One of the many decisions you will face in running your art or creative business is how to price your products or services. In strict economic terms, price is the amount paid in exchange for goods or services. You may start with an asking price and settle with the true or exchange price if you are in to bargaining. There is an assumption that the final price paid is equal in value to the goods received.
Price vs. Value
Price is different from value. As mentioned above price is the amount you ask or eventually sell your art for. For the artist (or seller such as a gallery or representative) the value of the art is quantified by the asking price. Things may not be so simple for the buyer.
Some of the things that go into value are:
Intrinsic Value – This is one of the easier measures of value to quantify. Basically it is the sum of the ingredients that went into producing the art. This would include the materials, the amount of labor, marketing costs, and any overhead such as studio rent etc. that can be apportioned to a particular piece of art.
For example let’s say you make rings. A ring you make out of gold would have a higher intrinsic value than an identical ring made of silver. A ring set with a diamond would have a higher intrinsic value that the same ring set with cut glass.
This is where the fun begins! The intrinsic value of a painting might be very low; after all it is made up of some canvas, some paint and the labor it took the artist to paint it. For some art the subjective value and the intrinsic value may not be that far apart – I’m thinking of the starving artists sales that come through town a couple of times a year where no painting is more than $29.95.
At the other end of the scale is art that sells for a great deal of money – clearly the subjective value is much greater than its intrinsic value. What makes up this difference?
Your target customer
The old saying one man’s junk is another man’s treasure applies to your art. If you don’t match up your products with your potential customers they may not see your art as “treasure”. Be careful where you show or place your art and make sure that your prospects will place a value on your work.
Your brand, reputation and past sales history will have a large effect on the value of your art. If you are well known you should be able to command a higher price for your art. If you a less well known or not known at all you will need to develop or create your brand.
Don’t forget we are talking here about subjective value, an artist may have a history of producing very expensive artwork and then decide to create a branded line of goods to be sold in a discount store – in the eyes of the consumer there may be a great deal of subjective value associated with the artist and with these lower priced products.
You can have a great brand and mediocre art and be successful, it is much harder to have no brand, create great art and be successful. Having a great brand and creating great art is a dynamite combination!
When you have two or more products that are similar then the intrinsic value of the equation may have greater weight. If one piece of art is similar to another then they should probably sell for the same amount, right? – Probably not.
Genre / Style / Fashion
The price you can receive for your art may be influenced to a great degree by what is in fashion or in vogue. If your type of work is popular you may have a greater chance of getting a higher price. You may choose not to produce what is popular but you will have to work harder to find customers who value your style.
Many artists seem to think that controlling the distribution of their work is the key to fetching a high price – most of the artists who are successful employing this strategy have built the subjective value of their work in many other ways but most notably their brand. Some examples of creating scarcity include limiting the amount of work created, creating variations of limited editions (numbered, signed, lithographs, posters…), or by segmenting the geography where the work is available. Unless you have a great brand and your work sells quite well, creating scarcity may not be the best strategy.
When talking about subjective value investment always comes to mind. When people buy anything for investments (art, stocks, antiques, houses….) they are hoping that it will be more valuable in the future. In times when investors are awash in money, many types of investments are bid up in price – there is more money than art. When times are not so good these types of investments may go down just as fast as they went up in better times.
Artists or art works that you compete against may influence the subjective value customers place on your work. To make this work you would have to be comparing similar artists of similar stature on similar types of work. Just having work that is comparable to a known work of art is probably not enough to create much subjective value.
If I hear another artist say, “My work won’t be valuable until I am dead, that’s why I can’t make any money so I am just doing it to create art” – I think I will gag. The reason why dead artist’s work is valuable is because it is scarce. Not all dead artists’ work is valuable. The good thing (and about the only good thing) about this thinking is that you will never know if you were right or wrong.
Art also has a utilitarian value – some art may have more than others. If you are a pottery maker and you create vases then your work can also hold flowers. If you create paintings you are providing a wall covering at a minimum. The neat thing about art is that some of this utilitarian value is hard to measure. How do you measure making a home or office a pleasant place to be in or creating a good mood of feeling of the owner. These are the things that make up the “secret sauce” of your art.
Your pricing strategy is not monolithic. You may have different pricing strategies for the various products you produce. These pricing strategies may vary by market served, product attributes such as size and quality or where you are in your product (art) lifecycle.
The 4 P’s
Pricing is an important part in well known marketing model known as the “4 P’s”. The 4 P’s along with Pricing are:
- Product – the art you sell along with it various attributes such as style, size, quality…
- Promotion – the ways you make people aware of your art such as advertising, public relations, social media, brand…
- Placement – the way you distribute your art such as galleries, stores, agents, internet…
Here are few of the many strategies that you can use to price your work. Study them closely; some may work better than others for you.
Cost Plus Pricing
This concept is pretty simple – you price your products by adding up all of your costs labor, materials, overhead and then add an amount for your profit. In order to make this work you need to keep records and have a good idea of the costs associated with a particular piece of work.
There are times where you may want to sell your art for less than it cost you to produce (including the cost of your time and a reasonable profit) but you should have a good reason to do so. The main reason for selling below full cost is to get a foot hold in a new market or gain market awareness. Remember that you can vary your profit level, but not covering your costs is not a sustainable business model.
Depending on the type of art you produce your competition may have a large effect on what you can charge. For example if you make jewelry, you may be limited by what others are charging. If you have a strong brand your buyer may be less concerned with what others are charging and more concerned with the value that you provide.
Premium or Luxury Item Pricing
With this strategy you keep the price high and try to instill a perception that your work is of the highest quality, the best investment value, is only for a select few and worth the premium pricing. In order to make this strategy work you need a exclusive brand and you have to deliver a premium product.
Dollar Store Pricing
This strategy may work if you produce art that is of low value/quality and would have a low price point. If you can mass produce your work and sell it at a low price you can make a lot of money – no judgments here on your work, only business success.
Great Deal Pricing
A good way to build your market is offer a great deal. Consumers are getting a good product at a great price and the word is sure to spread. As with all strategies make sure you are covering your full costs. If you are successful with the Great Deal Strategy then you may want to consider moving some or all of your products up to the Premium or Luxury Item Pricing strategy.
Shady Business Pricing
In this strategy you sell low value / quality products at a high price. I wouldn’t recommend that you employ this strategy but it is done every day. You need to convince your buyer that they are getting something which they are not. While this strategy may be initially profitable it is not very sustainable unless you want to continually reinvent yourself and possibly have to move frequently.
Some final thoughts on pricing your work
- You need to be competitive but try not to leave any money on the table.
- Your pricing strategy may change depending on the product or services offered.
- Your pricing strategy may change depending on where the product is in its lifecycle – new product/market, established product/market or declining product/market.
- As your brand and reputation grow you should be able to raise your prices.
- Cover all of your costs and don’t deviate unless you have a real good reason to do so.
- Experiment with your pricing strategy, try different prices with different markets and distribution channels.