Wednesday, January 09, 2008

On the dilemma of pricing

I'm going to be doing a Black Bunny update this Friday (around noon), with a mix of odds and ends (some sock yarns, some laceweights, a few rovings). Due to the interruption of the holidays, it'll take me a couple more days to get back into maximum production mode, but I will be going back to a schedule where I update the shop at least once a week.

In the meantime, as long as I've been airing my neuroses on the blog, allow me to tell you about another. (At least you don't have to worry that I will stop writing the blog due to running out of things to say: I have enough neuroses to last us well into 2054...)

It is the dreaded question of pricing.

You may laugh at my earnestness, but I take pricing seriously. In a more traditional retail setting, say, a department store, the shop buys at wholesale and marks up the price, knowing that there is a traditional percentage or range that is the standard markup in the industry. (Anybody remember my post on keystone pricing?) But I'm not simply reselling a product as is. I'm adding something intangible to my fibers, something artistic if you'll pardon my pretension. It's hard to place a specific dollar value on what I add to each skein of yarn or batch of roving -- and it's also hard to calculate a dollar value to the "costs" of producing the yarn. (For example, how do you divide the cost of a small jar of dye among who-knows-how-many skeins of yarn that it helps to dye?)

I'm also painfully conscious of wanting to provide good value for knitters. I am a consumer as well as a seller. Like everybody else, I like getting my money's worth and I don't like overpaying. Sometimes, when I surf the 'net looking at other handpaints, I am kind of aghast that the prices have crept up so much. I want to price my stuff fairly and I want to keep it as affordable to the largest number of knitters as I can.* And honestly, I sometimes think it seems absurd to expect people to pay close to thirty dollars for enough yarn to knit a pair of socks, or twenty bucks for four ounces of fiber. Even though they may be perfectly fair prices, given the cost of what goes into them.

I also need to make money, and there's the rub. The cost of wool, especially merino, is rising. The post office raised rates last year. Rising oil prices means it costs more in shipping for me to get supplies. It's hard for me to figure out which costs to pass on to the buyer, and when, and which to suck up. For example, I charge actual postage with no handling fees, so when the Post Office raised rates, I passed that on to the buyer. But some of my wholesalers have raised prices, and I've tried to not pass them on to the buyer. (At least not yet.)

Other more intangible things concern me:

  • Is my attempt to keep prices low a psychological undervaluing of what I do, a sort of self-punishing humility?
  • Am I being unfair to other dyers, and thereby devaluing what they do, by not charging more?
  • Am I being pennywise and pound-foolish when I try to do things to save costs, like not getting fancy labels printed up?
  • Do people realize that the reason I use Priority Mail instead of first-class, or UPS, is because I can save a substantial amount of money by getting free Tyvek mailers from the post office and a substantial amount of time by using on-line postage and shipping functions on Paypal? Or do they just think my shipping costs are really high?
  • Do I alienate customers by doing some things on cheap? How to decide what to do on the cheap and what to spend money on? Would it be better for me to, say, tie up my packages with fancy bows made of scraps of yarn, or use some kind of packaging, even if that takes away precious time from the dyepots?
  • Should I consider more widespread wholesaling of BBF to yarn shops -- would the exposure to a wider customer base help overcome the fact that I'd be making half as much money per skein although my costs would remain the same?

Geez, it's hard being an overanalytical pointy-head who thinks too much.

Anyway, I'm throwing all of this out there so you can understand a little better where I'm coming from. People are very kind and send me lovely emails complimenting my yarns and fibers, and I appreciate that -- and they also throw suggestions at me. I want you to know that I do think about them all, really think about them. Right now, I'm going to continue selling on Etsy, and at Rosie's if they want to continue to stock me, and work on getting my website up and running this spring. I may have to raise prices on a few of my items, but I'm going to continue to try to provide the best yarns and fibers at the fairest prices I can (fair to you and fair to me). I'm working on keeping inventory in the shop without sacrificing the individualized style of dyeing that I think makes it worthwhile.

Thanks for listening. I feel better now.

