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Introduction
Wouldn't it be nice if there were a game show like "The Price is Right"
for photography?
"Ok, contestants. Our first photo is to be licensed to a company for use in their brochure, printing 5000 copies, worldwide."
"Bob, I would license that image for $200 for that use!"
Bzzzzzt!
"Sorry, Dan, but that photo is worth $3000 for that use!"
(Huge gasp from audience.)
"Ok contestants, this next item is the same photo to a different company, for use in a magazine ad running one year, for a circulation of 1,000,000 units."
"Bob, I would license that photo for $3000!"
Bzzzzzt!
"Sorry, Dan, but that photo is worth $250 for that use!"
(Huge "HUH?" from audience.)
"I don't get it, Bob. Why is it less than the other use?"
"Different client! That's all they'll pay because otherwise, they'll get a different, but worse photo from a microstock agency."
Finding the right price points for selling photography or bidding on
an assignment is the Holy Grail of the photography business. What do
you charge for licensing an image for an ad in a magazine, a billboard,
or for a local merchant's Web site? What about pricing a photo shoot of a
parade for one of the corporate sponsors? How about a wedding? No matter
what the product or the service, pricing is the most daunting problem
facing all photographers in their first years, and it seems there is
no sure-fire method to finding what works. The natural thing to do is
research price charts or guidelines, but as the industry has evolved and
competition has grown, such data points are no longer reliable. What's
more, it's not that simple. Even veteran professionals get frustrated
by the volatility in pricing, not just among different clients, but in
the way the same product can vary dramatically from one case to the next.
Most pro photographers and websites that attempt to assist in pricing
photography approach the subject as a matter of fine-tuning negotiation skills.
But you cannot teach negotiation strategies. It has to be learned
through empirical experience. More importantly, it's imperative that
this experience be a part of a much broader career strategy. One with
specific direction and intent. Any given business act (shooting an assignment
or licensing an image) should be part of that longer-term strategy for it
to be beneficial.
Most photographers don't think long term—they want to shoot and get
paid. And that's the reason why most photographers fail at the business,
and why most who try to help them fail at their advice.
The reality of the marketplace is that photography is a commodity, and
the gap between the perceived "value" of the product between the buyer
and the photographer is too wide. You cannot close this gap simply
through negotiation strategies. The problem with most pros' advice
is that it side-skirts this very reality.
When the career goals and strategies are well-developed and articulated
in one's mind, new and different ideas, goals and objectives get weaved
into negotiations, which turns out to have win-win benefits. That is, what
might seem like a "bad deal" to a short-sighted photographer who only seeks
the highest return for an assignment might actually be quite beneficial to
the longer term career path—which itself yields higher financial returns.
This concept is discussed at greater length in the chapter, Photography and Business Sense.
The unmentioned variable in this concept is marketing. It not only has
an impact on pricing in the short-term negotiations, but has feedback-value.
That is, the non-financial benefits associated with having gotten the
gig (or the license agreement), which adds credibility and increased
perceived value to the photographer for the next client, contract, or
negotiation. These small, incremental successes build up over time, and,
when combined with other acts in the career-building process, add to the
longer-term financial growth.
In the end, marketing strategies frame how a product is packaged and
presented. Who does that presentation has so much more to do with
perception of price than what most people think (or want to believe),
that to understand pricing, one must also have a firm grasp on the
nature of marketing. That discussion is covered in Marketing your Photography Business.
Nevertheless, with all these elements involved in the recipe, the one
take-away message one must commit to memory is this:
"One doesn't just find a pricing chart and expect to sell pictures with it."
The entire sales process, from the initial marketing and presentation,
to the final closing and collecting of money, contains elements that all
have to fit together symbiotically. This delicate relationship has to be
consistent with the photographer's most fundamental business model. For
example, if a photographer produces a low quantity of images per year,
and focuses on a narrow market segment, then it follows that his pricing
structure should command a high price per image, or he won't yield much
income. So, he'll have to have very strong and focused marketing and
packaging for his business to justify such expenses to his potential clients.
Hence, asking for a high price for images makes sense here, and his success
will be determined by how effectively his other business strategies support
these prices. Conversely, a photographer that produces a huge number of
images per year would be well advised to set up an infrastructure to move
a lot of images to a lot of very broadly defined clients, in which case,
each image is priced pretty low. Trying to claim high prices per image
would require a lot more time spent with clients that would take away from
the time necessary to deal with the rest of the volume of images.
The question that many photographers face when getting started is that
they don't yet know where on that broad spectrum between high-volume and
low-volume they will ultimately fall. Invariably, such photographers (and
readers of this text) are probably unclear on their longer term objectives,
but are at this very moment faced with a sales opportunity for an image
and they need some guidance on guidelines. To that, I can only provide
this simplistic advice: take whatever you can get—it doesn't matter.
