Race to the Bottom with Price Competition

Why Not Compete On Price?

I went through both macro and micro economics classes for my Business/Accounting degree recently.  One part stuck out so strongly that I can’t help but to share it here…. and I’m paraphrasing,When businesses compete on price alone, the businesses crumble.  Think about that.  When photographers are competing on price and price only (because let’s face it, all the work is starting to look alike with the popularity of PhotoShop actions and Lightroom Presets), they keep bidding lower and lower until there is nothing left.  The photographer, if she is able to bring in clients based on being the lowest price, is no longer profiting……. and the consumer has lost all perception that photography is a custom product, a piece of art, that should be of more value.  Therefore, the industry tanks.

Recently, I noticed one of my favorite clients who usually spent $2,000+ on photo sessions with me (the family is totally an awesome, loving family, and I feel connected to them in a sense – great people) is now frequenting a local photographer who charges much less.

Let’s compare:

  • ME:  At this time, I charge $1,500 prepaid for a photo session for time and talent only.  That includes 20 high resolution digital images edited to perfection, with an option to upgrade files or product, (they can purchase above that at a discounted rate), or they can take their 20 files and purchase product themselves at whatever price point they wish through other companies.  There are a lot of reasons I changed to this model (see upcoming article on “Evolving Business”), but it works very well for me in my market.  I am paid for my time and talent, and the clients are compensated in beautiful work that they have full control of as far as sharing or printing.
  • THE OTHER PHOTOGRAPHER: charges $350 for up to 5 people and includes all digital images on CD and a 16×20 wall canvas.

I know this may sound conceited, but I’m being realistic.  My work is definitely of higher quality as should come with many more years of experience and higher quality equipment.  HOWEVER, her work is very nice (but DEFINITELY worth more than she is charging in this expensive high cost-of-living Baltimore area).

 


Price competitionIN YOUR CLIENT’S SHOES

I like this client a lot.  I’m not mad at them.  I ask – why should they come to me, when they can get a nice product that includes “it all” at a fraction of the cost especially when they are just documenting their children year after year?   I’d hope that they still come to me once in a while for a treat, a quality timeless and classic product that they will cherish forever, but let’s face it, if you can get it cheap, why not?

I have a collection of Frye boots.  They range from $200-400 each pair.  They are very high quality and beautiful.  Back when I purchased them, it was before everyone was wearing boots.  I’m an equestrian and have always been drawn to the tight pants/tall boot look, so when I was looking for boots, there weren’t a lot to choose from (just like years ago – there weren’t a lot of custom photographers available so price was premium).   Fast forward a few years later, money has become tighter due to the downturn in the photography industry, and I’m not thinking $400 boots are top priority right now.  However, I wanted to buy a few new pairs for work.  Because the trend of boots has exploded, every shoe maker is giving a plethora of options in every price point (just like the photography industry).  So, on a whim, I purchased a pair of ankle boots from 6pm.com for – get this, $27.  What did I have to lose?  $27?  If they turn out to be horrible, who cares?

My boots arrived.  I tried them on.  Sure, they are not the luxurious Frye leather and feel, but they are darn cute!  I wore them out, and received quite a few compliments on them.  $27 versus $400?  Why should I ever buy $400 boots again?  So for right now, at this moment, I love my $27 boots.  Ask me again in 5 years, if I still love those $27 boots or even if I still own those $27 boots, but I bet you I will still love and have in my possession, my Frye boots – timeless, high quality, and classic – just like the “more expensive” photography should be.

Now again, apply that to quality photography.  Right now, as children are growing and changing quickly, why should someone spend $2,000 on documenting a child when they can spend $350 on a lesser quality product, but still pretty dang nice?   This, my friends, is why I am absolutely not upset with the client.  I get it.

