When pricing your work, be sure to take its uniqueness into account

By Gary Dawson

Maybe it was something about the weather: Meteorologically perfect, yet with a hint of unpredictability that can inspire a degree of risk-taking in even the most stable of personalities. Not that I was particularly stable in those days, mind you. I was participating fully in the cultural milieu of the early ’70s. On this particular day, I was in Eugene, Oregon, at the Saturday Market— a weekly open-air crafts festival—trying to jump-start my fledgling career as a goldsmith. The hottest topic that summer was whether or not women should be allowed to be topless within the confines of the market. The charged atmosphere, combined with the tradition of early-afternoon beer drinking that many of the young vendors followed, led to interesting events.

Perhaps my most memorable event had more to do with my career (surprisingly) than it did with tan lines. After a few years of working in silver, I had begun experimenting with 14k gold. After finally saving enough money to buy a foot of 14k 16-gauge round wire, I had proudly executed my first gold ring.

And there it sat, weekend after weekend, being admired, inquired about, and passed by. Then, one day, a late-afternoon shopper asked how much the ring cost. Blame it on the sun, the suds, or the tan lines—whatever it was, it made me answer his query with an amount that was at least twice the price that I had been asking. I was stunned when he plopped the cash on my wobbly table.

I’ve reflected on that moment during more sober times over the past 25 years of marketing my jewelry, and I’ve come to some conclusions. I think I undervalued that ring because I based its price solely on gold and labor. In truth, it was unique in the venue at the time, and I probably could have charged the higher price all along. But with my limited experience, I had no basis for price comparison and no method for putting a value on uniqueness—one aspect of pricing that jewelers often overlook

Deborah Spencer, a two-time Spectrum Award–winning designer from Portland, Oregon, recognizes the value of one-of-a-kind work. Her line-item labor prices are only about 38 percent of her normal labor quote for custom pieces. If I did the math right, that represents a markup of about 265 percent. (The premium applies only to her labor fee; she maintains a consistent markup on the materials used for all products.) So if the labor cost on a line-item piece is about $170, that same cost for custom work would start around $450. According to her, it’s a simple matter of time involvement. Creating a totally new design for a client—one she can guarantee is unique—represents more time involvement at all stages of the process, from consultation through production.

Others take a slightly more mathematical approach to pricing.

Doing the D.U.F.

David Feldman, a Manhattan jewelry supply store owner, artisans’ advocate, speaker, and software developer, has done considerable research into the topic of pricing. Uniqueness, he says, may come from two levels: The design itself (as Spencer has recognized), and the materials used. In fact, Feldman has integrated a system into his pricing software that attempts to quantify a “uniqueness factor” at both levels—design and materials—in order to arrive at a workable and sustainable pricing system.

Design Uniqueness Factor (or D.U.F., as Feldman puts it) works on the premise that innovations become less unique as one manufacturer follows the next into an eventual commonality. But by pushing the design envelope and striving to create something truly original—and properly priced—you can gain recognition and profit. The D.U.F. is represented by a number between 1.00 and 2.00; the more original the designer feels the piece is, the higher the value.

Additionally, the designer might consider his or her reputation or brand. It’s common for branded products to command a premium price. It may sound unfair, but if a designer’s jewelry is known and respected, it is probably worth more to a customer than the work of a relative unknown. The brand premium should be figured into the D.U.F. number.

Material Uniqueness Factor (M.U.F.), which is also represented by a number the designer assigns between 1.00 and 2.00, reflects the rarity of the materials used. Feldman gives the example of purple gold. Much less commonly used than other gold alloys, it can be considered more rare. As a result, purple gold may be “worth” more in the consumer’s eyes, and therefore commands a higher M.U.F.

So how is this concept of uniqueness applied? Here’s what Feldman does: He assigns every raw material in the piece an M.U.F. value, as described above. That value is then multiplied by the cost of each material in the piece, and the resulting figures are added for a total material sum (Mtotal). That total is added to the labor total (Ltotal)—your cost per hour for any artist working on the piece—and the sum is multiplied by the D.U.F.

The resulting product is added to both any relevant overhead (Oallocated) as well as any profits that are to be set aside for investment back into the business (R.P.allocated). This sum is then multiplied by the designer’s wholesale markup (W.M.U.).

Thus:

([(Mtotal Ltotal) x D.U.F.] Oallocated R.P.allocated) x W.M.U. = Wholesale Price.

Using Feldman’s formula, if designers combine unique materials to create truly innovative designs, they can apply a greater markup. That is, when incorporating a portion of purple gold into a simple belcher ring design, one may add a premium for the M.U.F. but not the design itself.

Conversely, when producing a very unique design but executing it from common materials, such as 14k and sterling, one can certainly expect to be compensated for the uniqueness of the design, but perhaps not as much as if the piece were executed with rarer materials.

It may take some thoughtful consideration to choose an appropriate uniqueness factor value for a given material or design. On some levels, the market will certainly help determine if a particular product line is either over- or undervalued. If it just doesn’t sell, but the design seems marketable, it may be overpriced. Conversely, if a designer can’t keep a piece in stock, he or she can likely take additional profit on it. Practicing self-criticism as well as monitoring trends and patterns may help a designer arrive at acceptable values for use in the above system.

Attempting to quantify as many variables as possible to create a uniform and consistently applied pricing strategy can help make a designer more credible. And that credibility will, in turn, lead to commercial success.

Now, about those tan lines…

Originally published as “Doing the Math” in the May 2001 issue of MJSA Journal (formerly AJM Magazine).