So... you know what your hourly rate should be to live off your crafts about as comfortably as you live off your job now.* You might have calculated how much to charge for a typical item that you make.
Now you face the "competition". To recap the comment by Stephanie Ann that sparked all this:
I run into this problem when pricing knitted items. I know I've worked X amount of hours on a project but know shop Y is selling theirs at prices so low.
I hear in the crafting community you should set a fair price or eventually you will not make enough to stay in business. I think it is probably true.
Competition, in that case, is shop Y selling at low price - probably much too low a price. And this is the point in time where you face a hard decision:
Will you undervalue your time, your work and your skill to help keep handcrafted things low in prestige and esteem in our community? Will you match the prices of shop Y or crafter Z regardless of your own calculations and your knowledge about fair pricing for the time and skill involved?
Or will you value your own work and your own time and skill, and set fair and realistic prices for the things you craft? This might not sell a lot of items - but the persons who buy them will appreciate the craftspersonship involved and appreciate that hand-crafting does take more time. Selling an item at a fair price will feel a lot different from selling an underpriced, undervalued item.
If you do not need to sell pieces to make a living, this decision should not be hard for you. And if you do feel pressure to sell something because you need to gain additional money, consider this:
Continually under-pricing, under-valuing and under-estimating yourself will diminish your own intrinsic value-system of crafted items. And after a while, it will eat at your soul and your self-esteem. Underpricing yourself can also lead to a customer taking one look at your wares and turning away - not because it is too pricey, but because it is too cheap. "Something has to be wrong with that, it's too cheap" would be the thought in their heads when they turn away. If your prices are too low, you will get stamped as a silly hobbyist that has no idea about what is involved in crafting professionally, but still wants to sell - and selling items is professional behaviour, because it makes the crafting your profession. Every person selling too cheap instead helps to undermine the market for professional crafters that have no other job. And they are thus taking part not only in lessening the value of crafts, but also in diminishing professional level skill and knowledge - because these two can only develop properly if you can work at a craft as your main job.
So if you price realistically and sell, everything is fine. If you do not sell... there can be many reasons. "The price is too high" is usually not the right reason to blame. And whether you do not make enough money because you do not sell many realistically priced items or because you fling away your items at a ridiculously low price, the outcome is the very same - not enough money. But with a sale of a fairly priced item, you will at least feel good about that sale.
* It's probably time for a little side note here, just to make sure there are no misunderstandings: I am presupposing that if you are calculating prices or wages for your crafting, your craft skill level is on a level with your skill in your current, normal, day job. I am also presupposing that the virtual or actual crafted items we are talking about are a good quality, well-made and well-designed. We are not talking about a first try in some discipline here, but about developed, trained crafting of high quality - professional or semi-professional level. Though I absolutely think that you should value the time and effort gone into a first try or something that did not come out just as it should have!
read part III of of this series