Pricing is always a hot topic for creative services like photography and videography. Why? Because it can get complicated quickly and it’s stressful, confusing, and overwhelming. Often it seems there are no straightforward answers (that’s because there aren’t).
I’ve worked with dozens of photographers who have been in business for 15+ years and still feel confused by how to price their services. When I started my photography career ten years ago, I remember feeling all those unsure feelings. I took an entry-level business course at a local non-profit organization and they talked about Cost of Goods (COGS) but didn’t cover – or even understand – the intricacies of offering services in a creative field, as opposed to a simple widget-type product. Even when I started to tread water in other areas of my business, photography pricing was still this mysterious section. It wasn’t until I took a masters-level accounting and finance course that I finally started to piece it all together. But the thing is, it shouldn’t take all of that in-depth, detailed financial knowledge to start feeling comfortable with your own pricing. The good news is that it doesn’t.
5 Key Considerations to Guide Your Photography Pricing
You don’t have to know everything about business or finance to feel confident in photography pricing, but you do need to know the specifics of your personal business and your industry. I cannot tell you exactly how to price your service and work. In fact, if anyone is telling you exactly how to price, beware! It’s some real shady business and borders on price fixing (which is a federal crime). That being said, what I can do is give you some solid guidance of how to think about pricing your individual services.
After working with and surveying hundreds of professional photographers, I’ve identified 5 key components that will help you to price your services:
1) Photography Pricing Comparison
2) Market Saturation
4) Target Market
Each of these components takes up a certain portion of the overall photography pricing pie. How much weight is put into each segment is completely dependent on your specific location and industry. Some locations are highly competitive. If that’s the case, differentiation may be more critical to consider when pricing yourself.
Let’s break it down.
Photography Pricing Comparison Tactics
Often, this is where most creatives start. Which is great, but then they stop. Which is not great. It is an important piece of the pie, but it cannot be the whole pie. Researching pricing entails looking at those who are both your direct and indirect competitors. It also means knowing the industry as a whole to understand where your value, offerings, and experience may fit.
Frequent question #1:
If I research the industry, why can’t I just price myself competitively with other photographers? Why do I need to do all the other stuff?
To put it simply: because many photographers don’t do the math. We’ll get into costs in section 5, but often when solo entrepreneurs (not just photographers) start their own business, they don’t consider all 5 segments. They end up guessing based on their own skewed perception and, more often than not, their guess is far too low. Sooner or later they discover that they can’t sustain a business on their pricing, so they fold. It’s really difficult to raise your prices once you’ve become known as the “cheap photographer”. It’s one of the big reasons why photography businesses have such high turnover.
So if you’re pricing yourself based on what others are pricing themselves at, you may be completely undercutting your time, your talent, and the ability for your business to be sustainable.
Frequent question #2:
Why even consider what other photographers are charging at all? Shouldn’t I just do my own thing?
You need to know at least a ballpark of what others are charging for a similar service, because your clients are price shopping. If you are completely above or below the rest of the industry and can’t educate or easily explain why, the cognitive dissonance will cause customers to turn away before they even step foot in the door.
Market Saturation and the Photography Industry
Everyone who lives in or around a city works in “the most saturated market”. It’s true, cities are highly competitive for entrepreneurial small businesses – especially cities where creativity, arts, and culture are nurtured. More rural areas can allow for more control surrounding your own business’ pricing. If you’re one of two professional photographers in town, your need to compete on price goes way down. If that’s the case, this segment may carry less weight than the other sections in your pricing pie.
If you’re in a big city or a more saturated market, you’ll need to dive deeper. How many photographers provide a similar service in your specific niche? Is there a hole that you’re able to fill? Often in over-saturated areas it’s more beneficial to specify the services being offered instead of generalizing and offering a little of everything. Before you can start to understand and translate your differentiation, you need to research and understand the competitive landscape as a whole.
A few priming questions to help you research the saturation in your own area:
• How many businesses generally offer what I offer?
• How many businesses offer specifically similar services?
• How long have these businesses been around?
• What has made successful businesses sustainable?
• Why do customers continue to go to these businesses?
• Is there potential for growth or contraction within the market as a whole?
• Is there a hole or a need that my business uniquely fills?
Define Your Value/Differentiation from Other Photographers
What makes you unique or different from the person standing next to you? What unique value do you bring to the table? Does your value lend itself to a higher volume pricing model, an elite service, or somewhere in between? For photographers and videographers, the discrepancies in style can sometimes be subjective, so when considering your own differentiation, these questions also need to be filtered through the lens of your target customers. Their experience and their end result need to match the value that they give (how much money they pay).