That's right, if your career is going to be long and illustrious, it really
won't matter much in the end if you found you got way underpaid in the
beginning. The real value is the important lessons you learn while diving
into the water and learning to swim. The mere value of the experience itself
trumps whether or not you get it right in the beginning. Of course, you want
to learn the most you can, which is why you need to continue reading this
chapter.
This chapter looks at the various strategies associated with pricing
images or services. This includes more than just pricing "policies," which
may be rules of thumb for price adjustments based on certain variables.
"Strategies" exist at a higher level, where policies are modified according
to an intuitive sense for sales as unique transactions.
Sales Basics
To understand pricing, one must understand the sales cycle, which
starts with the product itself, then how it is marketed, and lastly,
interactive negotiations (otherwise known as the sales process).
For purposes of this chapter, I will only discuss the commercial realm
(licensing images and assignments and services). I will not talk about
photos sold as "art" here.
(For that, see Selling Photography Prints.)
What makes selling art difficult is its intangible qualities; it has
little "functional value," unlike software whose value can be analyzed
quantitatively by the amount of work produced. Photography's biggest
disadvantage of all the art forms is its perceived value. A famous
and rare print by Ansel Adams may only go for several thousand dollars,
compared with millions garnered for a painting by an equally well-known
painter. Making up for this handicap is photography's ease and low
expense in reproduction. (Sadly, this may be the reason why its value
perceived to be less, and why it's seen as a commodity.)
On the flip side, these characteristics become benefits: more people
can more quickly identify and understand a photograph than a painting,
making it more suitable for commercial use. That it can be easily
reproduced makes it easier to sell in quantity in broader markets.
But, these contradictory qualities don't always work in tandem.
For example, the value of an image is higher if it is being used to
advertise an expensive vacation package to Hawaii in Conde Naste's
Traveler magazine, versus an image used for a local newspaper ad for
a pet shop. The fact that it's an image has, in itself, no real
value. Its perceived value is defined more by the buyer. (Hence, the
seller has to de-tangle his emotional attachment to it.) Therefore, the
product must be regarded as something that has no value until it is
presented to the appropriate buyers in an appropriate market segment.
This is vague right now, but that's why it's important to understand
marketing.
The critical step in the sales cycle is marketing. Yes, before pricing
comes into play, the most important component of selling photography is
how it is packaged and presented (or, the name recognition of the artist,
if applicable). Marketing can pre-empt the perceived value of the product.
Since marketing and pricing go hand in hand, they must conceptually
agree with one another. Thus, the marketing "message" must be customized
to the target buyer. The product itself is clearly important, but as we
all have seen (and are frustrated by), even the most mediocre images
(and photographers) can sell quite well if marketed properly. This isn't
a new concept; it also applies to software, vacation rentals, horoscopes,
and political candidates. So, above all get your marketing right. It is
strongly advisable to read the Marketing your Photography Business before this chapter,
if only to grasp the bigger picture here. But, marketing can only go so
far—it "sets up the kick," as it were. To really score, the performance
must come from you personally. This comes in the form of:
For any pricing structure to work, it must lie within the circle
of plausible possibilities. That is, the customer has to believe
it. Setting arbitrary prices can be intuitively seen by any buyer as
just that: arbitrary. And you can't set prices high with the expectation
that you'll just negotiate from there—such a strategy will only alienate
more prospective buyers. You can't begin the sales process if you don't
start with the right pricing structure. As mentioned in the beginning
of the chapter, most people think of pricing as static data that can
be listed in a chart. Indeed, there are such charts, and you may end up
making some. But how you make them, and how you use them are important
parts of the larger strategy. So, we must begin by establishing a
plausible pricing structure for your products in your marketplace.
I propose the following foundation:
"Pricing a photograph involves finding that range of values that most of
your likely buyers are willing to pay."
There are several elements to this statement that need to be made part
of your sales paradigm.
First, I used the words, "a photograph."
I didn't say "Pricing photography...", I said, "a photograph." Because
each image is different, it will likely be of more or less value to any
given client. You must establish a mindset that disassociates photography
from the "commodity" pricing model so you can perceive sales as a
process. This won't always apply, of course, and there will be many
times where you sell directly from your published price list (discussed
below). Negotiated sales requires breaking from the "price list"
paradigm, and that will happen more often than not. Many photographers
resist doing this, because they feel they would be regarded as weak
negotiators. That is definitely not true. Weak negotiators are so, not
because they "deviate" from the price list, it's because they do so
poorly. Accepting the fact that price lists are not etched in stone
requires a mindset that you are not selling a bunch of identical widgets,
nor to equally qualified clients.
Next is the phrase, "range of prices."
