Pricing handmade products is one of the biggest challenges for makers.
This guide will cover:
- Cost-based pricing
- Market-based pricing
- Pricing for sustainability
Cost-Based pricing
This is pricing Products based on Cost of making the product or service, and adding standard Margin.
Understanding Your Costs:
- Materials cost
- Labor/time investment
- Overhead expenses
- Platform fees (15% on Gwanga)
Pricing Formula:
Materials + Labor + Overhead + Profit Margin = Final Price
Example:
- Materials: UGX 5,000
- Labor (2 hours @ UGX 5,000/hr): UGX 10,000
- Overhead: UGX 2,000
- Subtotal: UGX 17,000
- Add 30% profit: UGX 22,100
- Add 15% platform fee buffer: UGX 25,415
Final Price: UGX 25,000 (rounded)
Market-based pricing
This is the idea of setting a price for an item based on the current market price for the same or similar item.
Understanding Market Price
It focuses on:
- Demand and supply of the product
- Perceived Value of the Brand and product.
- Market competition and
- Product life cycle
Pricing formula:
Market-base pricing = cost of product + market factor price + premium
Market-based pricing is an ideal choice for supporting revenue and competitiveness. Using competitors as a benchmark allows Makers to select the most competitive price upon launching a product.