The science of pricing
Pricing an 8x10
This method recognizes a relationship between pricing and the costs of
raphy, it becomes more complicated because you must include
Cost-based pricing is a fundamental strategy for pricing photography.
Pricing merchandise such as a frame is easy, but when you price photog-
running a business. It’s an area where benchmarks can help you to set
production labor costs in addition to materials, which includes the
your prices with precision because it recognizes that the higher your
print itself and its packaging. Monteith goes through the process,
costs are (for cost of sales, general expenses, and capital expenses), the
using Figures 1-3, below and on the next page, to illustrate how she
higher your prices must be.
arrives at costs and prices for an 8x10. She cautions every studio owner
You will find cost-based pricing easy to master if you approach the
must arrive at his own figures, based on the studio’s specific workflow
process one step at a time.
time, the per-hour value of that time, and the cost of materials for the
1. Understand how mark-up factors work and how they relate to
item(s) being priced.
the PPA benchmarks. You’ve already learned that PPA recommends a
35% cost of sales benchmark for home studios and a 25% cost of sales
benchmark for retail locations.
1 Time to produce an 8x10 print
To assure you achieve those benchmarks, you must first determine
............................................................................................................................
the appropriate mark-up factor for each of the two benchmarks as follows:
• 35% COS for home studios. Divide 35 into 100 and the result is
Acquire & backup 50 RAW+JPG images
3.0 (rounded up from 2.9 for ease of pricing)
Import images to sales software
• 25% COS for retail studios. Divide 25 into 100 and the result is 4.0.
2. Understand the formula for cost-based pricing and how to apply it.
To arrive at the price of your product, simply total the cost of production
and multiply it by the mark-up factor (costs x mark-up factor = price).
15 min.
5 min.
Prepare 25 images for presentation
40 min
Retouch 1 image fox 8x10
10 min.
Produce hi-res image in sales software
5 min.
different models are in play (home studios vs. retail studios).
FTP image to lab
5 min.
Backup finished print and file order
5 min.
which is $50.
Total time
3. Understand how photography pricing is affected when two
Follow this simple example of pricing a frame, the wholesale cost of
The home studio marks up the frame by a factor of 3 to arrive at a
85 minutes @ $.50/minute ($30/hour)
price of $150 ($50 x 3=$150)
The home studio pays the frame supplier $50 and retains $100 in
The retail studio marks up the frame by a factor of 4 to arrive at a
price of $200 ($50 x 4=$200)
$150 in
studio pays
frame supplier
and retains
to the
produce
an$508x10
print
1 TheTime
2
gross profit.
............................................................................................................................
over when COS are paid. Gross profit is used to pay general expenses,
15 min.
Import
images
sales and
software
5 min.
compensate
thetoowner,
provide profit to the business.
Because retail
studios 25
have
higherfor
general
expenses, they must drive higher
Prepare
images
presentation
40 minprices.
To summarize: Both studios paid the supplier the same amount for
Retouch
1 image fox 8x10
10 min.
FTP
imagefactor
to labof 4 that drives the higher price of the retail
5 min.
mark-up
studio
$42.50
Lab shipping
$2.50
8x10 mount
$1.00
$8.50
Digital media charge
frame. finished
The additional
gross
profit is necessary for
the higher
Backup
print $50
andinfile
order
5 min.
85 minutes @ $.50/minute ($30/hour)
$3.00
Total materials charge
5 min.
85 minutes
Lab cost for 8x10 print
..........................................................................................................................
while the home studio retains only $100 in gross profit. It is the higher
general expenses of the retail studio.
Material costs for an 8x10 print
Digital much
media charge
$2.00
How
does it cost to produce an
8x10 print?
the frame ($50), but the retail studio retains a gross profit of $150,
Total time
$42.50
............................................................................................................................
Gross profit is defined as that portion of the sales dollar that is left
Produce hi-res image in sales software
85 minutes
1: Determine the time involved and establish the per-hour value of that
time for pricing a single 8x10. This is the hardest task, as it is easy to
overlook costs and underestimate time.
gross profit.
Acquire & backup 50 RAW+JPG images
...
$2.00
Acquirematerials
& back up
50for
RAW
& JPG
images
15 min.
2: Determine
costs
creating
and
archiving the order.
Import images for slideshow
PPA.COM/BENCHMARK
Prep
18
25 images for presentation
Retouch 1 image for 8X10
$7.50
5 min.
$2.50
40 min.
$20.00
10 min.
$5.00
?
THE PPA BUSINESS HANDBOOK
3
Cost of time
$42.50
........
materials charge
$8.50
Total COS
$51
Retail 25% COS
---------------------------------------------------------------------------------------------------------SALE
MARK
UP (4x)
PER 8x10
3: Add the cost of production time to the materials charge to arrive at the total COS
for the 8x10. It’sSTUDIO
really COS
not hard to do:
$42.50
production time
cost +
---------------------------------------------------------------------------------------------------------$8.50 total materials charge = $51.00. $51.00 is your total cost of sales for a single 18x10.
It’s
also
easy
to
arrive
at
the
8x10
price
for
the
two
business
8x10
$51
$204
$204
---------------------------------------------------------------------------------------------------------models: Simply multiply the $51 COS by the mark-up factors. (For home studios:
$51 x 3 = $153. For retail studios: $51 x 4 = $204.)
