This chapter is from the book
This chapter is from the book
This chapter is from the book
You Are Not Wal-Mart
It is very tempting to think that price alone gives us a competitive edge. If I just price myself low enough, the thinking goes, I’ll get the gig. It’s not surprising we think this way, given the proliferation of big-box stores and the “lowest price is the law” mentality of the discount retail market. The problem is in transferring this line of thinking from one based on thousands of units of cheap widgets to one based on a unique talent that can only be in one place at one time and has a specific cost of doing business. You can’t compete on price alone, nor should you. In fact, doing so can harm you and the industry. Here’s why.
You have set costs, and unlike a department store, which can lower their prices to only pennies above cost—sometimes even going below cost, creating what is called a “loss leader”—you can only sell one of you. A loss leader is an item sold at a loss in order to pull customers in with the hopes of selling them other items at a higher profit margin. They lose $5 on one item with the hopes of making $20 on another. You, on the other hand, can only be in one place at a time.
Furthermore, if you and other area or industry photographers begin a price war you sabotage your own branding and value. There is only so far a competition waged on prices can go before no one can afford to go on, and there are no winners. And when you finally come to your senses and return to charging what you need to make (to cover your costs and make a profit), you have to retrain your clients and convince them of your value. And that’s an uphill battle.
There is also one more thing to consider. Value is not determined by price. Value is about what a client gets for the price paid. If I pay $100 and get nothing, that’s not value. It’s cheap. If I pay $1,000 and get much more than I expected, that’s not expensive; it’s value. And when you consider this way of thinking, it’s easy to see how competing on price can lead a client to look at your pricing and ask the question, “What’s wrong with their service? Why are they so inexpensive?”
Repeat after me: “I can’t compete on price alone.” Is pricing important? Yes. Will clients consider the price? Yes. But if you need to lower your prices until you are bankrupt, then these are not clients you want, and you should find a new market or register as an official not-for-profit. (At least that way you can get a tax break.) The clients who are worth keeping want value, and that’s defined differently according to the market.
What clients want is bang for the buck. The hard reality is that there will be clients who want the world for nothin’, and when that happens, they aren’t clients at all—just people or companies looking to exploit you. So let me try to say this without coming off as a jerk. Ninety-nine out of a hundred clients like this should be avoided without a second look. They’ll promise free promo; it’s not promo you want. They’ll promise future work if you do this on spec; it won’t happen. A client who doesn’t recognize your value now won’t recognize it later. You’ll think that these clients will be a step up the ladder; they aren’t—there are no rungs on the ladder they’re asking you to climb. If you really must work for free, do it on your terms, not theirs.
What gives you the strength to say no to clients who insist that you compete on price alone is knowing what your CDB is and knowing that these aren’t cheap or free gigs. They cost you, and you can’t afford to take them. There are plenty of occasions when negotiating a lower fee is in your favor. There are even occasions when working for no fee at all is in your favor. In both those situations you’ll be looking for something specific out of the exchange. Shooting for a worthwhile NGO in exchange for access to a story, a tax receipt for a gift in kind (check your national tax laws on this), or as part of a personal project can be a win-win situation. I’m a fan of win-win situations, but in these circumstances it must be you who is calling the shots. Negotiation is a concept that involves both parties getting what they need, not one party making expensive concessions.
So how do you compete, if not on price alone? By building a business that listens to and serves the clients within that market. Not everyone can afford a Ferrari, and the local Ferrari dealer doesn’t lose sleep over the hundreds of people buying Chevrolets at the dealership around the corner. They weren’t going to buy from him anyway. He focuses on his market. The other guys are busier. The other guys are selling way more cars. It doesn’t mean the other guys are more profitable; the moment that Ferrari dealer begins to lower prices so that a Chevrolet customer can get into a red Italian car, he’s lost the game and will shut his doors forever. Don’t get into the trap of taking on work where you will lose money. Let it go. Spend your time on the clients you have now. Take those two days working for the client with empty pockets and pour that time into current clients.
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You’ve established a brand and a unique selling proposition (USP) within a market; don’t sabotage it. To return to my earlier analogy, there’s a greater danger to the Ferrari dealer than he thinks. Even if he managed to offset the losses made by slashing prices to make Ferrari more accessible to the Chevy crowd, he would not survive the loss of his current market. Part of the Ferrari USP is its exclusivity. The moment the Chevy market can afford a Ferrari, Ferrari has become a commodity and not an exclusive brand—and Ferrari owners and potential owners will jump ship immediately. They want exclusivity, and if Ferrari no longer offers it, Lotus will. You don’t offer exclusivity, fine, but by diluting the strength of your brand in order to serve the deep-discount crowd you’ll be trading away a good market in exchange for one that won’t pay you.
Your Next Step
If you haven’t already done so, figure out your actual CDB and what you need to earn in exchange for your time. If you suspect your market contains a certain segment looking for deeper discounts than you can afford, but for whatever reason you don’t want to lose them, find a way for all sides to win. Is there a day your studio is usually quiet into which you can book discount clients and then make money on the back end with print sales? Is there a way you can incorporate their needs for photo resources with your stock library so you make money in residual stock sales from the shoot? Photography is a creative craft—so is business. Look at these negotiations as a chance to exercise that creativity. Finally, if you have current clients who are losing you money and not offering other returns you don’t mind paying for, then you need to find a way to cut them loose. They might be wonderful people, but they’re picking your pockets.