Wednesday, October 20, 2010

Let's Talk "Loss Leaders"

As many of us prepare for the upcoming season of makin' and creatin', we are undoubtedly spending time thinking about what will sell. An elusive question that usually changes the answer on us right after we've invested mucho deniro into one of our ideas. However, there are a few strategies that we can focus on that have been researched and proven and I would like to talk about one of them today; Loss Leaders.

 A Loss Leader is defined by an article sold at cost that leads the customer to other more profitable purchases (r1). For instance; XBox consoles are sold below cost (materials and labor) but is made up in the very profitable, high selling, video games. In the handmade market, it can be priced high or low; it doesn't have to be cheap, it just has to be popular with your buyer.  A sculpture that sells well at a trade show priced at $100 is positioned strategically in the sellers booth to catch the attention of their buyer and move them forward onto sculptures that have a much greater profit margin.

Let's translate this to our niche of handmade jewelry. As a jewelry designer you may have one of a kind pieces. They took for-ev-er to design and even longer to assemble, their worth and their cost is and should be pretty high. But a booth full of high end designer jewelry is only going to attract one type of buyer. There are only so many collectors of high end artisan jewelry and unless you want to keep going home with containers full of gorgeous jewelry, you will need to work for a variety of buyers.

That brings us back to your loss leaders. An item that is popular, can be created quickly and priced effectively, therein catching the eye of a broad range of buyers. One of my past loss leaders were pendants. I could create nearly 10 to 12 an hour and their low cost in materials made for an attractive low price. I used them in booths and online. There were a lot of them and their bright colors and bold graphics were eye-catching to a lot of people. They led the buyer in to more elaborate pieces that sold for higher profit, not as often, but they still sold.

Think about your skills, what you enjoy doing, what simple jewelry item can be created in large production and offered at an attractive price to a variety of buyers; simple charm bracelets, briolettes on lever backs, pendants with add on chains. My plan for my own loss leaders this year is to utilize all the fantastic talents being offered in the art bead community which will serve a duel purpose of supporting other artists while still appealing to a broad range of buyers.

Bronze Clay Worry Bead by Jennifer Tough
The last art show I attended, I arrived with my mom early in the shows opening. A glass artist had a table near their booths opening that featured delightfully tiny $10 bowls. On the other side of the table full of tiny bowls they had mini glass ornaments priced between $5 and $10, equally delightful. They sparkled in the sunlight and drew us in where they had more elaborate glass items for much higher prices hung behind them and arranged around them. We marveled at their skill and collected a business card, but we were not able to purchase anything but a glass bird ornament for $9.

Hours later as we pass this glass artists booth while leaving, I see they have sold out of tiny bowls and their baskets of mini glass ornaments have dwindled considerably. I look in the booth and see 5 empty places where huge art glass bowls had hung. Without knowing exactly what they brought in money wise, I knew they had a good show. This is a perfect example of the loss leader pricing strategy working for the artist.

I hope this article helps you consider a way to become more profitable at your next show while still staying true to your authentic self.
Much Love & Respect,
Shannon LeVart

missficklemedia.com   
 
referenced;1 -Investopedia

23 comments:

lunedreams said...

Thank you for the practical and thought-provoking article! A straightforward but probably really effective concept and not hard to implement. Going to be looking at my supplies/designs with this in mind.

Alice said...

Shannon, what a great article!

I have a few loss leaders: individual tubes of Sunshine Polishing Cloths (great seller), simple necklaces strung with liquid sliver and tiny crystal beads (great stocking stuffers and a good seller), and I also offer handmade bars of soap. Earrings are good sellers too, but I'm not sure they qualify as a loss leader since I normally make a good profit here, but they are good for when a person doesn't want to spend a lot of money.

Melissa Meman said...

Great post!! This is something I have been working out for myself at shows...the challenge is coming up with something cool and unique enough that can still fit the criteria :)

Off the Beadin' Path said...

What a brilliant idea! Basic marketing, but you have written it so well and shown just how to do it. Oh, and those pendants with one or 2 other beads are wonderful! Your dual purpose plan is a way for others to benefit, too, another win-win! This is my motivation for the day, maybe the week!

Michelle said...

Thanks for a fabulous post! You always have great advice Shannon!
Bead Happy!
Michelle

Patricia Wood said...

Thank you for sharing!

sharon said...

Fantastic post , and something to think about. Thank you!

Marie Cramp said...

Shannon, that is fantastic! I was reading it thinking that "there is someone who knows what they are doing" I am so glad it's you! This validates what I have been doing ever since I started selling my wares! I ALWAYS have something to draw them in, and other things they can't live without to make money on!
Glad I have such smart friends ;)

TesoriTrovati said...

You are full of it, Shannon, and by IT I mean really awesome advice!!!!

I just had my one and only show yesterday. Lots of different price points. Thought earrings would sell this time and they didn't. But the 'market research' I was doing for my soon-to-be line of jewelry was very valuable. Sold some of those. Gave cards for custom orders. I think I am on my way.

Thanks for sharing your IT with us. It is so very helpful!

Enjoy the day!
Erin

SummersStudio said...

This is pretty much how I'm approaching my upcoming large show and how I approach market each month. It works! I'll only have a couple of show stopper pieces of jewelry and I fully expect that those will come home. But I will have a large assortment of customisable pendants and chains on hand. People love those for gifts and seem to enjoy having a hand in taking away a piece that they were involved in selecting the components for.

Thanks for this. In some ways I've felt a little like a sell out with my approach. But at the end of the day, if I don't sell, I don't get to create.

peacockfairy said...

Good and interesting information! My husband always hassles me saying things like "you're not making any money on that", but I do agree that you need something to draw people in and create a following.

Sue Doran said...

This is so true; additionally, the interest of people buying the lower value items creates a "buzz" around your booth/stall and others are attracted to come to see what everyone is looking at!

Meekiyu said...

wow great post and definitely very true! I've been trying to think of smaller ways to use my art =D

Gardanne said...

Shannon very interesting information. I was familiar with this term but not in so much detail.

Softflexgirl said...

Terrific subject matter!

Pretty Things said...

Excellent post! I use this theory all the time in my craft shows, and it works!

Sharon P said...

Brilliant! I will take your good advice and apply it to my next show.

Riki Schumacher said...

I like it! Good to think about for next time. Thanks. Riki

Sandrine O'Shea said...

Great advice for anyone who sells anything at a craft show.

Barbara Lewis said...

I knew this article was by you, Shannon, before seeing it was by you! You're a very savvy business woman. Thanks for the information and for encouraging us to consider what we do a business.

Raida Disbrow said...

Thanks for this great post! It couldn't of come at a better time. I have an upcoming craft show which I'm making colorful and affordable lampwork earrings to draw customers in. I wasn't sure this would work but now I feel more confidant, thanks!

Lisa said...

Fantastic article great information. Thanks for sharing.

Cynthia said...

This is a great article, Shannon. I'd love to link to it from my blog.

I always called those types of items my meal tickets. Even if I didn't sell a ton of them they'd buy me a nice dinner. My favorites? Very simple, one-bead-and-a-headpin earrings made out of unused extra beads. No matter WHAT the current earring trend is (hoops, chandeliers, shoulder-dusters, buttons) there are always lots of ladies who will buy a pair of $9-11 earrings. And they fit everyone so they are good gifts. I could make 20+ pairs in a hour...okay, you get the point!
Cynthia