2 8x10s
$51 + $11
$248
$124
---------------------------------------------------------------------------------------------------------3 8x10s
$51 + $22
$292
$ 97.33
---------------------------------------------------------------------------------------------------------4 8x10s
$51 + $33
$336
$ 84
---------------------------------------------------------------------------------------------------------At this point in the example it’s easy to imagine a chorus of photogra5 8x10s
$51 + $44
$380
$ 76
---------------------------------------------------------------------------------------------------------phers yelling “I can’t sell an 8x10 for 204 bucks … not even $153! My
6 8x10s
$51 + $55
$424
$ 70.67
----------------------------------------------------------------------------------------------------------
PROBLEM: Pricing 8x10s profitably
SOLUTION: Sell in multiples
competition will bury me!”
Granted that only a handful of photographers can command prices that
Home 35% COS
---------------------------------------------------------------------------------------------------------SALE
STUDIO COS
MARK UP (3x)
PER 8x10
---------------------------------------------------------------------------------------------------------1 8x10
$51
$153
$153
---------------------------------------------------------------------------------------------------------2 8x10s
$51 + $11
$186
$ 93
---------------------------------------------------------------------------------------------------------3 8x10s
$51 + $22
$219
$ 73
---------------------------------------------------------------------------------------------------------$252
4 8x10s
$51 + $33
$ 63
---------------------------------------------------------------------------------------------------------5 8x10s
$51 + $44
$285
$ 57
---------------------------------------------------------------------------------------------------------6 8x10s
$51 + $55
$318
$ 53
----------------------------------------------------------------------------------------------------------
high, but for the sake of your bottom line, if the only thing you sell to a
client under the above scenario is one 8x10, you’ll have to find a way to
recover your costs plus the markup that makes it possible for you to pay
your general expenses, pay yourself, and earn a profit for the business.
That’s where the art of pricing comes in.
The Art of Pricing
In a perfect world, pricing would be as easy and straightforward as the
Retail 25% COS
---------------------------------------------------------------------------------------------------------SALE
STUDIO COS
MARK UP (4x)
PER 8x10
---------------------------------------------------------------------------------------------------------1 8x10
$51
$204
$204
---------------------------------------------------------------------------------------------------------2 8x10s
$51 + $11
$248
$124
---------------------------------------------------------------------------------------------------------3 8x10s
$51 + $22
$292
$ 97.33
---------------------------------------------------------------------------------------------------------4 8x10s
$51 + $33
$336
$ 84
---------------------------------------------------------------------------------------------------------5 8x10s
$51 + $44
$380
$ 76
---------------------------------------------------------------------------------------------------------6 8x10s
$51 + $55
$424
$ 70.67
----------------------------------------------------------------------------------------------------------
cost-based 8x10 example shown in Figures 1-3. The problem is that pho-
tographers face what Monteith calls “the first unit of sales dilemma.”
“It takes a great deal of up-front work to get to the point of produc-
LESSONS FROM
THE BENCHMARK
Home 35% COS
Monteith calculates the time-and-materials
cost of each additional 8x10
---------------------------------------------------------------------------------------------------------image
from the session
(different
not duplicates)
as $11
SALE
STUDIO
COS poses,
MARK
UP (3x)
PEReach.
8x10 So
---------------------------------------------------------------------------------------------------------you spread out the cost of the initial 8x10 over six 8x10s, the price
when
1 8x10
$51
$153
$153
retail studios can go down to only $424 (or just over $70 each), For home
for
---------------------------------------------------------------------------------------------------------2 8x10s
$51for
+ $11
$186
$ 93
studios
six 8x10s can sell
$318 (only $53 each).This
doesn’t mean
the stu---------------------------------------------------------------------------------------------------------dio
must
limit what it charges
to the exact amount
3 8x10s
$51 + $22
$219of the mark-up price,
$ 73 only
that
it is the least amount that should be charged in order to be profitable.
----------------------------------------------------------------------------------------------------------
• Place a value on your time. When
determining pricing, don’t forget about the time
you and your employees spend on producing your
products. If you want to be profitable, you can’t base
your prices on material costs alone.Your time has value.
Make sure you charge for it.
4 8x10s
$51 + $33
$252
$ 63
---------------------------------------------------------------------------------------------------------5 8x10s
$51 + $44
$285
$ 57
---------------------------------------------------------------------------------------------------------ing 6an8x10s
8x10,” says Monteith.
$51 + $55If that one image
$318turned out to be $the
53 only
----------------------------------------------------------------------------------------------------------
product a client buys, then it would have to fall into a price category
• If you are in a retail studio, you must set your prices
high enough to achieve a 25% COS! In both Benchmark
Surveys, retail studios lagged far behind home studios in
financial productivity, and the lower COS sales numbers of home studios in the most recent survey suggests that home studios are actually charging
more for their work than many of their
retail studio counterparts.
that most families would consider to be a luxury product. But once that
first 8x10 is produced, any additional poses from the session are bur-
dened only with the cost of the print and its retouching and packaging.
So by combining additional prints and/or accessories with the first one,
it is possible to create packages that represent both a good value to the consumer and an appropriate profit for the photographer.”
Bridget Jackson, PPA’s SMS manager agrees that it takes a multi-faceted
PPA.COM/BENCHMARK
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