Tasteful displays of your awards and accreditations, like these in Christa Hoffarth's studio, can increase your perceived value in the minds of customers.

ated for that something. The basic rule of supply and demand makes something worth a higher price if that product is in demand. For example, I remember when the PT Cruiser came out a few years ago. My best friend had one on order for nearly six months because everybody wanted one. I would venture to say that he didn't get much of a discount (if any) on his purchase. There may have even been some dealerships that were charging more than the sticker price, because they could!

The other thing that allows you to charge more is that your client wants the product emotionally. We have all heard the terrible stories of the bride who hired Uncle Bob to photograph her wedding, only to be totally disappointed in the results. The price may have been right (in many cases as a free "gift"), but the true "cost" was very high. If we only had a way of shaking that bride upside down and convincing her that her wedding deserved to be photographed by a true professional, she would have been much better off.

The key comes down to whether or not we can create value for our clients, giving them something that has perceived value and benefits their life in some way. A classic example is in the auto business. You all have seen the television commercials from car dealers that say, "Sunday! Sunday! Sunday! Noon 'til midnight! ALL CARS MUST GO! And we are prepared to sell you a car for a dollar over invoice—no tricks, no gimmicks, no kidding!"

As a potential customer, that has very little no value. At least very little perceived value. What happens after I drive the car home? What kind of service will I get?

I'd be more likely to buy if the commercial said, "Our prices are $100 more than anybody else's, but our service is guaranteed to be 110 percent better than anybody else's service." Underneath that are pictures of their customers telling you why they paid an extra 100 bucks and that the service is wonderful. They would probably grab a fair share of the market, don't you think?

Of course, not everyone will buy value; 30-40 percent of all people will buy based on price. That's the bad news. The good news is that 60-70 percent of all people will buy value if you provide it to them.

The Power Pricing Self Test

Before we get too much farther, I want to clear the cobwebs out of your brain. We are going to start with the Power Pricing Self Test and see where you are with your understanding of pricing strategy. This will take only about five minutes, so grab a notepad and a pen, sit down in your favorite easy chair, and jot down some ideas as we go along. Here we go.

1. How do you feel about your current price list (or, as some prefer to call it, your investment sheet)?

2. Do you know your costs on each of your products and services? If so, what are they?

3. Do you offer a la carte pricing as well as packages or bundles? Whether you do or not, what were the factors that you considered when making your decision?

4. What is your mark-up factor, or how did you decide what to charge for each of your products and services?

5. How much does it cost you per month, per day, and even per hour to keep the doors open at your studio, regardless of whether or not you have any business coming through those doors?

6. Do you raise prices at least once a year to cover the additional expense of operating a business? If not, when was the last time you did change your prices?

7. Could you raise your prices 5 percent on January 1st and 5 percent on July 1st without giving your customers a heart attack?

8. Have you done a competitive analysis of other studios in your market to find out where they stand with their pricing structures? Where are you in the pricing hierarchy?

9. If you could create a life that had everything in it that your heart desires, what would that be?

10. Do you feel that your current pricing structure will allow you to get there someday?

11. What changes would have to be made in order for you to be able to attain your dreams and goals?

Well, how did you do? Many of these questions may require you to spend some time crunching numbers and doing some calculations. That's good! Make the time to get this accomplished as soon as possible—I would recommend today. There's no better time than right now to improve your business.

Addressing Pricing Issues

Your ability to handle pricing questions relies heavily on your belief in yourself and your products and services. Before you can address price issue with your clients, you need to address it with yourself. If you don't have an unshakable faith that your products are worth the price, you will not be able to sell them. Your work may be better than your competitors, but without the skills required to be able to price and sell your work, all will be for naught.

Three Methods of Pricing

There are basically three different methods that photographers use in order to determine what the price should be for each of their products and services.

Overhead (or Cost-Based) Pricing. Using this strategy, your pricing is based on what it costs you to produce a print. This number is then multiplied by a factor in order to come up with the selling price. This multiplication factor must cover all the costs of running your business— your payroll, utilities, lease, cars, taxes, your compensation, and of course profit.

The first order of business is getting your arms around the cost of operating your studio. You must have a complete grasp of these numbers in order to be the best businessperson you can be and price your work correctly. The first expense category is your capital expenses or your investment costs, things like real estate, vehicles, equipment that your purchase, props, furniture, etc. The second category contains your general expenses, things like your pay and benefits, employee pay and benefits, lease payments, electric, phone, trash, insurance, taxes, advertising, education, bookkeeping services, etc.—things that have to be paid every month, whether you have any business or not.

The third category consists of your cost of sale (COS). This is what it actually costs you to produce a product from beginning to end. This can be tricky. If I were to ask you what it costs your studio to produce a single 8x10

As this display by Christa Hoffarth shows, you can display tear sheets of your published images alongside wall portraits. It's another great way to boost your perceived value.
A simple table display might be an attractive addition to your studio's decor. Images by Christa Hoffarth.

print, ready for delivery, what would you say? You can't simply say, "Well, the lab charges me $2 for an 8x10, so if I sell it for $10 I'm making $8 in profit!" It doesn't quite work that way. Let's think about this question for a minute. In addition to the lab bill, there was the time that you spent talking with the client on the phone, conducting their consultation, and shooting the actual session. There was the digital media that the image was stored on (or, if you are a film shooter, the cost of the film, processing and proofing). There was also the labor and time required to manage that image from capture, to download, to editing, to backup, to selling. And let's not forget the commissions paid to get the order, the cost of retouching and image manipulation, shipping expenses for getting that file to and from the lab, and the costs for mounting and laminating, and stamping the print. There were also costs for boxing, bagging, or framing the image, the tissue paper that goes around the print, the stickers, bows, and ribbons . . . and ultimately the delivery of that image to your client. Oh my!

Now. Based on that, if I asked exactly what it costs you to produce a single 8x10 print, would you have a different answer?

If you don't know what your cost of sales (COS) are, I want you to spend some time with your nose in your books coming up with a real number. You will also need to identify how much time you spend on each client from start to finish and you have to assign a value to that time. Yes, you heard me correctly. I said that you have to assign a value to your time. Just because you enjoy your work, doesn't mean that you should have to do it for free. Sitting in front of the television on Saturday night after you get home from a wedding while you download and edit your images is not time off. You may think, "Oh, this doesn't really count because I'm sitting here laughing at Saturday Night Live." I hate to tell you, but that time has to be accounted for.

The industry standard ratios for COS in today's market are as follows:

10-20 percent for a high-end boutique studio

30 percent for a home studio or residential gallery

40-50 percent for a retail studio that has high volume and lower pricing

So if you have a residential gallery and are working with a 30 percent COS, of every dollar you bring in, about .30

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