IN THE PHOTOGRAPHER’S SHOES

Now, as a photographer, working hard as a business owner, $350 is not worth me even picking up my camera.  To drive to and from the session takes time.  At the session, I photograph clients regardless of their kids moods, etc., I have to perform.  Performing drains me of every ounce of energy for the rest of the day, so while the session may only last an hour or two, I am physically and mentally drained the rest of the day, so forget getting my house cleaned or anything else done but relaxing with the family…..  Then, I have to upload, cull, and edit the images, upload, and fill any orders of product.  As the sole administrative role, I also am in charge of all the “secretarial” work, marketing director, industry researcher (for new products/trends/etc.), social media director, blogger, webmaster, and bookkeeper.  That’s a lot of work for $350 (minus the cost of that wall canvas which could be anywhere from $50-150 taken out of that $350).   Then, there are still expenses to take out.  Even without a studio, there is gas money, website fees, props, backgrounds, lighting equipment, lenses, cameras, software, office supplies, etc.  After that is taken out, whatever I am left with, I have to hand 50 percent over to Uncle Sam (even if you are only in the 25% tax bracket, add another 17% on for self employment taxes).  What would I be left with?  A bit of nothing.

Many photographers are offering good custom service/good custom product for cheap these days, even cheaper than the cheap chain stores were (which remember, are out of business these days), hardly making minimum wage, and sacrificing their time for not much of anything…. I feel sorry for these photographers that have no idea what they are missing and have absolutely no self confidence in what they do.

 

Am I mad at the client for choosing a cheap photographer?  Absolutely not – they make out on that deal for sure.

Am I mad at the photographer for charging so cheap?  I’ve been irritated by cheap photographers offering a custom product but not so much anymore  – because now I just feel bad for them devaluing themselves so much.  I feel like anyone who charges so cheap truly has a self-esteem issue and really needs a big hug and a “you rock, you are worth more than this!” speech.  This isn’t your little hobby that people pat you on the head for and say “how cute”…. This is a real business with real work and even if you claim not to need the money, you will need it in the future.  Trust me.  Those toddlers cost only a fraction of the amount they are going to cost in a few years (and stop banking on your husband’s income only because anything, I mean ANYTHING could happen to him, his job, or your marriage, don’t gamble on your future….)…. and if you are middle class and up, your kids are not going to get any help as far as college goes financially…. In a blink of an eye, you are going to be sitting exactly where I am – one in college and one getting ready to drive….

polaroid-cameraBut back to the subject….

As a business owner, I cannot imagine not giving myself a decent salary for the responsibility involved in owning a business.  I could never cheapen myself.  I value myself.  Maybe I’m a bit snobby with my time, but so be it.  My time is very valuable to me.  I’m 38 years old and have watched my two children blossom into teenagers in what feels like a split second.  Any time away from them or living a peaceful existence cuddling the hubby is worth a premium rate.

I know this is a tad morbid, but life is short, and this is so important……. I always think of this —–  When my life is coming to a close, and I’m teetering at death’s door, if I were to look back on my life, which of the following would I feel….

  • I wish I would have spent more time with my family
  • I wish I would have lowered my price and spent more time on customers

I doubt any of us would be wishing for the second option…..

 

Is competing on price ever a wise choice?

Yes, actually it is.  When you are involved in retail or marketing a certain product in mass, yes, competing on price is a good idea.  In fact, any business owner who wants to compete on price is going to reduce the costs and processes for everything involved in this product.  A business owner who wants to lower price cuts all corners by doing the following:

  • Reduces time spent on creation of product (mass produces using automated or computer/robot assembly for speed – more product produced, less time)
  • Reduces all costs associated with creation of product (gets rid of unnecessary employees/replaces them with robots/computers or outsources to cheaper countries, acquires all products at lower costs)

If this is something you wish to apply to your photography business model, and you wish to mass produce, that’s great – but you cannot mass produce AND spend a lot of time producing a custom product with expensive equipment, props, etc. if you want to profit and give yourself a real salary.   There are some shoot and burners out there doing mass production (same background, same lighting, same prop, spending 5 minutes per customer, and as soon as they are in the chair, they are dumped out of the chair for the next person – think school pictures) – there’s nothing wrong with this model, but you cannot have both a custom quality product that takes a lot of time and cheap prices.  It’s either cheap prices which equals cheap products and fast and in mass production or it’s expensive price which comes with a higher quality product, more time, and less clients.

 

What choices can I make to turn a better profit?   I will share upcoming posts about this very thing.  Please come back.  I am keeping up with the “Honest Articles” and this will be addressed in detail in the near future.

 

Work Smarter, Not Harder

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