It's counter-productive to think that you're going to set price points
that (a) people will either accept or reject, or (b) apply to the broader
global market. Selling is ultimately about negotiation, so your pricing
tables should really be thought of as starting points for discussion. It's
true that if you're selling "commodity products," like calendars or even
prints, one rarely deviates from the price list. However, when it comes to
a consultive sale, where someone wants to license an image of individual
and unique uses, variables come into play that don't apply to the
commodity market.
For example, consider an image to be used at a size of 18x22", on the
box for a game being distributed in the Pacific Northwest. There's a
price somewhere for that—what, we don't yet know. Let's also say the
request for the image is for two-years. That's a price adjustment.
Let's also say they just want to use it in black and white—another
adjustment. You don't go to a price list for this, and although you can
establish "pricing policies" to cover various modifications like this,
you optimize return by understanding the "importance" the client places
on the product. The greater their need, the greater the value of your
image, the more you can edge those "policies" in your favor. Conversely,
the lesser value your client places on it (or the lack of "uniqueness" of
the image, etc.) the more willing you may be in relaxing those policies.
The policies are considered your legitimate vehicle for justifying
pricing proposals. Yes, it will happen that you need to lower your price
to make a sale, but you need to save face; you can't just lower the
price arbitrarily, or it'll appear your pricing was arbitrary. Pricing
policies help protect your legitimacy because they give you "good reason."
This is a fancy way of saying negotiation.
In summary, don't look at price lists strictly as the high point, after
which you expect to come down. They are best thought of as "typical uses,"
where different terms and conditions can make the prices rise or fall
accordingly. Your published "policies" may even articulate this point.
(This sets up the buyer for expecting to negotiate.)
Last is the phrase, "most of your likely buyers."
As noted at the top of this section, you can't expect a price list to
apply to the global market. Granted, that's a very loose and vague
term. We live in a global market, but I'm not referring to geographical
boundaries. You must identify your target market, preferably one
that you know quite well (perhaps because you came from that industry
in a previous career). Your pricing cannot be arbitrary; it has to be
based on either empirical experience, where you know the business model
of your buyers (consultive sales), or it has to be researched, where you
understand the buying behavior of the market segment (such as commodity
products). Whoever the buyer is usually has a preconceived notion of the
value of what they're buying before they see your product, and you have
to either meet those expectations, or convincingly justify a deviation.
A discussion of this is found in Photography and Business Sense.
When photographers seek out pricing tables based on published reports
of historical sales, they fail to realize that those prices are based
on negotiation sessions for specific uses, by specific clients, for
specific markets. Having data about ranges of prices for very narrow
market segments may be useful, but the narrower the segment, the
less likely it is that there is a sufficient sampling of data points
to give validity to any of them. In short, they're all circumstantial.
We'll address this again later.
Deconstructing a Sales Strategy
Drawing on the information above, we can identify three major components
of the sales process:
- The Price List
- Pricing Policies
- Negotiation
Each of these can be considered a separate stage in the sales strategy.
Once potential clients have responded to a marketing effort of some
form and an image they're interested in, the first thing they see is
your price list. From there, they usually establish contact, where you
discuss various policies. (These can also be printed as part of your
price list.) At this point, negotiations begin. Let's take each of
these independently.
Establishing a Price List
Figuring out initial price points is the hardest part, because you
need to establish that circle of plausible possibilities we discussed
earlier. So frustrating, this is, that you may think you should have
taken up cooking instead. (I'm just kidding; cooking isn't nearly as
fun as photography because it requires a kitchen, which is dangerous for
those of us who are cleaning-impaired.) So, where do you establish your
initial price points? Doing research on this is like having a severe
mental disorder with hundreds of voices in your head: you don't know whom
to believe! Charts, research reports, coaching software, prices quoted
on other photographer's sites, what your friend, Ed, told you, peer
pressure (what other photographers on the internet claim), and industry
associations all have something to say about the subject. Rarely will
any of these sources agree on actual numbers, but they'll all claim to
be right. The thing is, sometimes they are right! Given the thousands
who constantly chime in with opinions, such as, "Hey Steve! Your advice
to quote $500 for that image was right on!" It can sometimes appear
that someone knows something more than the others. When it comes to
anecdotal evidence, remember this quip:
"Even a clock that doesn't run is right twice a day."
You can never base business decisions on anecdotal evidence, whether
yours or that of a select group of people. You have to see in much
broader terms.
There are various philosophies about the most effective strategy for
determining appropriate price points. Most photo-industry groups
point to formulas for determining prices based on historical models,
for example. The price for an image licensed to a magazine was typically
based on their advertising rates. For a full page ad, the theory held,
if the magazine charges X to an advertiser, your price would be a
percentage of X.