*This is why I get cranky when people resell my stuff on places like Ebay for more than they purchased them for. I have no problem with people reselling stuff, but I had a customer who was extremely high maintenance and after wringing my hands about trying to deal with her myriad of demands, I found out she had a sideline going on of buying knitting-related things and marking them up for resale on Ebay. She was taking the yarns she purchased from me for $20 and listing them with an opening bid of $26. (To add insult to injury, she was also adding a hefty markup for "handling and postage" after giving me a hard time for charging actual postage.) She was doing this with other handdyers' yarns, too, on an on-going basis, so it wasn't just a stash liquidation.


Anonymous said...

I don't know what to say about how to figure out pricing and how much your time and artistry are worth (other than "a lot"), but I can comment on some of the more concrete questions.

Fancy labels, shipping container, packaging, wrapping, and froufy extras have no impact on whether I'll be a repeat customer to someone. As long as the yarn arrives in a reasonable amount of time and is sealed up so it doesn't get damaged on the way, the only thing that's important is the quality and beauty of the yarn. All the rest of the stuff gets torn up and thrown away anyway.

I'm lucky enough to have a fair amount of disposable income to support my knitting habit, and in particular when it comes to items I know take extra effort to create, I'm willing to pay pretty much whatever when it's something I really want. I know not everyone can do that though, and can appreciate that pricing is a big thing to deal with on both the buying and selling ends of the deal.

Keep up the beautiful work!

Corvi said...

I've purchased one skein of (yummy hot pink) yarn from you. I thought the price was fair, and I find your shipping policy to be reasonable as well as sensible.

I'm not a relative, either. :-)

Just my two cents. Thanks for BFF.

mindy said...

I've been pondering some of the same questions as I'm washing fleeces this week (all that hot water!).

As for the fancy wrappings, etc- they don't really impress me and since, as Theresa said, they get thrown away, then its just a waste of resources (including your time and money). There is someone on etsy that does have a listing for gift wrapping- maybe you could offer that for folks that want it. As for me, you can slap a scrap piece of paper on the top before taping and call it a day. And even if you don't do that, its still not the end of the world. I'm here for the beautiful fibers and your wonderful color sense- and I'll still be here, if and when you need to raise your prices.

Try not to stress too much over it- it takes away from your valuable dyeing time!

Donna said...

Thank you for noting the price creep in handpainted yarn; I thought it was just my Midwestern thriftiness that was causing me to balk at $28/skein. Then, there are days when I think for many knitters, the biggest part of their hobby is yarn acquisition, so $28 skeins fit right in with that.

As someone married to an artist who faces very similar issues ("what is my time worth?", "what will people actually pay for fine furniture?") I can only say that recouping the cost of supplies is the easy part - pricing your items so you feel you are well-paid for the time it takes to make them is harder, and essential. Saving time so you spend more time dyeing and less time making packages seems important too - I think the Priority Mail solution is a clever one.

I guess you make me think of the old saying that the best thing on a restaurant menu is often the second-most expensive; you don't have to raise your prices to the max, but if you need to feel well-compensated, a few dollars more might make the difference.

fillyjonk said...

A couple of thoughts:

I love it when stuff comes Priority Mail (it is the most reliable way for stuff to arrive to me on time and in good shape) and I'm well aware of how much it costs, so no, I'm not offended one bit by stuff being shipped Priority Mail, nor that I the customer should pay for it.

I also don't care whether there are fancy frou frous. As long as the yarn gets to me in a timely fashion and in good shape, I am happy. (Kevlar envelopes good).

I also understand that sadly, the price of EVERYTHING is going up (because of gas prices going up, because of corn prices going up because of the drive to make ethanol). And those increases get passed on everywhere, not just in the price of a gallon of gas or the price of a can of corn at the store.

As for price, I'm willing to pay more for "artisanal" yarn than I am for mass-produced yarn; I recognize the work (and love) that goes into such a thing.

WendyKnits said...

I've done quite a lot of yarn shopping on Etsy and have always found your yarns to be among the best value for the buck.

