23 March 2016
How Our Prices Are Determined and Why They Change
Co-founder and CEO Ken Tomita explores our adventures in running a small business and the journey to understand the meaning of it all.
Launching a new product is an exciting time here in our shop. It’s the moment where an idea transforms into an actual, physical object. One of the least exciting things about launching a new product, however, is getting the price right. It’s one of the most critical decisions, and can mean life or death for the product. Here are a few of the factors we consider:
Labor How long will it take to make? Since Grovemade works in small batch manufacturing, we often launch products after only making a few dozen. This doesn’t give us enough concrete data to know how long it will take to make hundreds or thousands. We have to use a combination of estimation and our gut.
Material How much do the raw materials cost? Because the natural materials we work with are inherently variable, there’s quite a bit of guesswork in predicting waste, a big factor in the overall cost of the product.
Brand How does it fit in the market? Design, functionality, aesthetic, and quality of materials all need to be taken into consideration before settling in on a price. Where best do we balance value for our customers and making sure we have enough margin to sustain a financially healthy business?
Labor How long will it take to make? Since Grovemade works in small batch manufacturing, we often launch products after only making a few dozen. This doesn’t give us enough concrete data to know how long it will take to make hundreds or thousands. We have to use a combination of estimation and our gut.
Material How much do the raw materials cost? Because the natural materials we work with are inherently variable, there’s quite a bit of guesswork in predicting waste, a big factor in the overall cost of the product.
Brand How does it fit in the market? Design, functionality, aesthetic, and quality of materials all need to be taken into consideration before settling in on a price. Where best do we balance value for our customers and making sure we have enough margin to sustain a financially healthy business?
![](https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=200&s=2de9258805667acf9f5f2c94e3fef542 200w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=300&s=2e8fae41c7f93a5a8901faf6840c05f8 300w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=500&s=660eb9cd6378fa1e6e1c4c3dc07a5b2c 500w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=700&s=a2468b26d62eb095042a7b4b34093058 700w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=900&s=f4a3dc2876c485e4a2ac74f2f401b0a9 900w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=1100&s=4f6f1366e2eb1ced0080e8d7ed8b2b09 1100w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=1300&s=c34433495e7ae19e6e49d73a36574ac5 1300w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=1500&s=c44f21eae6e81523698d2916e4f6cf11 1500w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=1800&s=78d939593efbfb760047ea89960a5fd1 1800w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=2250&s=90699ee4d2068cb39334eb8b0fb8c8d9 2250w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=2500&s=76527d0a3a3c72333c3e23fd1b745ec1 2500w,https://grovemade.imgix.net/https%3A%2F%2Fsiteleaf.grovemade.com%2Fuploads%2Fjournal-why-prices-change-A1.jpg?auto=format&ixlib=python-1.1.2&w=3000&s=5ba65c45f514fb9cd6e75d45c2317344 3000w)
Typically, we go in with optimism at how efficiently we can make a new product. Sometimes (okay, oftentimes) things don’t go as planned. Making things is hard, surprises pop up, and that’s part of the fun. But, when costs end up higher than expected, we have to reconsider the viability of the product.
For example, we’re about to raise the prices on our catch-all and wall hooks. After making over a hundred of each, we’ve realized the cost of labor to craft these meticulous designs is too much for the prices we charge. Having exhausted our efforts to make them more efficiently, we have to choose between discontinuing them or raising the price to make them financially viable. We choose keeping them!
For example, we’re about to raise the prices on our catch-all and wall hooks. After making over a hundred of each, we’ve realized the cost of labor to craft these meticulous designs is too much for the prices we charge. Having exhausted our efforts to make them more efficiently, we have to choose between discontinuing them or raising the price to make them financially viable. We choose keeping them!