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! =)

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!

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!

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.

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!

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!

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.