Many commercial photographers struggle with pricing. They wonder whether they’re charging enough (many are not) and they’re not really sure how to establish their prices in the first place. Some defer to the local competition to set the going rate, while others simply calculate their cost of doing business and add a little on top. Both of these approaches are inadequate according to business consultant and pricing expert Dale Furtwengler, author of Pricing for Profit: How to Command Higher Prices for Your Products and Services.
“It’s a big challenge for a lot of businesspeople,” Furtwengler says. “For this reason: finance is really only taught to this one group of people. I’m a CPA by background, so you learn to quantify a lot of things in business. But most people aren’t taught how to do that. And unless they go to somebody who knows how to do that… Even a lot of CPAs use ‘cost plus’ pricing, they don’t use value based pricing.”
In contrast to cost plus pricing, value based pricing means not limiting yourself to what your competition is charging or what it costs to keep your doors open. Photographers who have shifted away from day rates in favor of licensing fees have essentially moved to value based pricing. Two different assignments might take the same amount of time and materials but they are priced very differently because the value of the product delivered to one client is significantly higher than the value delivered to another. This value-based pricing, Furtwengler says, is the first step toward premium pricing.
“We have an instinctive perception that there’s a direct relationship between value and price,” he says. “We develop this at a very early age. There’s an instinctive sense we have that if a price is too low—unless we happen to be price buyers, which a very small percentage of the population actually is—that there’s got to be something wrong with it—some deficiency in quality or service or convenience or something that is driving the price that low. By raising prices, you’ll price yourself into work. You’re creating the perception of value.”
“How many brands can you name that have been around for a century or more?” Furtwengler adds. “You start listing companies like Kraft, Johnson and Johnson, Coca Cola, Proctor & Gamble… All of them have a premium pricing strategy.”
Furtwengler says there are a few key steps that will help businesses develop premium pricing. They can be implemented by anyone—even professional photographers—in order to develop pricing confidence, increase prices and ultimately maximize profits.
“I know how severely underpriced most companies are in their pricing,” he says. “It’s as much art as science. But basically there are five elements to a premium price strategy. The reason most companies don’t get compensated well for the value they provide is because one or more of these five elements are missing or not congruent.”
5 Keys To Premium Pricing
1. Make a clear brand promise
The brand promise is what customers should expect as the results you will deliver. Some companies use their tagline to communicate this, but if the tagline isn’t appropriate, you’ll be communicating the wrong message—and an empty promise. For instance, black and white portraiture may be your process, but what you’re really delivering is meaningful family heirlooms that will be treasured for generations.
“I define a clear brand promise,” Furtwengler says, “as a result that the customer is going to get. A lot of smaller businesses in particular use taglines to communicate that. But unfortunately most of the taglines that get used are descriptions of what they’re going to do. And frankly customers don’t care how we’re going to do it, they just want the result. So when you create a tagline that communicates a result, then you automatically differentiate yourself from your competitors because that’s what people are interested in—not the process of being a photographer.”
“A good tagline can do three things,” he adds. “It will succinctly communicate the result the customer is going to get. It will beg the question how do you do that, so they give you permission to tell them more about what you do. And it lays the foundation for benefit statements in the sales call.”
2. Make a psychographic profile of your ideal customer
Determine the profile of your personal ideal customer and why they buy what you’re selling. You may think customers choose you because of low prices or great lighting, but in fact you might be closing sales because you’re easy to work with and have extensive experience that clients find reassuring. Without a meaningful understanding of your ideal customers, you’re shooting in the dark. Worse, you might be aiming for the wrong target.
“The profile is based on the values, ideals and characteristics of your ideal customer,” Furtwengler says. “That’s different than demographics. With demographics, lets say you own a Mercedes dealership and you know all your customers have six-figure incomes and they live in certain zip codes. Those are their demographics and they’re accurate. But what they don’t explain is why there are people in those zip codes buying Audis and Hummers and BMWs. Until you get to that why, you really don’t know who your ideal customer is.”
