Pricing Your Work
We've got about forty five minutes left, and what we're going to do is I want to kind of closed the loop on some things that happened earlier on friday, I guess so we went through pricing and packaging, but what I want to talk to you now is about understanding this concept of cost of goods. I realized based on the feedback I was getting, that we weren't really touching base on that so let's understand a couple of key concept if we can hear when you're building your packages, okay, and you're in business. There's one key term you have to understand and it's called cost of goods, your cost of goods is literally the true definition is everything every dollar that went into every ounce of energy has to be calculated manpower the cost of the product, your cost of goods is what it cost you to produce that product or service. So when we say an eight by ten cost you about to dollars, it didn't really cost you two dollars, right that's the cost of the actual print, but the true cost is everythi...
ng that went into producing that eight by ten that's the time you had to drive to the photo shoot the time to ship off the hard drive to package it, too, you know, to the cost of wrapping it. The cost of taking that phone call right delivering the product these are all things that go into that cost so I'm always intrigued when I meet with photographers and they say to me hey you know what's your rule of thumb when it comes to pricing out of product what's your percentage upgrade well you can't do one hundred percent you can't do a two hundred percent it doesn't work that way the numbers just don't work and let me play it out for you I think we can all agree that an eight by ten will cost you approximately two dollars right regards of what your lab you're getting it from its two dollars okay well great let's uh let's follow this for a second if you follow this two hundred percent mark up three hundred percent markup that means you're going to sell this two dollars eight by ten okay you're going to sell it for approximately six eight dollars yeah wow that's not how that's gonna work okay so when you're figuring out cost of goods it's very difficult to figure it out on a per item bases you can calculate it but that's not how my system works so the system I was teaching you about on friday doesn't really work this way if you remember we're selling this eight by ten for fifty dollars right where did I get that number from a little bit of that okay I'm not gonna lie this price this fifty dollar price that ala carte price is meant to punish bad behavior that is the on ly reason it's meant for that is priced artificially high why? Because I don't want people to come into my studio and just spend by one eight by ten by two eight by tens so even if I were to charge twenty dollars that's not where I want to remember money's like water it will follow the path of least resistance so if I make this if I make it cost effective for them to buy all the card they're going by on a card and you saw it with kendra and joe mom was looking at this and going she was quickly moving back to the ala carte pricing I mean to the package pricing she was staying away from allah cart because it was too expensive that's the goal here now let's talk day one when I started when I started day one okay my eight by tens they were in the fifteen to twenty dollars range day one today they're fifty so I had to in three years okay get from this fifteen to twenty dollar range toe a fifty dollar range and then of course, every price that bolo went up accordingly, right? So you can't charge fifteen dollars for an eight by ten and then charge three hundred dollars from eleven sixteen that's not gonna work and so my pricing had to adjust accordingly so all of you out there what I've been talking about for three days is this understanding of this is a framework on the ala carte side you have to punish bad behavior okay? Are you guys with me on this ala carte wise where your eight by tens right now thirty five is not a bad place to be talking to my perfect that's not a bad place to be I don't know you don't know where they are I really don't there's there I just read it all my pricing for this year so I don't they don't know it probably is too low ok good let's keep going fifty nine fifty nine that's actually high what part of the country you in connecticut? Okay no that's perfectly fine. Yeah thes pricing the pricing I'm talking about. I'm in st louis metro area when I go to new york this fifty dollars doesn't exist when I'm working with clients in new york it's not fifty dollars it's more seventy five to one hundred dollars for an eight by ten right? You've got to know a little bit of your market but just because of that I know what you're going to say right? I deal with photography all the time they're like well, sound my part of the country nobody would ever pay fifty dollars for an eight by ten I know I don't want them to pay fifty dollars for an eight by ten that's the whole freakin point here they should not be here we don't want them in the cart price list all right, so where you at forty forty digital? Have we changed you? I will be fifty or convert yes forty eight, forty eight okay, all kind of good and I'm sure the audience actually a pre appreciates hearing how were all the different parts in our business now? Theology car price isn't necessarily what I'm overly concerned with. Unless you're too low, then I am concerned because here's here's how you know if you're too low even out there how do I know if my prices are too low? Where are your clients spending? Are they buying into your packages or they buying everything off the ala carte menu? So it doesn't matter what I'm telling you, we're going to look to the history of what your clients are doing and that's going to determine if they're in the right or wrong spot or if you're on the right a wrong spot. So that being said, you tell me who's got the mike over here where your clients you haven't where your client's spending are they in packages or they ala carte hybrid they do always like the package these base package top package they will normally go maybe medium okay, so what is that telling you? Their going medium? You don't know what it's telling you what it's telling you is your