I've received orders from other etsy sellers that are beautifully wrapped and contain little extras (like stitch markers and magnets)and are accompanied by a professionally printed business card and thank you card. If the price I paid for the yarn was low, I sort of feel bad for the seller, thinking that she must be spending all her profits on fancy gee-gaws. (That's just the way my mind works -- scary, huh?)

While the pretty wrapping and extras are very much appreciated, I'm just as happy when a seller writes me a little note on the invoice and packages the yarn in a zip lock bag.

Yarn or Death said...

I'm with everyone else -- pretty extras may be nice for a moment, but I imagine most everyone who buys your yarn to work with (as opposed to setting it on a shelf because it's so pretty) would rather have the good value on yarn. KnitPicks doesn't have fancy labels, and yet people order it all the time because it's a great value. I suppose if you were interested in catering to the I-buy-yarn-and-never-use-it crowd (I imagine it exists though I've never seen it -- never underestimate the ability of rich people to spend money on something you consider ridiculous), you might want to throw in fancies like that, along with a steep price increase, but I don't get the impression that that's your market.

Unknown said...

Charge what the market will bear and stop feeling guilty. Your product is far and above the garbage I've seen going for high prices. You're in this to make money, so do it. I know that all the BBF fans will be happy to pay what you charge for your great stuff.

This is a neurosis you don't need to have.


Deborah C. said...

I'm leaving a biased opinion - I LOVE your yarn. I'd be willing to pay more for the skeins because I like the way you dye, more than other higher-priced alternatives.

To figure out how much you might want to charge, you could factor in how much the yarn (fleece) is to purchase, how much dye it took (I know it's little bits, but little bits add up to a lot), your precious time in doing this (don't undervalue your time!), postage, packaging, etc. When people ask me to knit for them I usually tell them they can't afford me because of my time - the number of hours it would take to complete something.

Fancy wrappings and extras in the package can be fun, but I'm in it for the yarn, not the extras. Priority Mail is fine by me because it gets the yarn to me quickly. If you're on Ravelry, check out my Projects page, I have 2 pairs of Here There Be Dragons socks made with BBF yarns there (I need to post more pics, and I have another pair I have to put up).

Keep up the great work!

Marin (AntiM) said...

I think you have to analyse to the point of over so you know how and why your numbers are where they are so you know where you can change them when and if you need to.

That's not neuroses... that's a business plan.

Unknown said...

First off, I think your prices are fair.

When I want cheaper yarn, I buy commercially made yarns, which don't have the same interest as yours. And even many of them aren't that cheap anymore. I was just pricing some of the Noro sock yarn and it goes for about $20. I think the Kaffe sock yarn is about that too.

When I made the Celestine Shawl out of your laceweight, I made a garment that could not possibly be replicated with commercial yarns.

I personally believe that pricing is a lot like blogging.

You price/write what you think is right and stick to that. If folks want it, they consume it, and if they don't, it's probably a good indication that you should stop blogging/dyeing.

I've had my eye on the blue laceweight out on your site right now. I may need to design another shawl.

Lola and Ava said...

I'll be completely unbiased because I have never bought yarn from you (have meant to, but just never followed through - New Year's Resolution #1 - buy yarn).

I will pay more for yarn that has a uniqueness to it or that has a colorway that particularly interests me. However, $28 seems a bit much.

If shipping is an issue, you can ship via the Postal Service for an $8 flat rate and they provide the boxes (which come in two sizes). Plus, you can schedule a pick up so you don't have to run out to actually ship them. Also, tell you customers that the shipping isn't negotiable since it is what the Post Office charges you. The only thing you must do is order your boxes on-line in advance. The rest is a piece of cake.

Off to buy some yarn!

Anonymous said...

Hello Carol,

This post is incredibly timely. I've been thinking a lot about pricing lately (a big skein of undyed yarn is on its way to you). I think that you can afford to raise prices - your yarns sell out very fast.

I'm not persuaded to buy by packaging of the yarn, I actually like ziplocks - the sock project is usually stored in them.

Steph said...

