Six key elements of pricing

Know what your costs are

This is very sim­ple and yet a lot of folks dis­re­gard it because they think it entails a lot of left brain machi­na­tions. I’m here to tell ya if that was the case I’d never ever address it…because while I grew up as the tail end of the slide rule gen­er­a­tion I’m lucky to add 2+2 and get four if I have to do it in my head. Thank­fully, I don’t have to any more due to the advent of those funky things we called Goesin­tas ( as two goes into four or calculators).

While it may seem obvi­ous that your prices must at the very least cover your costs and if you intend to sup­port your­self with your work the price must also include some­thing extra to help you move out of your van. This process is called know­ing your “Cost of Doing Busi­ness”. In its small­est form it amounts to adding up all the things you need to spend money on that

Cover the costs of the stuff you need to have to make your stuff… in other words sup­plies, expenses like costs asso­ci­ated with fir­ing a kiln load of pots.

Let you move out of your van, like PROFIT.

To do it the short way, just add up your stu­dio related expenses to get a base num­ber that will show you the least amount you need to make to keep your credit card bill down and your stu­dio work­ing. That’s your Cost of Doing Business.

If you then sub­tract that from the income you receive you will have the min­i­mum you need to at least break even.

How­ever, I would sug­gest an eas­ier way that would give a good idea as to what you need to make to cover all your costs while fac­tor­ing in a desired profit (for mov­ing out of the van). There are a cou­ple of tools avail­able that I have used in my pho­tog­ra­phy business.

• NPPA (National Press Pho­tog­ra­phers Asso­ci­a­tion) Cost of doing busi­ness cal­cu­la­tor which is an online tool.
• ASMP (Amer­i­can Soci­ety of Media Pho­tog­ra­phers) Cost of doing busi­ness cal­cu­la­tor which does the same thing as the NPPA one only in more detail and as an Excel file. It is also designed to let you deter­mine your annual income
  You can down­load it here: cdb_calc_06
• Art Worth Calculator

Know what you need to keep you in your studio

Ok…now you know how much it costs to make your stuff and to at least keep you from either liv­ing in your stu­dio or out of your van. It is prob­a­bly safe to say that you’d really like to have liv­ing arrange­ments that at least gave you a kitchen and your own bath­room, so now you have to fig­ure out what you need to make to get those tow impor­tant things. It is called profit and amounts to income that isn’t eaten up by other costs.

This part is more art than sci­ence and sub­ject more to your own pref­er­ences than any­thing else. I gen­er­ally, list out the things I need… like pay­ing myself, upgrad­ing com­puter etc. And then pri­or­i­tize them by their order of impor­tance and NOT by their cost because cost can lead me down a rab­bit hole. Once I’ve done that, I add what I call con­tin­gency which can be any­where from 50 per­cent to 100 per­cent to get the profit I need to make. The details of pric­ing indi­vid­ual prod­ucts will be cov­ered later.

Know your mar­ket and its buy­ing habits

Before you attempt to set pric­ing strate­gies you gotta know they have a chance of work­ing with your mar­ket. So spend some time now review­ing your per­fect buyer pro­file and both your mar­ket demo­graphic and psy­cho­graphic descrip­tions. What causes them to buy? What type of stuff do they buy? How do you really fit into their buy­ing habits?

Know what you are really selling

Instead of describ­ing what we make in a way that would put even the most ADD among us to sleep in sec­onds, we are going to look at how to REALLY describe what we make and when to use that descrip­tion. For now just start­ing think­ing of your stuff the way a chef might describe a sen­su­ously lux­u­ri­ous meal.

Know which three types of buy­ers you attract

There are gen­er­ally three types of buy­ers and it is impor­tant to know where yours fall. Know­ing where your buy­ers fall will be key to your abil­ity to price and sell with­out dis­count­ing. The three types are:

Those who will­ingly pay full price for your stuff because they know and trust and they know the value of your work.

Those who shop for cheap stuff because they really can’t afford much let alone your pre­mium prices but they do rec­og­nize your value.

Those who are hunters, always pur­su­ing the lost price pos­si­ble as a tro­phy with­out regard to qual­ity. These folks proudly brag about how they “saved” five cents on a whatzit despite using up $10.00 of gas hunt­ing and bag­ging the prey.

Know­ing this infor­ma­tion can help you with your pric­ing strate­gies by help­ing you under­stand what trig­gers their desire for your stuff.

Know your mar­ket position

Go back again and check your busi­ness model as well as your USP and make sure you are clear on how you are posi­tioned in the mar­ket. Does pric­ing play a major role in your mar­ket posi­tion. So if you are posi­tion­ing your­self as a true artiste aim­ing at the lux­ury mar­ket low pric­ing may hurt you. Your pric­ing must be con­sis­tent with your position.