pull through? Remember we talked about that the other day your pull through isn't strong enough to get them up to your top package. If you make your base packages too compelling, they're going to end up in your base packages, right? So within your base package, you've got digital negatives, a canvas and album, you're going to go to their house and cook for him for a week, right? They're going to end up in that base package there's no way for them to upgrade, so you've got to come up with those compelling reasons those poll ther items to get him from one package to another. And don't take my word for it. Look to what your clients are doing. Let their dollars vote. If their dollars are going towards money like water, it will follow the path of least resistance. If you make it easy for them to be in your base package that's where they're gonna be if you make it easy for them to be on your ala carte or just by digital negatives that's where they're gonna be where your clients I burned until till, like march of this year and I read it like that I redid my entire pricing structure because I joined actually in january this year because I joined another person in the studio on guy couldn't continue to burn and pay rent, so I really don't know yet because I'm almost entirely a senior photographer. So this whole time has just been building up perfectly coming up july og so I don't know hopefully it'll be at the top because I instituted a package system like this all tweak it again when I go home. But I am I don't know the answer to question you. Yeah, and I'm hoping you walk out of here after this three days with a new mindset around how you want to sell certainly the what just happened, uh, is tenfold, because we also just move from that studio space to even bigger studio space. My mate is a little bit more established than me, so I've gotta pay for it. Yeah, awesome, they've been buying off the car, but they've been buying big canvases thinks that I think my packaging is too confusing because I was worrying about what other photography my area, you know, the whole post thing and blah, blah, blah and it's not working, so you're convert right now, definitely all right, good mid to top package okay, so you're in a different spot you're in mid two top package that could mean one of two things your price too cheaply right? So you might want to find a way to get them up higher. So what are we gonna do? What we're going to add to those packages to create more value in them to get them to spend more money and album might be one of those things do you agree completely agree and the videos and everything like you have been talking about earlier that's right? Perfect good. I do this digital wise I my one digital images one hundred and then like it used to in the past it's changed. Yeah, but I did. I mean, I kind of did the same thing with what? One hundred for one r fifteen for five hundred so, um but that's where they buy they buy the fifteen because you're back and you know what? It's it's easy. Yeah, but we don't want easy. We want not gonna be easy way want money? Alright monitor in the middle middle to upper but I had twelve different packages what are you kidding me? Renaud had twelve, but they each one I have a little bit of a pull through but it was just too confusing to have twelve so in may I went to three and that was a tough, you know, rework for me was that after you came to our workshop than you, sweetie? Ok, yes, I think I would've killed you if I knew you were going with twelve. Yeah, it was it was give me even even my wife and I were in the selling process going, you can't pull it through, and even for us, we didn't even understand it. You say in your own pad so I didn't even understand the opec. So we went to three now it's super simple I'm gonna share true story with everybody. I was that two years ago I was at w p p I and they do this cool thing where they do. You can have a portfolio of you well and the people would come up and all the top speakers are sitting in this room and you can come up and show us your images or you can show us your pricing. So this one couple comes down, sits down next to me and you know, when you go to a diner and they've got those placemats settings that was their price sheet, okay? And she puts this in front of me and my I don't have a poker face, man, like, if I'm feeling something, you see it in my expression, right? And so I'm like, okay don't don't say anything, just look at it, process it, make sure I look at this thing for, like four minutes, I can't make any sense out of it. She must have had ten to fifteen packages, and they weren't, like organized in lines or columns. I mean, they were like here's one that it went here here was another here was a third. I'm like I said, guys, I'm not trying to insult you, I just I am a photographer, I'm a business person, and I can't make sense out of your pricing, there's no way your clients can make sense out of this, you're confusing them the wrong way. You're overwhelming them the wrong way. This has to change. They were actually completely annoyed with me, shut down and stop listening to anything I was saying at that point in time. So I think you can't be personal about this. You've gotta listen to your clients and where their dollars are spending that where they're spending their money. And so that's. Why I asked all of you this because I'm gonna hold all of you to a certain level of accountability to make some changes in your business. I think that's what this is all about, so we have to understand that again, everybody ala carte pricing is to punish bad behavior. This is not where we want people. We don't want them coming to our studio buying one eight by ten one canvas, one sheet of wallets. I want them in a package. Why here's? Why cost of goods when you are in a package? I keep my cost of goods. This is what we covered on friday, I keep my cost of goods to about fifteen no higher than twenty percent. So for that package that I'm selling for a thousand dollars my cost to produce that is between one hundred, one hundred fifty bucks in the package I'm selling for two thousand. My cost okay, is about four hundred bucks three to four hundred and the reason is simple. I'm adding mohr value. So as they get into these higher