“It’s not that difficult if you know what you’re looking for,” he says. “Why did you create the product the way you did? That tells me a lot about what’s important to you, what you value. I ask my clients about their most enjoyable customers and why they’re so much fun to work with. And then I ask them who their most profitable customers are and why they’re willing to pay more than the other customers. When you regulate those three answers you get a pretty good idea. “
3. Make a positioning statement
The positioning statement is the core marketing message, the theme of all your outreach. It will attract the type of customers willing to pay a premium for your service because they value what you have to offer.
“The positioning statement,” Furtwengler says, “or marketing message. Once you have it it’s much easier to write marketing scripts, whether for your website or brochure or whatever, that are going to attract those kinds of people and filter out the ones who don’t fit. Price becomes less relevant when they already know it’s going to work.”
“As an example,” he says, “I have a customer who is an ergonomic equipment manufacturer. The tagline became “leveraging the power of man.” Because people can load more product more quickly and safely with that equipment. How do you do that? Well, we customize the gripping system for your application. Then in the sales call the script that I gave them was ‘we leverage the power of man physically and fiscally. Physically, your people are going to move more product more quickly and safely, which means all that profitability is going to fall to the bottom line. And by the way, your workers comp is going to go down, your insurance premium is going to go down and all the mistakes that get made when somebody’s filling in for somebody else, those go away.’ So you just build such a compelling value proposition that the price becomes irrelevant.”
4. Sales scripts…Asking the right questions so clients see your value
Clients want to see value translated into actual dollars. Sales scripts that encourage the customer to do the math will help accomplish that. “These are not ‘how do you get in the door’ kinds of things,” Furtwengler says. “These are questions that are designed to help you quantify the value to your customer, and to engage them in the calculation—to help lead them through a calculation of value. So the client is going to help determine what that value is. And then you base your pricing on that value.”
“The questions are going to be different depending on who you’re doing the work for,” he continues. “If I was doing the work for a company that does a million dollars in revenue and I could improve their revenues by 10%, that’s $100,000. Another company doing $10 million, it’s a million dollars. They shouldn’t pay the same price because it’s not the same value.”
5. Give clients choices with bundling and pricing
Provide customers options; groupings of offerings that give them choices without compromising profit margins. The best wedding photographers have long been experts at this, offering increased value for customers willing to spend more for larger packages of prints and albums.
“The fifth element is the bundling and pricing,” Furtwengler says. “And typically what I do with clients is we come up with three options so that a customer has choices. You always want to give them choices. One of the things that’s different about my approach is that a lot of salespeople will tell you to sell up: start with your lowest price and then sell the add-ons. Social psychology studies have shown that you want to make your big ask first, and if they don’t go for that then you offer them something a little lower priced. So we come up with three options and I teach them how to present it. The other thing is, when they say ‘no, that doesn’t fit my budget,’ then you say ‘alright, well I do have a second ‘ so this is the middle offer, and you lay it out for them and you tell them the price and you say ‘now, just to help you, this is what you’re giving up if you go with this option.’ There’s a lot of power in that language, and I’m very specific about ‘giving up,’ because nobody wants to give up anything, they just want a lower price. And that’s their way of trying to get it. But what you do when you say ‘what you’re giving up’ is you’re forcing them to do a more conscious evaluation of what’s important. Then whichever way they go they’re going to be happier with the decision because they made a more conscious, deliberative decision.”
To learn more about pricing strategies, visit Dale Furtwengler’s “Pricing for Profit” website.
About the author:
William Sawalich made his first darkroom print at age ten. He earned a Master's Degree from The Brooks Institute of Photography in Santa Barbara, California. Along with portraiture, still life and assignment photography, Sawalich is an avid writer. He has written hundreds of equipment reviews, how-to articles and profiles of world-class photographers. He heads up the photo department at Barlow Productions in St. Louis.