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Archive 2012 · Does your highest package determine your ceiling? (Price ...
  
 
dlateulade
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p.1 #1 · Does your highest package determine your ceiling? (Price anchoring)


I'm currently reading a pricing book (Priceless: The Myth of Fair Value by William Poundstone), and in a chapter about price anchoring, he makes the argument "the more you ask for, the more you get". He reviews courtroom settlements between fast-food restaurants and patrons who were burned by hot coffee. In every case, the more the injured party asked for, the more they got. They didn't necessarily get what they asked, but the higher the request, the higher the settlement, even when the request was insane (hundreds of millions).

My pricing ranges from $3500 - 6500, and my average is in the $4-4.5 range. I'm beginning to think that I need to raise my top package to closer to $8 - $10k -- not necessarily because I expect to book it, but because I think it may raise my average price as a result.

I've seen a few people here make reference to it in the "guess your pricing" thread, and I'd love to hear thoughts (or even better, real world experience)



Aug 23, 2012 at 11:15 PM
TheGE
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p.1 #2 · Does your highest package determine your ceiling? (Price anchoring)


In every case, the more the injured party asked for, the more they got.

Because in negotiations, one party starts high, the other party starts low and they meet in the middle. So if the high isn't too high, they'll settle lower than they would've.

This is somewhat different than the psychology of pricing packages but kind of the same idea. I say different because with packages, the high top price is to set an anchor that makes everything that follows appear comparatively reasonable, whereas with negotiating the high starting price purpose is to pull the other party's offer up.



Aug 23, 2012 at 11:44 PM
Tony Hoffer
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p.1 #3 · Does your highest package determine your ceiling? (Price anchoring)


That depends if you're in the business of negotiating for your prices or not...

I would argue that most businesses provide their services for an appropriate fee then offer add-ons and other options that they can make more residual income from future purchases or reoccurring fees.

We used to have a high package that we only had to 'raise the ceiling'. We removed it and saw no difference in bookings. However, we've been much more successful by implementing some of the additional options that I mentioned above.



Aug 23, 2012 at 11:55 PM
TTLKurtis
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p.1 #4 · Does your highest package determine your ceiling? (Price anchoring)


Daniel, I don't think an 8-10k package should be thought of as unbookable. It's not going to be as common, but 5-8k isn't outrageous and you produce great work so you're definitely 'worth it'.

Speaking of which, I believe you said you'd second shoot for me at some point.



Aug 24, 2012 at 12:01 AM
tobicus
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p.1 #5 · Does your highest package determine your ceiling? (Price anchoring)


There's a lot of misinformation deliberately perpetuated by corporations and the mainstream media re: the coffee lawsuits. The mega prices came as a result of McDonald's originally offering $800 as compensation for what was at least $20,000 worth of legal fees. I agree with the general idea regarding raising prices, but this isn't the best example to justify them.


Aug 24, 2012 at 12:45 AM
hardlyboring
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p.1 #6 · Does your highest package determine your ceiling? (Price anchoring)


I agree with Tony...
When we redid our website we put in some information about "packages start at x but couples normally spend between x and x $"

I think it sets a subconscious "norm" for some people. Do we normally get between x and x... no not normally but it has helped us book bigger packages. I would always over value your work... if you undervalue yourself you are only hurting your product and your bottom line.

The 100,000$ mercedes might not be the best car for the money but MB is sure going to tell you it is and then stand behind that claim whatever way they can.



Aug 24, 2012 at 03:12 AM
sboerup
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p.1 #7 · Does your highest package determine your ceiling? (Price anchoring)


To some extent your "top package" can put a cap on clients expectations of financial investment. If you are getting customers that are buying your top package/product, could/would they have spent more if you gave them the opportunity?

I don't expect that most photographers' top package is the VERY BEST thing that they offer their clients. Why not tell them the VERY BEST thing you could possibly offer them and offer it? That could be your ceiling.



Aug 24, 2012 at 05:00 AM
dlateulade
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p.1 #8 · Does your highest package determine your ceiling? (Price anchoring)


Spencer, that's sort of my problem -- I have no idea what the "very best thing" would look like for me, and why on earth I'd want to sell it other than to make more profit. I don't like working with or selling prints, so to me, the only reasonable package options are 1) coverage only 2) coverage and an album. The only problem is that I can't price coverage at $4k and double that for an album -- so I need to have a package that seems kinda stupid to me in order to push that price point up.