While this certainly feels fair and beneficial to both sides of the
deal, this pricing strategy is not as well received (if even recognized)
to a degree necessary to recommend this method. Using this form of
"formula pricing" will yield just as arbitrary results as reading your
horoscope will predict the future (unless you're a Libra and your moon
is in Aquarius). While it's true that such formulas were the standard
for the industry decades ago, and some media companies still use such
methods for determining pricing, these exceptional cases cannot be relied
upon in the general open market (unless you're a Leo).
There are software programs that can be purchased to assist in coaching
pricing strategies. An example of this is one called Fotoquote, which
is built from a database of statistical pricing from sources in the photo
industry during the previous year. You can look up hundreds of different
photo uses, with thousands of different variations on those uses, and see
how the prices range from one extreme to another. To be sure, each of
these provides some useful context by which you can gauge pricing
guidelines, complete with discussions on people's empirical experiences
for such markets.
There are too many problems with this data, including:
- Surveys only go to professional photographers, agencies, and companies
that buy from them. Truism #1 in the Photography Business states that
this is such a small and disproportionate representation of the entire
market, that the data itself fails statistical integrity.
- The data obtained is entirely voluntary; there is no oversight
whatsoever on the data's validity. Because of truism #1, asking
"photographers" how much they got for any given photo license is like
asking fishermen how big their catch was at the lake on Saturday:
hands spread a little wider every time they tell the story.
- Even if one were to accept that the data only represents the
narrower market segment of professional photographers and media buyers
the number of respondents still represent a statistically insignificant
percentage of that target population.
- Most sales are the result of negotiations based on discrete
conditions that cannot be generalized.
During a time when most image sales were done by agencies, and purchases
done by a limited set of buyers, there would be less price variation,
which may give more credibility to the reliability of this data. But,
as the internet opened up sales to a broader array of sellers and buyers,
consistency and reliability of data goes out the window. Not only are
the variations of both sides of the transaction too broad to conclude any
kind of price stability, but the expectation that such a consistency can
exist is naive. Therefore, relying on any kind of price quoting system
that isn't the direct byproduct of your own experience at selling
is worse than arbitrary. It's like trying to learn how to ride a bike
by being on the bike with someone else that already knows. The real
learning process doesn't even begin till you try it solo. Riding with
someone else gives a more deceptive sense of balance, thereby making it
harder to learn on your own when you finally get around to it.
Still, the search for some basis for pricing is desirable, and while
I would partially agree, I raise the second reason the numbers aren't
justified: many license agreements are often based on multiple images,
multiple uses, non-standard sizes, or any number of complex exceptions
that outnumber the "normal" rates described by a price list. The real world
of image licensing so rarely is based on simple text-book like scenarios,
that the price lists, once again, are deceptive to the point of destructive.
Does that make programs like Fotoquote and other price lists invalid?
The answer varies, depending on how new you are to the business.
A positive spin is that it's a tool, and you have to know how to
use it wisely for it to be effective. Most people don't, which is
why most will will be harmed by it than helped. For the extremely
experienced photographer who already knows the nuances of the industry,
but has come across an unusual circumstance where it'd be helpful to
know how someone else dealt with a similar situation, such data can
provide abstract insight that only a seasoned pro can interpret with
the proper number of grains of salt.
When it comes to assignments, whether "day rates" for an ad agency,
or the services of a wedding photographer, the same kind of data is
available, but again, it's not that simple, but the reasons for it
are more easily understood: a photographer doesn't wake up one day,
decide to shoot weddings, and then look up price lists in charts. More
often than not, he's familiar with the local market and what the going
rates are. Whether he starts as an apprentice for another photographer,
or has some other affiliation with the industry, one who starts his own
wedding photo business usually knows something of existing rates.
That should be the process for any photographer breaking into his chosen
fields of photography, whether journalism, advertising, or even the adult
market. No industry is simple, so it's best approached from the inside.
If you have an opportunity to quote an assignment and are completely lost
about where to start the bidding, you should review the checklist from
Photography and Business Sense. This won't help you determine a good bidding price, but it
will remind you that the value of the assignment itself is probably
worth far more than the money you may receive from it. (Therefore,
you should do what you can to get the gig.) That's not to suggest you
should bid low, just bid "appropriately," keeping the bigger picture
in mind. If you lose the opportunity, you could be losing more than
just the money you didn't get.
For what it's worth, I still get requests for price quotes that have
me scratching my head. Sometimes, the best thing to do is just ask the
obvious question: "Do you have a budget for this?" And if they squirm at
that answer, squirm back: "I can't give you a price quote unless I get
a better sense of what your overall project is like." People always
know how much they want to spend on the entire project, if not the
bits and pieces of it (like photography). Once you get a sense of
their project, it's easier to figure out what their expectations are.
If they're going to use a photo for a banner, and the banner costs
$5000 to make, they clearly find importance on the photo. If it's for
a 1/4-page ad that only costs $200 in the local paper, that's another
piece of data for you. The rest is somewhere in the middle.
