Thursday, July 12, 2012
The Dirty M Word Part 2: How to use your average item price
If you didn't, perhaps go back to this post and see how to figure out your average item price.
So let's discuss some questions you may have about how your average item price may/may not affect your sales.
1) How does my average item price affect my sales?
In short, it doesn't. What it does affect, is the type and quantity of work you make. It is merely an means, or production strategy to your end result, or your sales number.
2) My average item price is very low. How do I change it?
There are two ways to raise your average item price. The first is to make more product. This is a double edge sword because you'll have to make much more product. Let's take a look at the example I used last time, where our average item price was $10 and our sales were $1000.
Remember: SALES = Quantity(Average Item Price)
That meant, you would have to sell 100 pairs of earrings with an AIP of $10 to have $1000 in sales. Let's say you adjust your inventory to your next show so your AIP is $20:
Let's look at the ways we can increase our AIP:
a) Make MORE product of a higher price point. While a piece of jewelry that is lower priced may sell easier, you have to make a least twice or more of it to equal the same as selling one piece that is more expensive.
b) Use more expensive/exclusive materials that can demand a higher price point. If you're producing in a large quantity, you can often buy more expensive materials in bulk without deeply cutting into your profit margin, but the market will dictate a higher price because you've used more costly or precious materials.
c) Check your inventory to make sure it is well rounded. Your average item price could be low because you've overproduced your more inexpensive items and overlooked more expensive items.
3)Should you always try to raise your AIP?
No, it may not always be to your benefit to raise your AIP. As an artist, you should look at all of the shows and sales you make and analyze both the sales, the show, and the type of customers that not only attend but also PURCHASE. If you sell at mostly church bazaars and small local shows, it may not be in your benefit to RAISE your AIP, because those shows may not bear the weight of a higher AIP. In contrast, those types of shows may also not have the SALES or Customers to justify the QUANTITY of a lower AIP.
DO YOU FIND THIS TYPE OF ANALYSIS HELPFUL?
What questions do you have about SALES that I can help answer???