My packages now are
$3900 - Coverage and second shooter
$5250 - Coverage, second shooter, 10" album
$6500 - Coverage, second shooter, (2) 8" parent albums



Aug 24, 2012 at 12:58 PM
dlateulade
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p.1 #9 · Does your highest package determine your ceiling? (Price anchoring)


And Kurtis, the offer still stands Shoot me a facebook message and we'll figure something out.


Aug 24, 2012 at 12:59 PM
 

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bthatton
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p.1 #10 · Does your highest package determine your ceiling? (Price anchoring)


Keep in mind that when you go to a high end steak house... Their profits come from the $12 side of roasted potatoes and the $17 glass of "reserva" merlot. There's little margin on a $65 20 oz dry aged wagyu rib eye (which is what you came in to the restaurant for).


Aug 24, 2012 at 01:43 PM
TTLKurtis
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p.1 #11 · Does your highest package determine your ceiling? (Price anchoring)


Daniel why is your album so cheap bro? I charge that for an engagement guestbook...


Aug 24, 2012 at 02:20 PM
TRReichman
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p.1 #12 · Does your highest package determine your ceiling? (Price anchoring)


When we started offering a $25K offering (and changed nothing else) our average jumped. It is about setting overall expectations. Think about camera companies - they used to offer this lineup:

Consumer - $900
crop sensor - $1400
Full frame entry - $3000
Pro body 1 - $4500
Pro body 2 - $8000

That $8000 body sold a ton of $3k bodies. Because the scale went up to $8K very few pros bought the $900 camera even though in most cases it was functionally identical to the $1400 model in practice. Most photographers slotted themselves into the middle based on what they thought about themselves (crop model for low-earners or startups, $3k FF camera for the middle majority, pro body 1 for folks who wanted to feel a little more "pro"). Let's be honest, any of those cameras will get the job done very well, but the overall spread helps to indicate where you belong based on how you feel about yourself.

The thing is, for some brands (yours possibly being one Daniel) they may not warrant trying to push the average through additional stuff. Canon and Nikon can segment all these different bells and whistles to try and drive people up the line, but your value proposition is pretty consistent no matter what wedding you are shooting so there is little need to offer a bunch of other options to distinguish. Once you know what you do simplifying the offerings down to what makes sense is much better for the client. As Spencer said you ought to only add an upper level option if it is a natural execution of your brand value to its greatest extent.

- trr



Aug 24, 2012 at 02:26 PM
dlateulade
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p.1 #13 · Does your highest package determine your ceiling? (Price anchoring)


@Kurtis, I've thought about raising the album prices (a la carte for the album is $1500, in the package it's $1350) but even that seems obscene to me. I only sell 2 or 3 of them a year -- frankly, I'd be happy to do 20 or 25 $4k shoot and burns a year and call it even. I hate album design.


Aug 24, 2012 at 02:57 PM
dlateulade
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p.1 #14 · Does your highest package determine your ceiling? (Price anchoring)


Thanks Todd, that makes a ton of sense. I agree that for my brand having a bunch of options doesn't make sense. At the workshop, I was all about the single package (coverage and album) model, but I realized that I'd be missing out on a lot of profitable coverage only weddings. Given what it is I do, having more than two packages (coverage and coverage + album) doesn't make a whole lot of sense.

That being said, I'd like to keep my initial offering in the $4k area so as not to scare people off right off the bat, but I'd like albums to be more profitable -- I just can't wrap my head around a huge jump in price from package one to two when the only difference between packages is the album.




Aug 24, 2012 at 03:01 PM
lisy78
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p.1 #15 · Does your highest package determine your ceiling? (Price anchoring)


dlateulade wrote:
@Kurtis, I've thought about raising the album prices (a la carte for the album is $1500, in the package it's $1350) but even that seems obscene to me. I only sell 2 or 3 of them a year -- frankly, I'd be happy to do 20 or 25 $4k shoot and burns a year and call it even. I hate album design.


If you HATE album design then raise the price and outsource the design.



Aug 24, 2012 at 03:02 PM
TTLKurtis
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p.1 #16 · Does your highest package determine your ceiling? (Price anchoring)


Daniel I seem to recall you saying it was ALL about the album for you... Since when has that changed? Why?


Aug 24, 2012 at 03:39 PM
dlateulade
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p.1 #17 · Does your highest package determine your ceiling? (Price anchoring)


I'm just not booking a lot of album packages -- 75% of my bookings are coverage only, which I enjoy because they're quick (I can shoot Saturday and deliver on Monday) and pure profit apart from taxes.

I'd enjoy albums more if I were making more money off of them, and if they were a regular part of my business. Most people aren't clamoring for them now, and I'm only charging $1200 for them.



Aug 24, 2012 at 04:11 PM





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