If you are reticent to establish your price points because you think
they'll be set in stone, don't worry. I've modified my price lists many
times in my early years as experiences dictated and refinement was
necessary. In fact, as market conditions change, price revisions are
inevitable. So, this is an ongoing process.
Once you establish an initial price list, the next step is to formulate
policies for how and when to deviate from those lists. These are
usually simple, codified terms, such as:
- Per-image discounts for multiple images
- Price tiers based on image sizes
- Multipliers based on volume or distribution
- Per-year reductions for multi-year terms
- Incentives for encouraging behaviors that help you
(such as listing your Web address in photo credits)
- Premiums (mark-ups) to discourage behaviors
that don't help you (like not listing your Web address).
Pricing policies are necessary because most clients are going to have
an infinite number of variations that you cannot write into the basic
price chart. It would be confusing, let alone unwieldy. Buyers expect
some sort of pricing policies to be in place, which even have the added
advantage that such policies are regarded as "accepted price variations."
For example, if someone tries to negotiate down a license fee, you
could counter that he's getting a bargain because you've dropped
the "multi-year multiplier, which would have added an additional 25%
per year." He may still negotiate, but you're on a stronger footing when
you have policies to justify positions. He may continually beat you
back, but policies act as protective fortresses. Through all this, though,
remember that you still need to sell the product, and your price just
may be too high. Therefore, a finger on the pulse of reality is advisable.
As you can see, discussing pricing policies borders on:
Before engaging in any discussion on negotiation, one must have
read and understood Truism #5 in the Photography Business: all photographers are not
equal, and are rarely paid similarly for the same work or image. How much
you are paid, whether for an assignment, or a license fee for an image,
has everything to do with how well you negotiate.
While negotiation is a test of wits, and you can perform better or worse
based on your command of communication (written or oral), it's important
never to forget what you're negotiating about. It's not about the product,
it's the perception of value, as discussed earlier. This is not a
straightforward science, because it doesn't start out having anything
to do with your images. It's the sense of value that the client has for
the use of an image—any image. If the client has
an ad to produce, there's a sense of value the company has for the
photo that will eventually become part of that ad. Some clients value
text, others layout, others "imagery." Determine what's important to
that client before you enter into negotiation, but no matter what, understand
that you're not going to change this perception. You may be completely
correct in your client's poor marketing sense, and that he should value
images more highly in his overall message, but not everyone feels this
way. If he does, that's great, but you're still in the same boat: you
have to convince him of the value of your images (or the one(s) he's
selected). Where you expect to end up, however, must take into account
the client's abstract sense of value for images in the first place.
Once you know the client's general perception of value, there is number of
things you can do to influence his perception of your images. At
the top of that list is who you are. The better you are known
in your given market, the more value will be perceived by those
in that market. (This is why it's important you target the right
market in the first place.) This isn't just about how well known
you are for photography, nor does it even require your name to be
recognizable. (Although, all of those certainly help a lot, as you
know.) The broader point is that the better you know the client's industry
(part of the "who you are"), the more legitimacy your arguments carry
when you discuss business.
The next most important thing is how critical the image is to the client's
need. If the image is to be used to promote a highly priced or
image-branded product, like a cruise ship by a major cruise line's
brochure, it's going to garner a much higher price than the same image
used by an editorial magazine that writes about one of the trips from
that cruise line. Same image, different use, different client. Hence,
different perceived need. Where it gets more complicated in when multiple
variables are at play.
To illustrate a more realistic example, let's consider two scenarios. In
each case, we have two photographers, each of differing skills and
backgrounds. One shoots head-shots of corporate executives, the other
shoots travel photography for vacation magazines.
Scenario 1
A company wishes to hire each photographer to shoot its building
for the cover of its annual report. Neither photographer has extensive
experience with architecture, but the "portrait" photographer has
already worked with the company photographing its executives. (Hence,
he and his prices are known.) The company asks the travel photographer
for a competitive bid.
Scenario 2
A travel outfitter wants to hire one of the two above photographers
to shoot a hotel that will be used in an upcoming brochure. Like the
portrait photographer, the travel photographer also has little experience
shooting architecture, but the outfitter already has experience with
the travel photographer, and the travel photographer's prices are known.
Now, consider each of these questions for each scenario:
- How does each photographer compare in the eyes of the hiring companies?
- How about their bidding prices?
In a sense, you could say that the "job" is identical: shoot the
corporate headquarters building. Shouldn't the pay be the same?
Unless both companies know each other and exchange notes, the likely
case is that their price expectations are going to be based on the
fees of the photographer they know. They're asking for a competitive
bid as a sort of validation check—a form of "due diligence," as it were.
Think about the different ways this could play out and hold that in your
mind as you consider the next case.
