This statement is so true. I find this in my scrollsawing items as well as pens and other turned items. The customer will let you know if you have the sweet spot on pricing. They too are not going to know the differences between platings unless they are an experienced consumer. So I suggest staying away from the wide variety of platings and either go high end or low end. Mixing the 2 will cause confusion.I have found that my customers totally don't care what it cost me to make a pen, they buy or don't buy based on what they feel it is worth to them. I think that is true with all consumer goods.
My pricing method (I don't call it a formula) is to set initial prices at what I think the customer will be willing to pay, then take it to a few shows to test my value proposition assumption. From there I proceed with something like this:
1. Is the new pen getting good attention, people are picking up and looking at it, but not buying? That tells me I have it priced too high, try a lower price.
2. Is the new pen selling fast? That tells me I have it priced too low, try a higher price.
3. Is nobody even picking it up and looking at it. They don't like it at any price, don't make any more.
Finding products that sell faster at higher prices does happen occasionally.
For the old favorite pen styles I test the market at new prices frequently. Mark the good sellers up until they slow down, then back off just a little. Mark the slow sellers down until they start selling well, then raise prices slightly. That is not to say that I don't pay attention to time and materials. If the optimal selling price does not leave me with enough profit margin, I stop selling the product.
Personally I believe that there is no correct formula, every formula is a mistake. The correct price is the optimal price that the customer is willing to pay.
This statement is true also. Alot has to do where you are selling and to whom you are selling to.I sold restaurant supplies. Another salesman would take the cost and multiply it by two. He said that was 2%!
Yes, market research is a must. I know a pen maker who says a pen will sell for $29 in one market and $39 in another.