Tuesday, June 24, 2008

Digging a Hole with a Teaspoon

You have heard the expression of a death by a thousand cuts. This idea is similar. Digging a hole with a teaspoon is slow and you don't really see the progress you are making until suddenly you look up one day and wonder, "How did I get here?"

This is a lesson in not doing as I have done. Heed the warnings.

The problem is, you may, like me, not see how bad it is until the hole is much deeper than you intended. I am talking about pricing. Specifically underpricing. The biggest part of the trap for me, was the idea that "people won't pay more than $xx for this." And I let that idea guide my decisions for too long, even while seeing warning signs along the way.

Cranes. Of course. I seem to live and breath cranes. Cranes to sell. Crane to memorialize. And in this case, the intersection of the two was part of what made me wake up. Let me begin by saying I had increased my crane price three times in the last few years. The wholesale price had doubled over that time.

But....and this is a very big but....the product I am selling today is not the same product I was making and selling then. At first the surface design was fairly simple. And they were not sold in any special packaging, But, I added the packaging and informational inserts, and increased the price significantly. Sales took off. I was a happy camper.

Then, I started playing. I started to do more involved canework on the surface of the cranes here and there. And the customers loved it. "Send more of those ones with all the detailed patterns. Everyone loved them!" I would be pleased with the feedback, but also sigh a bit as I realized it would be more work. Soon that was nearly all I was selling. Meanwhile, the price had only gone up by about a dollar, but the labor was about fourfold more. Folding cranes for the Crane Project put into sharp focus for me just how long it was taking me to make these intricately patterned cranes. I saw what I had been trying to ignore.

Initially when I would ship the cranes across country, I could ship to California or Washington state, Priority Mail, for only about $6 or $7. I offered free shipping. I figured I could easily absorb that into the price structure. Last summer though, the Post Office revamped their price structure, and suddenly it was more than double that cost to ship across country. Ouch! This spring, the prices took another big jump. I had added a shipping surcharge to crane orders west of the Mississippi, but it was not going to be enough.

Then, the breakage started. I had shipped for two years with not one crane breaking. Now, changes in clay formulation have presented challenges. I have had to revamp my packaging, adding further costs. Not to mention the credits or re-shipments I had to make each time a broken crane was reported.

Can you feel my pain?

I had no room in my price structure for all of these problems to converge. But converge they did. With six more crane orders still to ship under the old price schedule, I knew I had to take action. It was time to begin to fill in the hole, and the teaspoon was not going to work. It was time to put things back in order quickly.

My prices have nearly doubled for the intricate cranes that everyone wants. If they want to pay the old prices, they will have to purchase the "Elemental cranes". Solid colors, to represent the five "elements", air, water, earth, fire, and metal. In between those prices I have cranes with crackled leaf.

I am now shipping FedEx Ground, at a much better rate. And I seemed to have solved the problem of breakage for now.

The reaction is unclear. But, in the end, I could not continue on the path I had been traveling.

Lessons, summarized:

1. If you add to your product, acknowledge that. It is a different product. Change the price. Rename it if you need to. Not all cranes were created equally, but I was pricing them as if they were. Some of you will be saying, of course. I would never do that. I hope you are right. But sometimes we do things that don't make sense, because they will be "easier".

2. Don't undervalue your labor. I was doing what I hate. I had gotten myself into a place that all I was doing was covering the costs of my materials and overhead, so I could make more cranes. Don't do that. It does not respect you. If you find yourself saying, "people won't pay...." Stop. If half the people will pay the new price, I will have the same dollar business, for half the work. I can definitely live with that. Too many people have also told me stories of raising prices, and losing their "high maintenance" customers. Another potential benefit.

3. Sometimes we need to re-evaluate suppliers. I had gotten comfortable with shipping my work by Priority Mail. I knew the drill. It was convenient. I didn't want to have to research alternatives. But in the end, I have a good service, for a much lower cost. And, my husband has a FedEx center right near where he works. I don't even have to leave home!

4. Things will change. At some point something you depended upon, and thought you knew will change. You will have to figure out a new way of doing things. I tried to avoid dealing with these issues for too long. I wanted them to go away. I did not have time. (Can you hear the two year-old tantrum welling up?) Once I decided on a plan of action, it was actually less stressful than trying to pretend the problem was not there, or that it would go away on it's own accord. It is not easy to own up to it, but I really did not want to have to deal with this. But being in business for yourself, there will be things that you have to do that you do not want to do. Unless you have employees, there is no one to delegate responsibility for these tasks. So buck up, and deal! And remind yourself how much you are happier doing what you are doing now...in spite of these kinds of stresses. And if you are not, then maybe a bigger change is in order......


Elaine said...

Ah yes...

Not that I am a master here yet but I think we have had some of the same struggles.

Shipping from Canada to anywhere (particularly domestically though, oddly) is EXORBITANT. And shipping in the US to international destinations jumped by 2-5 times last year. So I got the double whammy with that - I was shipping to my American partner and then we were shipping from her place to other destinations and hoping that only US customers would buy.

We had to raise our prices by 20% and she was worried. No one even blinked. Sales did not take a hit at all. We will need to raise them again by the same amount in 2009 to be in line with the competition and I don't imagine it'll get much of a blink then either.

What an expensive lesson to learn.

Cindy Lietz, Polymer Clay Tutor said...

It is so easy to undervalue our work as artists and teachers. What we need to understand is that if we do not charge enough we will eventually lose our businesses and our ability to create more art. And that would be bad for not only us but for the customers who love our work!

shiborigirl said...

this is something that only *real* artists/craftists concern themselves with. while many people can make lovely handmade items that people want to (and do)buy, only some can conceptualize and connect the real costs of making the items in terms of labor and materials to the final selling price. over and over again i see things under priced (etsy for example) and have to sometimes resist the urge to "compete" with someone who obviously is not paying themselves for their time. i too, prefer half the customers at twice the (right)price than the other way 'round. i don't like the idea of resenting my customers for the great deal they just got! it's not good for my creative spirit.
great post!

Jenny Patterson said...

Oh man can I relate!
Jenny P

tammy vitale said...

awesome post! and so so true. My own prices have significantly increased - right when the economy is saying: NO! But if I must take a side job until the economy picks up, so be it - I will not sell my art for less than its value to me. Good for you!