Assume that the travel photographer is perceived as the "better" of the
two (by both companies). Now consider how that affects the two questions
above. Here, the complication adds a "reality twist" that many people
underestimate. Once "need" has been established, the question is how it
affects perception of price. That expectation is based on the history
with the known photographer in each scenario, but is complicated by the
fact that each photographer's skill varies. Now consider these questions:
 How do the photographers bid, knowing that the other is involved?
Does the better photographer lower his rate because he knows he's
competing against a lesser-skilled photographer who may have lower
rates, and he doesn't want to lose the bid? Does the lesser-skilled
photographer lower his rates for the same reason?
Do clients think they may be at risk if they hire the lesser-skilled
photographer and not getting what they really want, thereby prompting them
to pay the higher rate for the better photographer?
Does the client use the lower price point from either photographer
to negotiate against the other?
If you think you know the answer to these questions, you're not thinking
wisely about this sort of thing. There is no way to predict how people
think and feel about this stuff at face value—you have to know them to
understand what they think. What's their risk aversion? What's their price
sensitivity? How important is it? As for the photographers, they too
have challenging questions to ask. Should they lower rates in order to win the
assignment? Should they keep rates higher to maintain integrity in their
pricing? However you look at this, remember one thing: there is no
universal truth about how to play this strategically.
The example above illustrates how perception of price and value play
into the decision-making processes on all sides. Pricing "policies"
are useful for handling whether to add or subtract a little here and
there for variations on use. But, as you can see, it has nothing to
do with how you handle negotiations.
Negotiation Sticking Points
Sticker Shock from the initial price list is probably the biggest
reason sales don't happen. And it isn't always because prices are high.
Clients can dismiss products because they're too inexpensive, too. For
example, the rage over royalty-free images on CDs were initially hot,
but time has proven to most serious buyers that the images they get are
pretty useless. The $300 or so that they spent isn't the real cost, it's
the lost time associated with searching volumes of CDs, only to come up
with nothing that upsets clients more.
Furthermore, sticker shock isn't always from the client; you might
dismiss a client who offers a price you feel is so low, it's not worth
negotiating. When you do negotiate, how do you find the middle? What
is the "best" price? Again, review the checklist in Photography and Business Sense for other
benefits beyond just the money you receive: you don't always need to reach
the highest price, just the best price.
Fotoquote Ratesheet for Catalog Pricing
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For example, look at the following price chart, where it indicates a
price point of $1500 for a full page ad. What do you do if you get an
offer for $250? Do you turn it down because you're under the impression
that it's worth more? Which "truth" came first? The amorphous "statistic"
of $1500 from Fotoquote? Or the tangible offer of $250 that you
know you'll receive if you accept it? It's a good question, and one that
has very impassioned arguments on both sides.
Some clients actually do this: they dismiss price lists and negotiations
completely and just offer a price. This is actually fairly common
among bigger publishers or those who license images frequently. Here,
the negotiation is easy: you accept or reject. (It may or may not be a
good deal, but it is easy!) Here, the business decision changes a little.
There's no question that by not taking the offer, that's $250 you
didn't get. The question is what are the longer-term ramifications of
this decision? One argument is that you've established a lower price
point, making it more difficult to get a higher price from the same client
in the future; or, that you've set your expectations unreasonably low,
and that you will underbid future opportunities, undermining your own
business. Many who work in the industry would also curse you for doing
so, arguing that you erode prices across the board, affecting not just
your own lower rate, but that of the industry as a whole.
The counter-argument is not so straightforward. First, you never know
what the reality of pricing is till you try it yourself. Everyone
in the business has stories about how they dramatically underbid a
sale (or many of them) when they were just starting out. In each case,
they chalked it up to beginner's naiveté, that if they'd just
"known better," or were more confident to stand their ground, they
would have gotten the better price. While it's comforting to believe
it's as simple as that, there's more to it. Sure, confidence and other
elements to negotiation play a huge role, but you can't manufacture such
a quality out of nothing and expect to use it to your benefit. That is,
you can't just stand firm and expect it to work.
For my business model, anything that requires time is costly, and
I want to be paid for it. Whatever I have to do to close a sale is
work I'm not doing for any other purpose than that sale. Once the
sale is done, the time and work I invested is lost, and that's lost
opportunity to be building my business in a much broader sense.
Even the process of negotiation is time-consuming. The more work it
requires, the more money I'm going to charge. Negotiations start on
my price list, then I get to know my client (this isn't a drawn out
process; it's a short exchange of emails), and then it's about how much
time I have to spend.
