Price is where supply and demand meet. More specifically the intersection of the supply and demand curves.
Notice that desired profit is not in this equation. This bears repeating as this is where many inexperienced business owners (and it seems most photographers) go very badly astray. So to repeat, price is a function of two things and two things only .. supply and demand. Pricing is already done for you .. every day the market is adjusted by the buyers & sellers participating in that market. A simple yet subtle concept, and one that is missed by many photographers.
When McDonalds (or any successful business) decides to participate in a market they first look at supply and demand, and the price for similar products in that market. They know there is little they can do to change the overall market price .. there are only so many empty bellies and willing hamburgers. They then decide if they can profitably compete in that market. Or if they need to make adjustments to their costing structure to compete. Notice they do not charge headlong into a market thinking of nothing but how much money they want to make.
What does all this mean to you? .. if you want to run a successful photography business first look at supply, demand, and current pricing in your local market. Only then can you determine if you are able to compete at your desired profit.
Stop wasting time by figuring out your desired profits and then setting your price according to your needs .. customers could care less. Far better to look at current established pricing (which you really can't change) and then deciding if you want to participate at those levels. Or if you need to change some of your business aspects (costs,etc.) to be profitable at those market price points.
Mike, with all due respect I think this narrow-minded, black-or-white thinking of yours is what likely makes you appear to be miserable some of the time. Dare to dream a little... apply a little imagination to elevate the perception of your business above others be a kinder gentler soul and you might be surprised what *could* happen.
You have given me advice over the short time that I've been in business, and I appreciate that, but your advice mostly went along the lines of, and I paraphrase, "if you aren't booking, lower your price until you do." I did exactly the opposite. I added perceived value to my packages and I increased the price -- several times. I am not the best out there, I'm not the cheapest out there, but I am now booking pretty regular. I have 15 booked for next year and most have told me that they chose me for the value and quality of my work. There are a lot of photographers in my market... they still chose me.
The next time I change prices, next year some time, I'll eliminate the bottom one or two packages that I offer... nobody books them anyway. They book the ones that I led them to by way of perceived value. That's right, I convinced them to spend $800 more than they could have because of the value of my offering. I know that you'll say that it is market driven, and you're right. But, with imagination, you can avoid pigeon holing yourself into small profit margins. McDonalds serves billions -- just look at their sign -- wedding photgraphers can't opperate under the economy of scale models... you can only shoot so many.
I'm 100% with Lucky Dog here. Raise your prices till you get the level of customers you'd like to work with, don't get me wrong, you need to deliver the value these clients are looking for, but by lowering your prices, you may fill your calendar, but at what price?
You'll have a calendar full of cheap brides, what's the upside, they'll recommend you to their equally frugal friends?
No thanks sweetie. Not all clients can afford all photographers, and that's fine by me.
Charge peanuts, get monkeys for clients.
No thanks. If I'm going to go broke, I'd just as soon do it sitting on my butt as busting my butt.
Wow, according to your theory no one will go to Ruby Tuesdays becuase they can get a $.99 burger at McDonald's. And the Luxury car market is about to crash since you can buy a $12k Smart Car instead of that $40k Hummer.
Your version of supply and demand might work if in fact there was only one market for photos. But just like there are dozens of markets for cars and burgers, there are many different markets for photos.
Lucky_Dog wrote:
You have given me advice over the short time that I've been in business, and I appreciate that, but your advice mostly went along the lines of, and I paraphrase, "if you aren't booking, lower your price until you do." I did exactly the opposite. I added perceived value to my packages and I increased the price -- several times. I am not the best out there, I'm not the cheapest out there, but I am now booking pretty regular. I have 15 booked for next year and most have told me that they chose me for the value and quality of my work. There are a lot of photographers in my market... they still chose me. ...Show more →
When you asked me for advice a few months ago I think you had pretty slim bookings (maybe just one?) and had virtually no portfolio. So I suggested lowering your prices to get you into the game and get some work. A valid startup technique used by many. I'm glad things turned around for you.
I am curious about this "perceived value". Just what is that?
Nathan Whitchu wrote:
Wow, according to your theory no one will go to Ruby Tuesdays becuase they can get a $.99 burger at McDonald's. And the Luxury car market is about to crash since you can buy a $12k Smart Car instead of that $40k Hummer.
Your version of supply and demand might work if in fact there was only one market for photos. But just like there are dozens of markets for cars and burgers, there are many different markets for photos.
First, it's not my theory .. it's a very basic economic guiding principle taught in economics courses and used by businesses for a very long time.
And second I really did not think I needed to cover every specific instance .. of course there are dozens of different markets for every product, including photos. You simply apply the rule to the specific market you're interested in.
I'm seeing why 70% of photographers fail as businesses.
