t-shirt has a variable cost of $10.

When I'm deciding how to price my t-shirts, I want to price them at a profit maximizing point. Profit as a whole, not profit per shirt.

Let's say I set my price at $20 / shirt. So if I look at variable costs only, that a $10 profit per shirt. If I want to cover my fixed costs, (assuming only 100 shirts) I'd have a profit of $8
At this price, I'll sell say 20 tshirts this month making a profit of 160$.

Let's say I set my price at $25 / shirt. So if I look at variable costs only, that a $10 profit per shirt. If I want to cover my fixed costs, (assuming only 100 shirts) I'd have a profit of $13/each
At this price, A few of customers who would have bought, don't, so I'll sell say 14 tshirts this month making a total profit of 182$.

Let's say I say my price at $30 / shirt. So if I look at variable costs only, that a $10 profit per shirt. If I want to cover my fixed costs, (assuming only 100 shirts) I'd have a profit of $18.
At this price many of my potential customers go 'um, too much for a tshirt, even though it's cute', and , I'll sell say 8 tshirts this month making a total profit of 145$.

So although profit per shirt is the highest for my last example, I made less money. Which isn't a good thing.

What those formulas are depends on the elasticity of demand for your product. Hmm, this is too much to explain in a comment... maybe I'd better write a blog post! So, just google that.

Many crafters who underprice are doing so because they are not including their own labor costs (paying themselves) in the formula above (note I included an estimate for fixed and variable cost labor), particularly variable labor costs. If I make a hand knitted sweater it's a much higher cost per item than if I screen print a tshirt, on the labor side.

In Diane's case, I'm assuming she has a high fixed cost, and very low variable costs for something like an e-book. So she needs to figure at what level of sales she breaks even on her fixed cost for an e-book, and include some estimation of fixed costs in her pricing. BUT, since her variable costs are so low, she has a much wider range of prices that could be profit maximizing. She might lose a large amount of sales by raising her prices, or not -- maybe she's underpricing for the market right now, and a price increase won't hurt her sales much (this goes back to elasticity of demand for your particular product).

There's of course a lot more that goes into this, but I have a client call in 4 minutes so I'd better go!


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