pricing

Turn down the volume

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A well-known saying from an unknown source:

“We lose money on every sale but we make up for it with volume!”

There are several web sites which sell discount vouchers to groups of online shoppers. A business will publish a discount offer on such a site and as long as a certain minimum number of folks buy it, the discount vouchers are e-mailed to the buyers. If there aren’t enough buyers, the discount is cancelled and no one’s credit card is charged.

This volume discount voucher system can work well for a company that sells “widgets”, meaning anything where the marginal cost is very low. It can also be good for a business such as a sports, theatrical or other event that needs to unload unsold tickets. Unloading leftover or end-or-line product at a discount can help reduce a loss.

But…
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The Paradox of Price

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Okay, a little Monday afternoon math and no calculators are required.

Consumers want the most value for their money. Value can be defined by the benefits provided by a product or service, divided by the cost of that product or service:

Value = Benefits / Cost

This over-simplified equation shows that for a given set of benefits, as the cost decreases, the value to the customer increases. It might seem that maximum value would be reached if the cost is zero. But if you remember your grade school math, you cannot divide by zero.

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Door Number Three

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While viewing a news web site tonight, there was a survey asking readers a question and the possible answers were: Yes, No, Undecided.

Why would anyone take the time to respond to a survey and then answer “Undecided”? It’s like a student raising their hand in class to answer a question posed by the teacher and then, saying, “I don’t know.”

Why did the survey even offer the third option? If everyone chose “Undecided”, the survey would be meaningless.

What does this have to do with running a photography business?

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Restaurants and photographers

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What do restaurants and photographers have in common?

When it comes to choosing a restaurant, or a photographer, a consumer in a larger city usually has many hundreds of choices. In the eyes of the customer, most restaurants, and most photographers, are more or less the same.

Why choose one restaurant, or photographer, over another? Convenient location? A positive previous experience? Price? Good word-of-mouth? Maybe the web site looked nice?

Restaurants rely on their menu to entice customers. They usually post menus online and near their front entrance. But compare how restaurants present their menu.
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The four-letter F-word

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If you search the web for the most powerful words used in marketing, the most cited word, as you might guess, is the four-letter F-word, “free”. Certainly, the word free can get customer attention but is it really effective in making sales?

The F-word is so overused these days, that we almost automatically tune it out. We know that any e-mail which starts with “FREE” is spam and any web banner ad that yells “FREE!” is a waste of time. We also know that nothing is really free, there’s always a catch. Free will get attention, but it’s never taken seriously.
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Pick any two

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Remember the consumer saying: “Good, fast, cheap. Pick any two.”

A similar saying is: “High quality, low price, good customer service. Pick any two.”

Of course, we want all three. But that elusive combination doesn’t seem to exist.

When a customer tells a photographer that their photo fees are too expensive, the photographer should then ask: “Okay, I can can give you a lower price but what do you want to give up, quality or service?”

Customers who only shop price are customers that a photographer can live without. These people don’t value a photographer’s work.

Bargain hunters don’t understand that a cheaper price only guarantees them of getting less for less.

What a photography assignment might cost is always less than what it will cost from not having that photography done at all.

Many businesses don’t realize that most commercial photography doesn’t really cost anything. If $1500 worth of photography helps generate $20,000 worth of business, then there was no cost for the photography. The photography was a business investment where the company put money into itself.

 

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