Pricing can be a constant source of frustration in your business if you aren’t pricing yourself effectively to make a profit. There are many factors that come into play when it comes to determining what to charge for your products and services – your business model, your skill level, the amount of time that you spend on each of your clients (from start to finish), your expenses, your market, and the list goes on – so spend some time determining your target projections for your business so that you can ensure your prices are setup to allow you to easily meet those goals.
Before you can determine what products to offer and how best to price them for your business model, you first need to determine what your target sales goal is for each session that you photograph. Meaning, every time a client walks into your sales room, do you know exactly what you need to make in order to meet the goals for your business?
Will $500 per sale get you where you need to be? Or do you need to be bringing in $5,000 per sale? The point is this:
If you are not priced effectively to make a profit in your business, then each session that you photograph can end up costing you money in the long run.
What if I told you that your $750 sale from last week made you $2.75 per hour that you spent on that client from start to finish when you take into account everything involved? It’s pretty sobering to think that many photographers are not even priced to make minimum wage. So many people see ‘cash flow’ as profit, and seeing $750 come in all at once can make you think you’ve hit the jackpot. But unless you are accounting for your time, your expenses (general, fixed, overhead, etc), insurance costs, and much more, you may continue to find yourself living ‘paycheck to paycheck’ (or ‘client to client’) and struggling to make ends meet.
Cost-Based Pricing vs. Value-Based Pricing
When deciding how to price your products and services there are generally two approaches that you can take. You can choose to base your prices on cost alone (cost-based pricing) or you can choose to base your prices on the value that your products and services provide (value-based pricing).
Cost-based pricing ensures only that you cover your costs and make a profit. While this is always a good starting point for any business, it doesn’t account for the value that your services provide or anything else outside of actual costs incurred (in a perfect scenario).
Using cost-based pricing alone to determine the prices in your business can potentially result in the following issues:
- Being treated as a commodity in your market (anyone can provide what you do)
- Price comparisons from potential clients
- Being unable to go ‘above and beyond’ for your clients without dipping into your profits
- Lacking the ability to correct order issues (which arise from time to time) because of the costs involved (that you hadn’t accounted for)
- And more…
However, by accounting for the value that you provide you are able to charge a premium for your products and services. This includes the value of you as an artist (as no one else on earth can provide exactly you behind the camera), as well as the value of the personalized services that you provide to your client, including (but not limited to):
- Consultations that create a personal relationship and ensure that you understand your client’s needs
- A session experience that builds confidence, creates memories, and makes your client feel special and amazing in a way they never anticipated
- Guidance in creating products that show them the best way to display their images (they hired you for your expertise)
- Help in designing books that tell a story, rather than simply grouping random images together
- A 100% satisfaction guarantee on all of your products
- And much more…
Value-based pricing ensures that if a client needs something reprinted that you can do so with pleasure at no charge, without nickel and diming them because you cannot afford the replacement cost of the product. It also allows you the ability to go above and beyond for your clients without fear of ‘losing money’ or wondering if you have enough money in your business checking account to cover the costs.
When you base your prices on value (rather than cost) you are able to work with your client during the sales appointment to better meet their needs. It gives you the flexibility to ‘give’ them more as they spend more, creating value for the personalization and customization you offer during the ordering process.
For example, based on costs alone and using a 4x markup for materials and time, a gift print (which is anything 10” and smaller) might be priced at somewhere between $30 and $50. However, you are not selling the paper (or materials) the images are printed on. The value of your time, your services, your artistic vision and skill, and your brand must be accounted for in that price in order to create higher value for more profitable products (and increase your sales).
By placing a higher ‘value’ for your a la carte gift prints you create more value for your collections and higher priced products. Your goal is never to sell just small prints. So they must be priced for you to make a profit for the time and costs involved when purchased a la carte in order to guide your clients towards investing in the best products for displaying their images. However, as their investment increases, the price drops on small prints. They are included in collections to create value for the collections (a better investment decision) and can be sold in sets for a lower price after the purchase of a collection as well (for example).
Also, the ‘value’ of any print 10” and smaller is the same as far as costs and usage goes. Your materials costs differ only in cents from one size to another, but your time involved in creating the final image and product is the same. On the client side, small prints are best displayed in exactly the same way no matter the size: framed and placed on a small table or shelf.
So when you are determining the prices for your products and services remember, they are paying for the value of you, along with what you do and the services that you offer. And this must be incorporated into your pricing in order to get higher sales in your business and ensure long-term profitability.