Terrance Lazaroff on mon 30 dec 96
To those who responded:
When discussing the price of an art object, we can say that there is no
limit, when it comes to establishing the price upwards. This is especially
true when the work is quality and in demand. There is however, a limit when
it comes to establishing prices downward. For example, if you set a price on
a "one-of-a-kind" mug at $35.00 and the market is willing to pay the price,
then life is great. If you find, however that the market is not willing to
pay this amount, it will be difficult for you to reduce your prices without
loosing some creditability. Imagine the clients, who paid 35 dollars for the
mug, suddenly finding that a similar one, made by you, is now available for
$15.00. I am sure they would feel a bit disappointed and would probably
never buy a piece from you again. If, on the other hand, you set your
initial price to low; possibly below the cost to make the mug, you could
unknowningly, be placing your profession in jeopardy. You will, in time, be
asking yourself, why are you working so hard with so little return. You
may find that, although you are producing great quantities of work, you are
still having difficulty paying the operating costs associated with your
studio. You can establish your prices higher, But will you know soon enough
before hand to avoid financial disaster?
I like to use the mug as an example, whenever I discuss pricing strategies.
It is one of the best forms, available to emerging ceramists, that can be
used to generate funds. the mug can be highly decorated, carved or could be
simply covered with the traditional glazes, available to the beginning
potter. I realize that there are many ceramists that do not do production
work. They may feel that the method, discussed by me, does not pertain to
them. I say that it does. A good pricing strategy will also help those who
produce, "one-of-a-kind", work.
Working out a strong selling price for our mug will require us to find the
BREAK-EVEN POINT associated with the making of that object. Even if we wish
to sell the mug below the break-even point, as a loss leader, it is still
necessary to find this figure. The process is similar to the one used by a
shoemaker analyzing the cost of producing a shoe, an automobile manufacturer
working our the cost of making a car fender. It is the method used by
thousands of other business that manufacture objects for sale. You cannot
stay in business and compete unless you know this figure. You can rely on
prices established by other potters, but will you be sure they have carried
out a solid analysis. You can rely on accepting the selling price figures
quoted by galleries as the going rate for mug sales. But do these figures
guarantee that we will be operating above the break-even point. Finding the
break-even point is something we must do for our selves.
Our analysis, at this time, will be to find a break-even point for a mug,
nothing more, nothing less. Once we know the break-even point we will be
able to establish a selling price that will be fair for the consumer, the
gallery and for ourselves. Finding the break-even point is most important,
without it , we will be continuously guessing at what to charge for out
work. Pricing above the break-even point when the market will bear it will
allow our enterprise to benefit from profits, pricing below the break-even
point with out a full understanding of what we are doing, will find our
pottery facing financial losses.
The Key word here is break-even.
In order to determine the break-even point we will have to research a great
deal of information, such as costs and quantity of clay required to make the
mug. We will have to determine the cost of glazing. We will have to record
the cost of, rent, heat, electricity, telephone and other related expenses.
We will need information on the energy costs required to fire out work and
finally we will have to decide on our labor costs. I am sure the latter
subject will make a great deal of discussion. Our labor costs are a
reflection of what we think our time is worth. It will be one of the most
difficult decisions, required by us.
With that, I will close this page and await responses that could form future
pricing philosophies. Pricing page 3 will follow.