Broadly speaking, I like to confine any work I do to things that
contribute to my business as a whole. When I work on my Web site, that
work enhances my entire business. When I do research, I am getting new
information that eventually translates to optimized prices. When I produce
marketing materials, I do so in a way that I can reuse them over and
over. Anytime I have to do something again is time wasted. Similarly,
immediate payment speaks loudly, because I hate having to bug people in
email about late payments. When I can spend time doing things that
generate new revenue, I'm happy. Slow me down, I'm unhappy and I charge
money. (Ok, I'm happy then too, but I still charge money.) I stand firm
when I know I can stand firm.
Seasoned professionals learn the subtle nuances and other cues that may
suggest when it's time to stand firm, or how to maneuver the client in
a way that makes the price more persuasive. Moreover, these cues are so
subtle, they don't always know when they've sensed it. It's similar to
looking at a human face that has a wide-eyed look. Is it fear? Is it
surprise? Is it anger? Is it laughter? One can't always articulate what
it is they see, but there is an intuitive sense for it that we develop
over time that just knows. The same is true for negotiation: just because
you may start out with lower bids, doesn't mean that you could have done
any better. Moreover, it doesn't mean that low bidding in the future is
a bad idea either. You just have to develop the sense for it.
An example that illustrates how my thinking applies to a "low-bid" offer
follows:
I happened to get two calls at the same time from two different people:
one in Kansas, and one in New York City. Both were realtors, both dealt
with high-end real estate property in their areas, and both wanted to
use a (different) photo for a 4x6" postcard used for direct mailing to a
targeted mailing list. The NYC realtor sold properties only over $3M;
the Kansas realtor's properties maybe would get to $250K. By fortunate
coincidence, I talked to the Kansas guy first. He looked at the pricing
guidelines on my site, and paid the listed rate of $645. The NYC
realtor wouldn't even consider it. She wanted only to use the image in
exchange for her putting my name and website (in small print) on the
card. As most clients will tell you sooner or later in a negotiation,
"your name will be seen by thousands of people!" (Clients always use
this as a form of negotiation to beat down prices. They also believe
they know how to market you better than you do.) Anyway, there was
just no way she was going to pay a dime over $100 for the image. But,
as I've pointed out, that's $100 I would otherwise not have at all.
You're probably assume I took the $100. Before I say, think about what
you would do and why. Think of all the reasons for and against both
decisions. Ok? Ready? The envelope please...
I didn't take the sale to the NY client, probably for reasons other than
what you predicted. First, while it wasn't a main issue, there was an
unusual problem in that I didn't immediately have the image in digital
format, ready to go. I would have had to go locate the slide, scan it,
and photo-touch it for dust and color-calibration before giving it to
her. This often takes long enough that no sale is worth less than
$300 (for me).
The more important reason was that she was just a difficult person.
You never really appreciate how costly it is in time and other intangibles
to deal with such people till you do it a few times. You quickly learn
that it's never about the money; if they have a problem or an issue,
you have to deal with them. A lot. If you think they were difficult in
negotiations, imagine how they'll be as you continue with business.
Whatever their problem is, it won't be an easy one to solve, because
they often have issues well beyond that of business. Difficult people
are so for reasons other than business, and they will continue to be
difficult as long as you continue to work with them.
The third criteria, which can apply to many more types of sales,
was that I had no future opportunity with this client. She was a
realtor that didn't license images often, so I had no incentive to
give her a discount. I've had clients that are in need images on a
regular basis, and these customers deserve (and get) price breaks.
In some cases, people "promise" to be future clients, and I always
counter with, "great! So, I'll give you a discount by selling you
multiple images at the same time (now), and deliver the future
images to you when you need them." This always shows their true
colors. (Hint: I've never had a long-term client actually tell me
he was going to be before the sale.)
"Free" Use of Images
The nature of the photo business is that your photos are your assets
that you sell to make money. But assets have value, and can therefore
be used as barter currency to get "opportunities" that promote your
business. You may hear many photographers say, "never give away images
for free," but that's an overly simplistic viewpoint. Instead, it should
be "don't give your images without recognizing some value in return."
This often comes up because photographers are often offered a photo
credit in exchange for using an image in a catalog, for example.
Clients want to minimize their costs, and they know that photographers
need help getting visibility. It's their perception that the photo
credit in exchange for the image is mutually beneficial. Some in the
photo industry say this is always bad, because it devalues your photos,
and makes it harder for other photographers to keep their prices high.
None of this is true. There's certainly nothing "wrong" with giving
away photos for use by a client in exchange for something that isn't
cash. The question is whether what you get in return actually contributes
to your business growth or evolution. Is a photo credit a good barter
exchange for your photo? During a time when the best (and only) way to
market yourself to prospective buyers and agencies was to have a strong
portfolio of name-brand clients in great glossy-looking catalogs and
magazines to show that you had experience and panache. But such marketing
techniques these days is limited to a tiny portion of the photo industry
these days, mostly fashion and advertising photographers. These days,
the usefulness of a portfolio is waning along with film itself. You
may still find many old-school pro photographers who still use film,
and still use portfolios, but the vast majority of new photo business
"development" is done digitally and on the web. What this has to do with
pricing of images is simply that sales and marketing go hand in hand.