Nice packaging is, well, nice -- I do notice it (Sundara's yarns & packaging is a good example I think), but it doesn't make a difference in whether I buy yarn again or not -- the quality of the product is what matters.

FWIW I don't trash that fancy packaging, I re-use it (from using it to wrap up homemade soaps or candles to, if nothing else, pad/protect things I'm mailing).

Priority mail is fine. I just figure it in as part of the cost of the yarn.

Unless you can seriously increase production I don't think you really need to sell to other yarn shops, especially if you're going to have your own website soon.

I'm not even going to comment (much) on pricing b/c I don't want to shoot myself in the foot....but unless you have stock that simply doesn't move, you could probably go up 10% esp. on your sock yarn and no one'd bat an eye.

FWIW I think it's hard sometimes to really value your own time. I'm an independent contractor and it was about 2 years before I (finally got the nerve and) raised my rates. I'm on my second increase in 6 months and plan on increasing again in June. No complaints from any of my clients.

Anonymous said...

Thank you for sharing your neuroses. You have helped me to feel less alone in mine. That said, I hope you are able to find a way to not be weighed down by yours too much. I think your thoughtfulness in this matter is wonderful, and I hope it translates into great sales, success, and enjoyment.

Gauss said...

Hi Carol,

I was lucky enough to score one of your sock yarns at Rosie's (mauve-licious! what a great name) and I really appreciate the quality and colors of your yarns. If you need to set the prices higher, then so be it - your yarn is at this point cheaper than koigu, and your colors are nicer.

(no, I'm not a relative either)

Mary the Digital Knitter said...

I knit lace shawls from fingering weight yarn, requiring about 800 yd. That usually means two skeins. I'm going to toil over each shawl for many hours and I want the best, prettiest yarn I can find. I also know that prices of everything are going up. I know I could save money buying mill yarn, not specialty yarn. I'll gladly pay more for hand-painted or artisan hand-dyed yarn than for commercial yarns. I know I'm paying for a real person's hands-on creativity and skills. I'm getting something unique and special that will ensure, in return, that the lace shawl I knit is also unique and special.

This will sound odd, but to many people a higher price is an indicator of better quality. If the product is too much of a bargain there must be something wrong with it. Inferior material, corner-cutting, something. So it's a balancing act; keeping your prices high enough to indicate quality and low enough not to price yourself out of the market.

PS. When you're adding up your labor, don't forget the clean-up time. That's a common error of artisans.

Alwen said...

"Geez, it's hard being an overanalytical pointy-head who thinks too much."

I read this line out loud to my husband (we are fellow overanalytical pointy-heads) to make him laugh.

Misstea said...

You're right. There are many issues to be considered, and you have done a very good job of presenting both sides.

But, fuzzy wuzzy feelings about fibre and related crafts aside, you are running a business.

Charge what the market will bear, and if that doesn't cover your costs, along with an adequate return on investment, it's time to either find a new market or exit.

Harsh, I know, but fuzzy wuzzy feelings don't pay the bills.

And personally, I would pay more. Your colours are amazing.

Anonymous said...

I've bought a lot of roving and some sock yarn from BBF. I've loved every yummy bit of it. I've never cared or even thought about how you shipped it to me other than the fact that I noted you're swift and careful that the roving doesn't end up glued into the package (ack! hate it when that happens.) I think pricing by what the market is doing is normal, isn't it? I mean, if you want to feel guilty, we'd love a nice sale once in awhile to compensate so, you know, you'd feel better. :-) Otherwise, gee, you're giving us not only your work, your creativity, and your skills, you're providing us with minutes of your life. Are they freebies?
And now that I've written all this, I do hope the prices will stay in a range that will allow me to continue to feed my BBF addiction since I have the feeling withdrawal would be excrutiating.

Cynthia said...

Marilyn is correct--you have no reason to feel guilty about making money. If you do not make money, you will stop doing this and then where will we be? Do it for us--charge the price the market will bear.

I love my skein of BFF. I recently changed careers (to be a librarian) and will have pretty much zero disposable income for a bit (health care costs now that I have to start at the bottom in a part-time position eat it all up). That said, when I have a special pair of socks to make, BFF will be one of my first choices for fiber.

