Pricing of creative work is a subject which I’ve found often brings up a lot of deep-rooted fear and apprehension in my clients. One of the most difficult parts of being in business is putting a value on what you do. How do I know what I’m worth? Will I be too expensive and put people off? What will people think of me if I ask for money? Sound familiar? Well, you’re not alone and I’ve a few ideas on how to navigate this arena of awkwardness that will help take the edge off of it. It’s well worth the effort as getting your pricing right is a vital part of making your business sustainable and enabling you to carry on doing what you love!
Whilst I believe there’s huge merit in being aware of what your customers might be prepared to pay, I’m also a big fan of Creatives being rewarded for their talents and not underselling themselves (which is all too often the case, sadly). It’s a fine balance. A combination of gut feel and science and the trick is finding that sweet spot in the middle. Here are a couple of tried and tested approaches for you to try out for size on your own product or service…
1. The ‘Bottom Up’ Approach
This is a way of calculating your ideal price based on covering all your costs plus any profit you might want to make. This approach is most relevant when you have a product to sell and there is more of an obvious market value to what you create (e.g. a mug, a table, a greeting card).
The simple formula looks something like this…
Material costs* + Labour cost + Overheads + Profit = Price
*Material costs include anything which goes into your finished product (e.g. paper, clay, wood, ingredients).
Labour costs are how much you want to charge per hour for you to make your product multiplied by how long it takes. (This may be included within your material costs if you have your product made elsewhere).
Overheads are the business costs which go into you being able to make your product (e.g. electricity, storage). You may just want to add a small contribution to each product you sell or you could include this as part of your Profit.
Profit is anything you want to make over and above covering all the other costs (you may actually be happy to break even and just get paid for making your product!) Profit can be a bit of a dirty word, especially in the art world, and there are many other reasons for being in business such as the thrill of your work being seen or creating something for the greater good. However, it is often a necessary part of creating a sustainable business and to enable you to carry on doing what you love.
2. The Top Down Approach
This approach starts by you looking at the market you operate in to assess what your competitors are charging and what your target customers are generally willing to pay. Do some simple desktop research or take a look in shops, galleries etc to get an idea of what the market value is and what it might be telling you about your prices. It’s important to consider all the elements that go into what you are offering and that you try to compare apples with apples. And it’s also crucial to understand who your target customer is (how affluent are they, how price conscious?)
Art is trickier to price in either of these ways as there is often value which extends way beyond the intrinsic cost of the materials and it is sometimes difficult to compare the market value between artists as there are many other factors which come into play (particularly how well known an artist is) and it is obviously much more subjective.
Adjusting your prices
The results of your research may highlight the opportunity to increase your price if it seems you are undercharging. Similarly, it might highlight that you are more expensive and you might need to look for ways to take some unnecessary costs out of your business so you are more competitive and can attract more customers. Bear in mind also that some customers may question why you are cheaper than your competitors and in their mind see it as a sign of lower quality.
You may want to dip your toe in the water when changing or setting your pricing. Say you’re a wedding photographer and wanted to raise your prices so they were more consistent with your competitors, but were afraid you may lose existing customer referrals – you could give special discount offers for existing clients to use or pass on which enable them to get the same price for a limited period, whilst testing out your new price on new clients.
Pricing is an ever-moving feast and it’s good to be in the habit of re-evaluating it and responding to any changes in the market. Changing or setting your pricing is often a bit of a leap of faith, but if you’ve done your research and feel confident in what you are offering, trust that the right customers will find you!