Marketing opportunities may affect the price you charge for a photo,
even to the point of free.
Giving your work to clients is fine if their use of the image actually
helps promote your business. Catalogs don't do that. Why? Because photos
buyers don't look at catalogs, and the use of portfolios is less
common (or effective) in self-promotion. Consumers look at catalogs,
which means that you could conceivably permit a free use of the image in
exchange for the photo credit giving your web address (in a font size no
smaller than the rest of the text on the page). Having your website listed
is far superior to your "name" because that's like a free advertisement.
Well, it has value if your photo business involves the web and you
target consumers. (If not, then it's not such a great value.)
Another way to use "free" in proposals is to offer free use of your photos
on their website in exchange for their paying for the print uses. Here,
you could stipulate that the web use include a link back to your site.
A third alternative is to let them use the image for free so long as they
purchase another one of the same or higher value. This is a successful
way to rope clients in and keep them coming back. Of course, you also
have to prepare to execute this agreement properly—never ever let
a client use the future tense as part of an agreement. That is, don't
let them say, "we will license another image at some future date."
They will almost assuredly never do so. Even if it's written into a
contract, they don't care. Instead, make them pay today, and they can
have the use of this image today and another image at a future date when
they choose. This way, money is paid and if they flake out on their
free image, then that's their loss, not yours.
When I got started, I've used techniques like free use of images in
exchange for free or discounted travel. Today, I still engage in giving
away photos or other services if I feel the opportunity I'm getting in
return ultimately leads to more or better business. But what I considered
"valuable" yesterday is not the same as what I do today. No pro should
ever get out of that mindset.
You should always look at any "exchange" in terms of how it grows or
contributes to business. It isn't always cash, and when it isn't,
understand the value of what you may get in return and weigh it
accordingly. If you ask, "should I give the image in exchange for a photo
credit," and you genuinely don't know the answer to that, then the answer
for you is no. Your business may evolve someday to the point where
such a barter might, in fact, be valuable. The same strategy doesn't
work for everyone. And that's what it all boils down to: strategy. Know
what it is you need or want, and be willing to barter in exchange for
those things. Unless you know you need it, you don't. Don't try to
be like a chipmunk, hoarding things that you think you might need in
the future. Your cheeks can get pretty big and you'll invariably make
poorer choices, thereby passing up better choices that lead to better
opportunities later.
Pricing Summary
Pricing is the hardest part of the photo business. You start with a
target market segment, then create your marketing strategy, and then you
go through the sales process. In each of these steps, you're going
to fumble around a bit before you get it right—they do not have to
be executed to perfection before you go to the next step. What you'll
find, if you play it smart, is that successful pricing is the result of
knowing your client's business model and the subtler nuances in their
negotiating styles. So, let's review:
Don't set pricing expectations on single data sources.
While pricing charts provide great information to know and reference, you
need to dispense with your emotional attachment to them. When you're
getting started, consult many sources to get a handle on various price
structures, but don't expect to reliably use any of them right off
the bat. Keep in mind all the truisms discussed in the Photography Business, as these
will help you maintain a business mindset and perspective.
Consider the cost of doing business.
All things considered, if it takes 30 seconds to email an image to a
client, that's worth a lot of money in the form of time and overhead
saved, than if you have to locate a series of potential images that you
have to send to the client, who then chooses among them. Even a paying
client can be costly in indirect ways if you're not careful, so be sure
you don't find yourself chasing what appears to be a hot prospect, only
to find out that it's a dud. (And don't worry, it's easy to accidentally
fall into this; I still do from time to time.)
Consider the benefits of the ancillary aspects of your business.
There is value in the form of marketing and "name recognition" for
certain clients, and you should consider the intangible benefits of any
given sale beyond just the money. While I don't place much value on some
"photo credit" exchanges (I just "require it" out of hand, and don't
allow it to become a negotiating token), there are always exceptions.
As such, certain barters are more valuable at one point during a career
path than they are at another.
It's all about Volume.
When it comes to total annual revenue, there are two basic sales
models: lots of volume of low-priced items, or fewer sales of high-priced
items. The key is all about infrastructure and administration. If
you work better alone and with clients on a one-on-one basis, you're
probably better off with the higher-price/low-volume sales model. If
you are good at setting up and managing workflow processes involving
employees, you'd be better at the high-volume/low-price model.
If I had to part with any last piece of advice, it'd be to maintain
critical thinking. I found that simply knowing how the industry worked
gave me better negotiation skills and a more credible platform to state
my case for higher rates. But, the reality is that pricing is and always
will be, an amorphous concept that we never really grasp. You just have to
get better at it without expecting to perfect it.
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