Communicating value in service-oriented businesses, Part 1: What your prices say about your value

I’m feeling very empowered today–quite possibly because “O Fortuna” from Orff’s Carmina Burana just shuffled onto my speakers (how can you not feel brazen while listening to this classical music gem?!)–so I figure no better time to reveal some of my own research than the present. What follows are highlights and lessons learned from the case study that I engaged in as the final requirement for my Master of Arts in Public Relations (impressed yet?). There are three main points to the thesis of my work, so I’m going to do this as a three-part series of posts, but the crux of it all is about communicating value. Please, hold all applause until the end…

DB LogoAs part of my graduate capstone project, I had to choose a local small business and shadow their public relations efforts, then make suggestions that could hopefully be used by other small businesses. I interned for Philadelphia music photographer Derek Brad for six months; Derek was interested in expanding his services into more advertising and commercial work. During this time, I observed, spoke at length with Derek, devised questionnaires for him to fill out regarding the nature of his business, and did much of the media and client relations work. This experience gave me enough information to do a thorough business analysis to determine what public relations and marketing efforts were already being done, what could be done better, and what was absent all together. The results would then be used to help me build a PR plan that would ultimately lead to increased profits for this one-man business.

SWOT-AnalysisOne of the tools I used (and thoroughly believe in) was a SWOT analysis. Easily accomplished, a SWOT analysis merely helps you identify your business or organization’s Strengths, Weaknesses, Opportunities, and Threats–thus, SWOT–in a handy-dandy, easy to read chart format. You can then use the results to maximize your Strengths, lessen or eliminate your Weaknesses, take advantage of new Opportunities, and mitigate Threats before they happen. When I looked at the chart, I noticed that one thing stood out above all others as a recurring issue. Pricing showed up in all columns of the chart with the noticeable exception of Strengths. Thus, I decided to do a case study on how the value of what you (the business owner) offer, expressed through pricing, is non-verbally communicated to your clients and your competitors.

The Professional Photography Industry’s Views on Pricing

As is true with many service-oriented industries, the professional photography industry has been going through quite rapid and game-changing changes (is that redundant?) over the past decade that many professional photographers find difficult to keep up with and remain competitive. With the transition to readily available and affordable digital single lens reflex (DSLR) cameras, amateurs and hobbyists have invaded the photography market, often working for very little monetary compensation for friends and relatives who would otherwise seek out traditional professional photographers.

logo_asmpIn an essay in the ASMP’s Professional Business Practices in Photography (2008), Hermann comments on the state of the professional photography industry by saying, “Digital capture has simultaneously increased the costs of doing business and lowered the bar of entry to our industry” (Hermann, 2008, p.388). She goes on to note that photographers are no longer defined by the equipment they have because pro-sumer products allow clients and subjects frequently to have the same equipment and the relative ease of creating digital montages, slideshows, videos, and interactive media is leading to a shift in the role of still imagery in visual communication.

lowball1In the photography industry, as with any other industry, no organization or individual can set pricing standards for your business. It is just plain old illegal. Organizations such as the American Society of Media Photographers (ASMP) had examples and guidelines for pricing, but because the industry is so varied and subjective, it is impossible for ASMP to provide an example for every scenario or product a photographer might encounter and could never take into account every market or regional variance that might affect prices. Enter the dilemma of amateurs flooding the industry. Many photographers have had to rethink their business strategies to cope with this influx of inexperienced pro-amateurs.  With pro-ams consistently low-balling bids and undermining the industry standards in pricing, many times it thus becomes necessary for professional photographers to make increases in their price structures and fees. Derek, who in the past had been guilty himself of low-balling a bid or two just to score a gig or get his foot in the door, was struggling to figure out how to submit bids that would recover his Cost of Doing Business (CODB), provide him a profit for his work, and yet be reasonable enough that potential clients would not shy away from engaging his services and existing clients would not be alienated with rate increases…all without compromising the integrity, quality, or creativity of his work.

Are you still with me? We’re about to get to the good stuff.

The Role of Value in Pricing

What elements bring value to photographic services?

creativeMany consumers tend to overlook the elements that go into the final uniquely creative product of photographers and instead look at the prints or digital images as more of a tangible commodity.  However, photography is much more than just the sum of prints and frames and includes multiple intangible elements.  As mentioned before, there is the CODB that must be recovered.  There is a cost for the amount of time spent preparing for the shoot, at the shoot, and any post-production time spent in editing.  A photograph that may have only taken two hours to set up and shoot might have taken a week to storyboard and another eight hours after the shoot to edit, plus the cost of assistants and permits if applicable.  There is the intangible element of meeting a deadline (an extremely important element in commercial, editorial, and advertising photography).  Also, never underestimate the value in working with a vendor who is simply pleasant to work with (no one likes working with an a-hole)–another intangible element. And, perhaps most importantly, there is the fee associated with a photographer’s unique creativity and perspective that adds an enormous value to the product.

intangibleUnderstanding how others (such as art directors and creative directors at marketing and advertising firms—clients that Derek hoped to gain) value creativity is important.  According to Elsbach and Kramer, “The frequently touted organizational benefits of creativity include higher quality products, more effective decision-making, more integrative solutions to conflicts, better group performance on difficult tasks, and more innovative solutions to organizational problems.  Moreover, people associate creativity with a variety of other positive attributes including superior intelligence, humor, and leadership ability” (Elsbach & Kramer, 1998, p. 2).  They go on to say that many people in many different professions rely on their personal images of creativity to land jobs, attract financial resources, and garner public acclaim and support from audiences who might appreciate their work (Elsbach & Kramer, 1998).  This was particularly true for Derek in trying to break into advertising photography.