There is a lot more in running a business then lowering your prices. If you go to the Tavern On The Green (very high-class restaurant in NYC) and expect to pay McDonalds prices… guess again! But then you may eat at McDonalds every week and go to the Tavern On The Green once every 5 years they are both making money.
I noticed that a Bride that does not look at the price but the photos seem calm, but the budget Bride seem to be a little high-strung. Not saying I don’t work with the Bride to close the deal, but rather come to a compromised. Just recently I made an agreement with a Bride and Groom… that I would include a wedding album if they update my website. When I meet a B/G they seem to like me. Not to toot my own horn but I guess I know how to present myself.
How do you get the clientele? Time! So far most of my 2009 clients are recommendations from past weddings. Now I’m selling more books ($$$) and fine-tuning what the Bride wants in photos. This year I had a Bride hire me because she liked my photos (she did not question the price). She hired a video guy from a well-known budget-chain that “farm-out” to whomever. The video guy told me he does 80 weddings a year (I was shocked).
Now lets say you are doing $500 weddings (just to make it simple). You would have to shoot 100 just to make 50G’s. If you charge $2000 per wedding then you’ll only have to shoot 25 wedding. I love shooting weddings but the quality in shooting 25 wedding may be better then the quality in shooting 100. The reason; you’ll have more time in fine tuning the 25 weddings then the 100 weddings. Remember an 8 hour wedding may take ~40 hours in postproduction if it’s not just a shoot and burn gig.
In conclusion, don’t sell yourself short! If you build it, they will come
1. As far as my understanding goes, the market is divided into more than one segment. From short one-hour-jobs to full day coverage. It is not necessary to be the cheapest overall - you have to look at the price level of your specific product.
2. There is a possible reason why - if you have a certain level of skills - raising prices brings more clients: The curve for demanding is not linear! High end wedding photography seems to be a veblen good - see: http://en.wikipedia.org/wiki/Veblen_good . The demand increases with higher prices because the higher prices increase the perception of exclusivity and luxury.
So there is no need for disagreement. You can adjust your prices according supply and demand - but that does not always imply that you have to lower your prices!
Mike Mahoney wrote:
When you asked me for advice a few months ago I think you had pretty slim bookings (maybe just one?) and had virtually no portfolio. So I suggested lowering your prices to get you into the game and get some work. A valid startup technique used by many. I'm glad things turned around for you.
I am curious about this "perceived value". Just what is that?
Bells and whistles, mostly. Things that cost little, or maybe even nothing other than a little extra effort… yet the client sees these things as "special" because nobody else offers them at our price point. I also think that attitude separates us from our competition… I try to not put on my "business hat" instead I try to share in their excitement and joy for their big day. That’s hard to do when your first concern is how much to charge for a burger ;-) I gain confidence with every booking. I know that some of our clients considered as many as 60 photographers during their initial search yet hired us. I’m not the cheapest so that makes me feel like I’m on the right track.
I’m not totally disagreeing with your assertions about market pricing… we are still barely at the mid-price market level and I realize fully that my day job is still the lion’s share of my income. I do believe, however, that none of us are constrained by the market… in fact, we are empowered by the market! We must understand the opportunity in front of us and find a way to capture as much money as possible. We should not operate from a position of despair while lowering our price level to the lowest common denominator. It's a balancing act in essence… try harder, be smarter, and you will prosper.
yz-fotografie wrote:
So there is no need for disagreement. You can adjust your prices according supply and demand - but that does not always imply that you have to lower your prices!
Yes, always adjust prices up or down according to market, and always strive to provide a higher quality product along with higher prices while improving workflow & backend to increase profits.
Anyone who thinks Mike's post is hooey is either wearing rose colored glasses or simply doesn't know how to run a business. A long term business, not a 2 or 3 year operation. I'm on year 4 and I've learned so much in those years and from people like Mike. It's just not realistic to think you can say "I want to make $100K a year so I'll shoot twenty $5K weddings". Sure, that may indeed be ultimate goal in the business, but for start ups, it's completely setting yourself up for failure. Now sure, if you have another job or your income isn't needed to sustain your family, you might be able to make that work by shooting 4 or 5 weddings a year until you become established enough in your community that you have enough market saturation to get those 20 weddings, but you're not going to do it in year one or year two of your business. And you're going to have to work a lot harder to get those weddings than the guy charging $500. Your marketing, PR and sales skills have to be well above average. Most people starting a business (and thus asking the "how much should I charge" question) simply don't possess those skills early in their careers.
It's also very short sighted to assume that where you live and work has no bearing on what you can charge. Do you really think Becker could make as much working in Bismark, ND or Mobile, AL as he can in Southern CA? Knowing and understanding your market is vital to sustaining your business over the long term.
Now I do disagree with Mike in that I think you can "change" your market, or at least your niche in your particular market. But that takes time. And Joe Shutterbug with no experience to speak of and no contacts in the community can just hang a shingle on his door and start charging $8K a wedding and expect to book 15+ events a year at that price. Over time, if he does the right marketing, excels at public relations, and does outstanding work, he can certainly carve out a niche which could allow him to be "fully" booked at his goal prices, but advising newbies to do that is just setting them up for failure.
