Here is a blog from Al Berger, a 30-year professional photographer, giving pricing advice to new people entering the field. To be in business 30 years he must be doing many things right, but giving pricing advice is not one of them. This is a great example of how prevalent cost plus thinking is.
The article describes how you should gather all of your fixed and variable costs, estimate how many customers you will get, and then bury the prices for these overhead costs into the prices of prints or studio time.
This couldn’t be more wrong.
Understanding all costs is important to knowing if you can make money at this profession, i.e. whether or not you should be a professional photographer, but they are irrelevant to setting prices. The only thing that matters to what price to charge is how much your customer is willing to pay. This is pricing to capture the value you create and it is called Value Based Pricing.
Your customer’s willingness to pay is determined by how much better (or worse) you are than your competition and how much your competition charges.
Once you begin thinking this way, you can use price to your advantage. Some people are very price sensitive. Offer them a low priced package. Some people are not price sensitive at all. Be sure to have some very expensive offerings to capture more of what they are willing to spend. You can price your portfolio, where prices on some products are aggressive to attract customers, and prices on other products are higher to make more profit.
Pricing isn’t easy to do well. However, if you want to make the most money given your talents and experience then understanding and using value based pricing is imperative.
To be fair to Al Berger though, I believe he was addressing a problem that new photographers enter the field and don’t charge enough to cover their costs. This drives these new photographers out of the market quickly while at the same time lowering the overall market price for photographers. On this point I agree. If the revenue from Value Based Pricing doesn’t exceed the costs of doing business, get out of the market. Or better yet, don’t get in.
Mark Stiving, Ph.D. – Pricing expert, speaker, author
Photo by UggBoy