And this is where some real honesty is needed. We all want to believe that we offer something bigger and better than our competitors; but if that simply isn’t true, or if it doesn’t translate, it can’t be a deciding factor when pricing your services. This is not a judgement on the quality of work, it’s an authentic assessment of how your value fits in the greater market and is perceived by your specific target audience.
I often use the example of the “Wal-mart vs West Elm” spectrum. Both companies sell furniture, but the perceived value of the items being sold are very different. And while many people want to poo-poo Walmart (or other volume-driven organizations), their profits outdo their high-value-driven competitors year after year. As a photographer/videographer, you need to understand where your delivered value falls on the spectrum – and then pricing needs to match. You can be very successful being either Walmart or West Elm, but you cannot be successful delivering a West Elm value for a Walmart price (or vice versa). Value given has to match value received.
Study Your Target Market When Building Your Photography Business
This is a big topic in and of itself. While all five of these segments are constantly evolving over the life of your business, this segment is the most critical for businesses to understand and stay current. Always keep your thumb on the pulse, so to say. It affects not only pricing, but also marketing strategies, branding, and growth trajectories.
It is important to understand your target market when considering pricing specifically because it gets into the mind of your customer. Consumer behavior is a HUGE topic in business. You don’t need to know all the intricacies of consumer behavior, but it is important to know how your specific target market’s buying habits will affect your business and your pricing. We all have that friend (or client or relative) who won’t even consider paying the lower price being offered for a product or service because it means that it’s inferior quality. The same is true for the reverse. Many people can’t imagine why anyone would pay those high prices for furniture. For many (but not all), price communicates overall value.
Ask yourself these questions:
• How does your target market see the value of your service fitting into their life?
• How much are they willing to pay for that value?
Another reason target market is important to consider when thinking about pricing is that it might determine how you bundle your services (or maybe you offer á la carte). For some, it’s more appealing to have one simple, combined rate. They don’t want to do the work to include little odds and ends and customize your services for themselves. For others, they need to feel like they’re getting a tailored experience. Knowing how your customers shop will guide you in setting up your pricing and offerings.
When observing and gathering this information, it’s important to be impartial and honest. To really understand your target market, you need to get out of your own head. It’s not about your perception of how they value your service or spend money, it’s about interpreting the reality. It’s why good marketers and agencies rely so heavily on data. Data helps to remove our own biases.
As you’re considering the ins and outs of your target market, it’s easy to get overwhelmed. Keep in mind that this is an ongoing process. You don’t need to know all the details to set your prices. You need to have just a general understanding to get started. The details will guide you through education, writing copy, and communicating the value around your price.
Know the Cost of Doing a Photography Business
There is so much to dive into when it comes to costs. I love talking numbers but for this we’ll stick to how it will inform your pricing decisions. Here’s a quick finance recap. There are two types of costs (expenses) to know.:
• Cost Per Job, aka Variable Expenses
These are dependent expenses – those that you only have when booking the job. You need to know all of the costs of each job you’ll be performing because you need to know the margin. If you take nothing else from this post, take away this: margin is majesty. It is the most important piece of knowing your business’ finances. You need to know the margin for each and every service that you offer.
There is a reason that this is always the first question asked from the sharks on Shark Tank. It’s so important because so many decisions (and your business’ growth) hinge on your margins. Once you know your per-job margins, you can start to estimate or project your annual (contribution) margins based on the number of jobs you’ll be booking.
• Annual Cost, aka Fixed Expenses
These are independent expenses – those that you will need to pay regardless of how many jobs you book. The collective margins for all of the services you offer and jobs you book need to cover your annual costs.
So when considering costs when pricing your services, make sure the price covers the per-job costs and leaves enough to contribute towards your annual fixed costs. What’s left over after covering all costs is what you’re able to pay yourself.
In the above example, will $31,712 be enough left to pay yourself? If not, you need to raise your price (more than $2,500), book more jobs (more than 32), add in another segment of offering to your business (maybe a “job B”, or a product), or lower your total expenses.
You can see that pricing a service is multifaceted, which can sometimes be complex. It’s a lot to think about and takes time to assess for each and every business. What I can say with full confidence is that doing the work to consider all five segments of the pricing pie will save so much time in the long run. From my own personal experience (and from watching others live through it), I know that it’s no fun to be 5 years into your business and realize you’ve not priced high enough to possibly cover all of your fixed expenses – or that your low price is actually turning off your target market.
Removing the guesswork will not only allow you to run a sustainable photography pricing model, it will also allow you to feel more confident about your photography pricing. No more awkward silence when a client asks “what’s the price to book you for another hour?” No more talking your own self down in your pricing because you don’t “feel like it’s worth it” – now you know how much your target market values your work. No more hesitation in naming your rates because you’ve actually done the math. And now that you have some tools to better understand pricing, go forth and make some money, honey!