Keep your costs low--the shipping is a perfect example of the right thing. Use every drop of that dye (including the last bits stuck to the sides of the jar by washing it out). Source your raw materials well. Track all your resources used--water, heat, etc. and talk to an accountant so you can write them off. That way, you will have more room to play with the cost of you.

Your are right to want to be a cost leader--a good value is always welcome, especially as we enter this (dare I say it, no why bother) inflationary time of economic hardship. I think you will find BFF will outlast some of the other over priced merchandise.

Carol said...

This is a hard issue. The true cost of intangible things that go into a product are infinitely difficult to put a price on. I value creativity, humanity, etc when it goes into a good product. I'm probably in the minority. Do what you feel is right for you. If it comes to packaging, the environmentalist in me says less is definitely appreciated. Save all the pretty rubbish for someone else. I buy from you for the yarn you create.

Jennifer said...

Very timely post, as I just received three prices increase notices from three of my suppliers. Definitely something I think most of us obsess over (or maybe I'm just a pointy head, too).

I do think it's hard to price handmade items fairly for both the buyer and the seller. There is an intrinsic value of the artist's talents that is rather intangible, thus making it hard to put a price tag on it. And then again, how much is your time worth? Not to mention all the hidden costs of running a business.

Ah well. Head banging going on over here, too!


Anonymous said...

And I'm appalled to hear about that customer! Makes me wonder about a particularly PITA customer I had once, too!


Anonymous said...

>> Is my attempt to keep prices low a psychological undervaluing of what I do, a sort of self-punishing humility?<

This is between you and your analyst! However, there are 2 competing theories - low prices keep customers coming back(Walmart); high prices indicate luxury and quality (Bentley). Personally, I'm somewhere in between, decent prices for decent goods keep me coming back. And as you have great goods and decent prices, I keep pounding feet to your virtual door!

>Am I being unfair to other dyers, and thereby devaluing what they do, by not charging more?<

Depends on their costs and stuff as well. It's not like you guys are price fixing!

>Am I being pennywise and pound-foolish when I try to do things to save costs, like not getting fancy labels printed up?<

I'm not knitting the label!

>Do people realize that the reason I use Priority Mail instead of first-class, or UPS, is because I can save a substantial amount of money by getting free Tyvek mailers from the post office and a substantial amount of time by using on-line postage and shipping functions on Paypal? Or do they just think my shipping costs are really high?<

No, your shipping costs are more than fair. I do an extreme amount of on-line shopping. Using the Tyvek mailers and priority mail is generally the cheapest way (and often the most reliable) to go unless it's a really big order in which case UPS ground and recycling a box out of the incoming stuff works fine around here.

>Do I alienate customers by doing some things on cheap? How to decide what to do on the cheap and what to spend money on? >

Ok, the money goes in the wool and the dyes. That's the product. If you went cheap on THAT we'd all be making tracks.

>Would it be better for me to, say, tie up my packages with fancy bows made of scraps of yarn, or use some kind of packaging, even if that takes away precious time from the dyepots? <

No. We aren't knitting the bows either. Unless it's a giftie. In which case, the person should send you a note and pay a few $$ more for it. You don't see Amazon giving away free giftwrapping, eh?

>Should I consider more widespread wholesaling of BBF to yarn shops -- would the exposure to a wider customer base help overcome the fact that I'd be making half as much money per skein although my costs would remain the same?<

This is a business decision. To a certain extent wholesaling to shops frees up time for production as you aren't selling, mailing, etc. On the other hand, those of us no where near those shops would suffer from not buying direct. At some point or another, one part of the business will start to irk you. At which point it will either get farmed out or an assistant (kid, whatever) obtained, etc.

My friend, this is your business. My own feeling here is that you have sent me some of the best yarn to play with, and I'm a happy customer. 8-)

MsAmpuTeeHee said...