packages, I want to keep my cost of goods. I've gotta add more more value. So I'm throwing in an album. Well, guess what? An album as a higher cost of goods for me, I'm throwing in the canvas canvas has a higher cost of goods for me. I'm throwing in acrylic, but from the client perspective, they're seeing this top level package as having tremendous value so I'm okay bringing in two thousand dollars to my studio, okay, but paying three hundred dollars out to produce it. That means I'm getting seventeen hundred dollars of profit in this package that's a thousand nine hundred eight hundred of it is profit those air great great profit margins you cannot do that when you're selling ala carte by the way to prove this point how much is a sixteen by twenty four cameras no matter where you get it you're paying about one hundred twenty five dollars fish okay so now you're paying one hundred dollars if you wanted to hold true on this ten percent fifteen percent cost of goods you have to sell that canvas for almost a thousand dollars are you selling your sixteen twenty four four thousand no your margins sock then okay and we've got to fix that the way you fix that though is to drive them into the package how do I keep my my package the cost of good solo well let's look at what's in a typical package and we covered this on friday so I'm not going to cover in depth exactly what's in it I'm just looking to close the loop on this for you guys so in our middle package we had ten gift prince a sixteen by twenty four print ten sheets of wallets and this package by the way we sell for eleven, ninety nine and I'm gonna come back to this guy so hang out with me we're going to do a signature book that's that senior yearbook style thing we're going to put a web gallery up facebook and a dvd slideshow so when you're home bill watching this dvd over and over again and you get to this point you're trying understand okay so how do I build my packages with this stuff in it okay and you'll have access to this pricey how do I build this here's how you do it give prince let's go with the most expensive gift print how much is that two bucks let's say so now I can round this up to twenty dollars a sixteen by twenty four we mount those on styrene so sixteen by twenty four mounted on styrene is I think off the top of my head thirty box forty bucks somewhere in that range is anybody know correct me let's just say forty for argument's sake ten sheets of wallets another twenty bucks signature book I told you my cost there is twenty five web gallery zero but to the client high perceived value client perceives having that web got gallery as high value so now I can go zero facebook hard cost zero but from the client perspective this is a ninety nine dollars product an emoto sideshow sure there's a cost it's right whatever it is over the what is it? One nineteen ninety year two ninety nine to forty nine for a year but I produced so many videos off that thing really my cost per is about one dollars right, so negligible. So now my cost to produce this package? Uh, forty, sixty one hundred five dollars. I don't have a calculator, but I'm pretty sure I'm well under ten percent cost of goods. So I'm selling this package and higher for eleven, ninety nine, but my cost to produce this is one hundred five dollars. I understand I'm not calculating my time into this. I understand, but here's the problem I went to business school. I don't want to get lost in spreadsheets and numbers and all this other stuff just to come up with the true cost of goods. And you might be asking myself, why does it matter? Why can't you just calculate your time easily? Because my time on the phone is calculated differently than my time editing is calculated differently than my time marketing, so we all have different hats. We wears entrepreneurs here's what I here's my simple formula. If I can keep my cost of goods to fifteen percent or lower hard cost of goods meaning what I'm actually using to produce this right from ah, wholesaler. If I could keep that to below fifteen percent, the rest is gonna work itself out you with me on this, so this package here he's costing one hundred five dollars however if they add up all this ala carte right my gift prints are fifty dollars each so ala carte ten gift prince that would be five hundred dollars a sixteen by twenty four print we sell that for three hundred ninety five dollars that's you say four hundred to keep number simple another twenty wallets that's a thousand dollars that signature book we sell for fifty the web gallery is one ninety nine facebook is ninety nine in that dvd is three, ninety nine again let's say four hundred keep these number simple for me two hundred nine hundred thousand sixteen fifty so and that's right? Oh tom watson twenty bucks thank you five hundred thousand fourteen hundred eighteen hundred two thousand twenty one fifty sorry guys I'm doing quick math without a calculator. So from a client perspective the ala carte valuing if I miss added I apologize but the client value is twenty one fifty if they go on the ala carte menu and they start adding up all your other car prices they would see a total of wow if I buy this separately it's almost twenty two hundred dollars so if I bite in the package okay it's eleven ninety nine so they're seeing the saving and we have that on our price sheets are price sheet says eleven. Ninety nine regular are twenty one hundred regular price platinum package eleven ninety nine we are, we're helping them not have to go through this exercise mentally, make no mistake when they come into your studio, mom is looking for the path of least resistance mom is looking for. How do I get out of here spending the least amount of money so mom's looking at this price list and adding all the supple I've already taken liberty and all my price sheet. I've added that up for her, and so now this mom looks at this eleven, ninety nine number and she's like whoa, that's like a forty seven, forty five percent discount off the ala carte price. Are you seeing how this works? This is what drives them to the packages. That's. What I'm saying, money is like water. If you're driving them and they're spending on your lower packages, that's means they're not seeing the value in the upper level packages.