One issue that has not been addressed here is quality. And I don't mean whether you are a good photographer or not. Most brides don't know the difference. The quality of the photography is rarely something they recognize. I mean we've all seen 'other photographers' work where WB is a foreign concept and lighting was all direct flash, one lens (the kit one) was used for everyhthing, etc. And i've seen them get more money and more bookings that truly gifted photogs. Brides don't know quality. They shop on what then know - price. Or how big the album is or how many prints they get.
go to a bridal show (most brides do) and you'll see 5 photographers all running specials 'book now and get X' be that more product or a lower price. Women love sales and women buy 85% of photography so it makes sense in a lot of ways. But I don't see photogs saying 'I'm the best' or "my albums are the best" or 'better service' or anything like that.
There is only so much money a bride has to spend on a wedding and she must have flowers, dinner, booze, music, etc. The higher the overall budget the more can be spent on each part of the day including the photographer. Read BRIDE's magazine and such and you'll see a suggested budget - reception is 50%. Photography and videography together are 10%. So you can easily find out what you should be charging, or what brides think of your work.
If you keep working the New Britain that does dinner at $35 a plate and weddings have 150 people in attendance math will tell you the 'average' budget for a photographer at that venue is $1050. The local marriott charges $90 a plate so the same wedding there will have a budget of $2700 for the photographer.
So if you're charging $3000 and working at the mariott on a regular basis you're doing just fine. If you get a gig at Britain it's because they really value photgraphy and that's usually pretty obvious by how they interview you, cooperate on teh wedding day, how quickly the get back you with an order after the wedding, etc. If you're charging $1500 and working at the mariott a couple of things could be at play - you're better than your prices or the B&G don't place a high value on photography.
From my experience it takes the same amount of effort to book clients in any price range. You won't book as many at $5000 as you will at $1000 but you'll spend just as muich on advertising, meetings, etc. You need higher end handouts to give to a $5000 bride so you may spend more in the end. WOM is probably stronger in the higher end market - smaller group of people so they talk more amongst themselves.
There are indeed different market segments from low to high. But look how many mcdonalds and walmarts are out there vs starbucks or ruths chris steakhouse or nordstroms. There are fewer rich people than average people, period.
Some folks will buy 'near luxury' goods - starbucks, mall clothing (holister, aeorpostale, etc) or spend $70 on makup at estee lauder over $20 on max factor. They 'treat' themselves to things they value. Same for photography. If you want to get paid more then you have to sell your brand of photography as 'near luxury' - higher pricing, more service, etc.
What we sell is our time as much as anything else and that's a limited resource.
as has been said ad naseum, no one has advised a newbie to pick up an xsi, print up a price list charging $8000, then kick up his heels and wait for the brides to start rolling in.
being aware of our markets and the effects on our business doesn't mean being a slave to our markets.
Like I mentioned earlier, you should post how much you made this year and then whoever made the most should have everyone else follow their advice.
David Jay raised his prices from $2,500 to start to $15,000 and instantly became one of the top 15 photojournalists in the world. We should all do the same as fast as possible!
We set our prices according to what we want to make and are not too interested in the regular or average client who wants photos. My friend Sean McLellan lives in our area and he and his wife shot a wedding in Nashville this year for $25,000. The average spent in our area for photography in 07 was $5,100. He sets his price how he wants, is perceived to be great for many reasons including the price, and gets paid.
Regarding pricing. You gotta have the skills/goods to back up higher prices. Most of you folks do. The rest of us are new to the biz and working hard to get there. Hence our pricing will remain lower than yours.
No its not.
Lexus is 20 years old and cadillac is 100. Lexus' cost more than Caddy's.
McDonalds is older than Starbucks but costs less.
There is no connection between the two.
One does generally make more money the longer they are on the job but it depends more on the job. A McDonalds employee with 20 years experience will still make less than a laywer fresh out of school does on day 1.
You have to decide what market segment you want to serve, price yourself for that market, provide the goods that market expects - be that quality, attitude, albums - whatever. It's not likely you can have an office in the ghetto and get high end clients. It's not likely you can shoot with direct flash on a rebel with a kit lens and offer MyPublisher albums and get $7,000 for a wedding.
A top wedding photographer with 15+ years experience on both coasts has a very simple way to set up pricing. Pick you market segment and a price. If you book less than 80% of your meetings your prices are too high (for what you are offering, your look, your market, etc). If you're booking more than 80% of your meetings you can raise your prices some.
How many weddings do you want to book in 2009? When you get to 90% of that number raise your prices. Not double them, but raise them 5%, maybe 10%.
BTW, this photog gets $8000 for the shoot - albums are extra.