There was a point in my life where I the dilemma of deciding how much to charge for items that I made that I had put of myself into. I struggled quite a bit with the part about "valuing" myself. One of the things that helped me was to actually think about how much I thought I should be paid by the hour to make what I made. That figure went into the pot with the more tangible figures like the cost of raw materials. It was interesting for me, because when I started breaking it down that way I realized I was making about $3 an hour, and ummmm...psychological issues aside, I knew I was worth more that that ;-)

I would also like to comment about the fancy packaging. I've ordered many a thing through etsy lately, and it isn't the wrapping that makes an impression on me at all. What usually makes me smile is when there is a small "thank you for your purchase" type of thing in the package, or even on the invoice. The one that really sticks out to me was a little cut out heart (like we made on valentines in elementary school) with a "thanks! please come again!" handwritten on it. I saved it for a week (ok, I'm clearly lonely). But the point is, I think many folks by handmade/independent just for that very reason. To feel connected to the creator.

One last thing: when I wrap gifts of yarn or handknits that I give to people, I usually use scraps of yarn to tie it up instead of a bow.
XO~ bonnie

Anonymous said...

Concerning packaging, the one thing I would say to do (you might already, I haven't been able to be a customer yet) is to have business cards printed up and tuck them into the plastic bag the yarn is in. It would make it slightly more likely that when somebody comments on how great the yarn is, the knitter could respond with "Thanks! It's Black Bunny Fibers" (especially useful if they had the card handy to give to the interested person) instead of "Thanks, I got it somewhere on the internet"

Sherry W said...

From my POV as an Etsy seller, I do like some kind of simple, pulled together packaging for a more professional look. It doesn't have to be crazy or wasteful, even just a business card is fine.

To be honest, I think an improved ball band with your logo and a slightly heavier paper would be an improvement, especially when selling at the shop. You have to print and cut it now anyway so it won't take more time. Lightweight cardstock/resume paper isn't expensive bulk. Especially if you can get a couple bands out of a page.

Unknown said...

I'm selling patterns, not yarn, but I'm looking at revamping my pricing too. Although I sell mostly PDF downloads, things like Etsy fees and hosting fees add up, and I have the feeling that I've been underpricing myself. As I, like you, need to make money off this venture, a price increase in the near future would be a good business choice.

I do sell some finished items (mostly pattern samples I no longer need), and for postage, I employ a little retail cheat picked up during my many years of working retail service jobs: hide it. I calculate the cost into the listing price on Etsy, and then put $0 in for US shipping and $5 for international (I use USPS Global Priority, which is $11 and the most reliable international post I've ever used with the possible exception of the Swiss post).

I made "fancy" tags with my business info and care instructions, printed with my Print Gocco on manila tags I bought at an office supply warehouse. They fit the aesthetic I'm going for (handmade, old-fashioned) and my mother hates them because she thinks they look messy and not easy to read. She is not, btw, in my target market.

I buy as much as I can from Etsy, and I'm willing to pay a bit more to support another independent small business owner. My purchase from you was for KSKS, and well received! I don't remember how it was packaged or mailed. It didn't matter to me.

Anonymous said...

I thought I would mention that your questions and these answers are a real help to me with my stuff. Thanks for doing my research for me!
And Sherry W. thanks for the tip on paper. I've been looking for something heavier, but didn't know what to ask for at the supplier.
Barb B.

Sherry W said...

Just FYI for interested parties, Staples has a 250 pack of cardstock for under $10. As a guess, you could get three ball bands out of a page. 750 ball bands per pack. That works out to under a penny and a half per band.

Just my opinion. I'd buy the fiber anyway. Just a more durable/better looking band for almost no more work and a tiny cost would be an easy improvement.

Anonymous said...

Just a quick comment about shipping costs. I'm far more willing to pay a high percentage of the purchase price from a small business than from a big online store. --Mary

Carol said...

How much do you figure you rtime is worth? Look up minimum wage in you rarea as a base point and then factor in artistic talent etc. Then calculate your time. Add in cost for yarn, dye etc. markupa reasonable percentage and there you go! If the "reasonable percentage" has you stumped, then check out what other comparable yarns are goin gfor, compare to you rcosts and then pick a number higher than your costs but in the range you found...