According to Vickers, competition exists in every industry, but in photography the battle is fought primarily at the bottom line.  In her essay titled “Value Your Work,” Vickers said, “If photography is to evolve as a profession, we must recognize the value of our product and insist upon fair compensation.  Indeed our prosperity revolves around a cycle of value.  Photographers must make a collective commitment to maintaining that value” (Vickers, 2008, p.386).  She goes on to say that photographers who are aware of their value are far less likely to underbid or compete unfairly, thus undermining the industry as a whole. The same can be said for other service-based professions.

clearanceIt is important to note here that there is another aspect to value in pricing that is very common in the photography industry. Price serves as a major signal for quality.  “If your billing rate is below market, potential clients will think your work is below market quality. This is because your prices tell the client how to perceive the value of your work” (Orenstein, 2010, pp. 215-216).  Think of your own perceptions of the stuff on the clearance aisle at WalMart. Those items are usually there because it is slightly damaged, out of date, or just unwanted at a full price. It is the same with ridiculously low bids and low pricing in services. In fact, this low-balling of prices in the industry is quite rampant and photographers have to remember that it is crowded at the bottom—they will be competing with a huge pool of shooters, particularly pro-ams (professional amateurs) who are just recently stepping into the business.  By constantly offering low prices just to score jobs, Derek put himself in the position of giving the perception that his work was less valuable and that he had less experience, thus appealing to bargain shoppers.  As this market segment was not the kind of clientele he was aiming for, he had to be willing to raise his prices to reflect his perceived value and then be willing to explicitly explain these price increases to existing customers or potential new customers should they inquire about it.

Self-awareness of professional value and self-worth can only come from within.  The same is true for confidence in the value a professional brings to their craft.  Derek was aware of his value and believed in it, but lacked the confidence to communicate his worth effectively to potential clients (both B2B and B2C) when it came to pricing.

But I read this blog for communication, not photography. What about the communication?

Glad you asked!

magnifying_valueHow does one recognize their value and then communicate it to the client? The first step is careful introspection to figure out what is special about the services that one can offer.  Answer questions such as why should someone hire you? What value do you bring that no one else can offer?  After this is accomplished, a careful examination of existing and prospective clients and the market a business exists in is absolutely essential (Herrmann, 2008).  “A true competitive edge comes from understanding your clients, defining your markets, and offering services that your clients need, want, and are willing to pay for.  To accomplish this, you have to learn as much as you can about your prospective clients and markets.  You must also examine your offerings with a cold, critical eye to see exactly how your services measure up” (Herrmann, 2008, p. 394).

Brand word definition highlightedJackson takes this a step further in her article in Professional Photographer magazine.  In addition to considering what matters most to clients, she says it is also necessary to consider the business model and the studio’s image or brand.  The price that “fits” is one that reflects all three of these elements.  Jackson is also clear in saying that copying another photographer’s pricing is counter-productive as these three elements of ideal clients, business model, and brand are as specific to each photographer as the costs of doing business (Jackson, 2013).

In Derek’s case, he found that his expertise in working with fast-moving subjects in poor light or quickly changing, often multi-colored lights during concerts was a significant factor of his professional value.  His extraordinarily quick turn-around time on getting images to clients (usually within 24 hours) also set him far apart from his competitors.  Finally, his artistic creativity in creating original content put him ahead of the pack of his peers in the Philadelphia area.

But what does it all mean?! You promised communication.

Settle down. Don’t forget that 85% of public relations is research. You HAVE to do your research to craft an effective message.

Ok, so now we’ve identified a bunch of reasons why Derek’s work was valuable. We’ve looked at what made his work special, examined the needs of his target markets and publics, and looked at his brand to make sure the higher prices would “fit.” But how would we communicate all of this (via raising prices) to clients without losing business?

Lucky for you, that is the topic of the next part of this series. And it is GOOD. Be sure to subscribe to this blog or check back later for the next installment. You can also follow me on Twitter @laurakate79 or like me on Facebook to join the conversation and get updates. And as if that wasn’t enough, you can also follow me on Google+ and LinkedIn.

Oh, and don’t forget to check out Derek’s work at www.DerekBrad.com. He’s really got some amazing stuff going on!

Philadelphia Nights. Photo by Derek Brad.
Philadelphia Nights. Photo by Derek Brad.
The Darkness. Photo by Derek Brad.
The Darkness. Photo by Derek Brad.

June Divided. Photo by Derek Brad.June Divided. Photo by Derek Brad.

Noel Gallagher. Photo by Derek Brad.
Noel Gallagher. Photo by Derek Brad.
Arianna
Photo by Derek Brad
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