Architectural and real estate photographers: you probably need to raise your prices.
I know a lot of photographers feel very nervous about a price increase because they feel that they will lose too many clients. In this video we’ll look at the difference between elastic pricing and inelastic pricing, and I’ll show you how you can calculate the value for your photography business.
Price Elasticity Calculator
Here is the calculator I used in the video to determine whether a particular price was elastic or inelastic.
If the quantity of units sold (in our case, that's the number of photo shoots we do) decreases too much after a price change, then the price elasticity value will be greater than 1 (or -1). This indicates elasticity.
If the quantity of units sold drops by a very small amount, or doesn't change at all, then the price elasticity value will be less than 1 (or -1). This indicates inelasticity.
Photographers - you probably need to raise your prices. Now when I recently told another photographer that they said they couldn't raise their prices because they can only charge $150 per house in their market. I’m not sure that’s the case, and maybe that photographer, and indeed many of you, assume that you can’t raise your prices but perhaps you can, so let’s take a closer look.
What you can charge for your photography comes down to a thing called price elasticity. What economists mean by this is that if your clients aren’t price sensitive, and if you could raise your prices quite a bit and see little change in sales, then we would say that demand is inelastic. In other words, there’s not a lot that’s going to change when it comes to how many photo shoots you do if there is a change in price.
On the other hand, if an increase in your prices would result in lots of clients leaving you, then we would say that demand is elastic. In other words, there’s a lot of flexibility, a lot of elasticity, and so the demand for what you do can change a lot with even a small change in price.
Now a lot of photographers assume that demand for their services are elastic – they often say that even a price rise of $10 would see them lose clients, and maybe they’re right …. But maybe they’re wrong. Maybe they can make more changes to their pricing than they expect. We’ll look at that a bit more in a moment, but it’s worth noting that price elasticity is not something that happens completely out of your control – you actually have a say on how elastic your pricing is, and your marketing has a role here.
So if you can increase the desire your target market has for what you offer, or if what you offer is different to what other photographers in your market offer, or if you position yourself as the expert where clients feel that they have to work with you, then you can increase their willingness to hire you even if your pricing goes up.
So with regard to price elasticity, you could estimate what will happen with a price change, and that might be something worth trying but it’s really difficult to get right – we almost all think that things will be either significantly better or significantly worse than reality.
So you need to keep all that in mind, but here’s what you could do: rather than taking a wild guess, actually raise your prices by just a small amount, then watch what happens.
If you lose too many clients or if you get too many saying no then you’ve got some bigger issues to deal with. If the only thing keeping those clients with you is your price, and not the quality of your work, your service, or the relationship you have with those clients, then things will need to change for you. Now of course you probably can’t increase your fee by $100 and not expect to lose some clients, or maybe even a lot of clients, but a small price increase should not be a problem at all if that’s what you need to do to offer a higher level of service.
The other advantage of making a real change rather than just estimating is that these numbers will provide you with a measurement of price elasticity, and we’ll get to that in a moment.
So let’s say you currently charge $200 for a shoot, and you’re doing 20 shoots per month. That means revenue is $4000 per month, assuming no other sales. But then let’s say you increase your fee by $20, so you now charge $220. How many clients could you lose?
Well, let’s say you lose 5 clients, and that’s a lot – it’s probably not going to happen with a $20 price rise, but let’s say you’re now doing 15 shoots per month at $220 each, which is $3300 per month. You’re down $700 per month on what you were earning, but on the positive side you’re doing fewer photo shoots, which would give you at least a full day every week to focus on marketing and pursuing better clients at those higher rates.
What could you do with a full day with no photo shoots?
You could use that 1 day a week to build a better marketing system that will enable you to get back to earning what you were earning before, which would need an extra 3 real estate clients. Here’s another idea - put all your energy on those days into pursuing commercial clients, and aim to get at least 1 commercial shoot each month. Now with the right commercial client you’ll be able to charge more than $700 so you’re ahead on what you were doing with your old real estate photography prices, and you’re doing it with fewer shoots and more time to focus on your business.
Beyond that, you can also use these numbers to calculate your actual price elasticity value. To do that, we do a calculation where price elasticity is equal to the percentage change in quantity divided by the percentage change in price.
I know that sounds complex, so the easiest way to do the numbers with this is to use a price elasticity calculator online.
Now to make it easy for you, I’ve embedded one on the blog post for this video, and here it is. So let’s say that our initial price is $200, and our new price is $220. Then let’s say we previously did 25 sales in a month, and with our new price we do 20 sales in a month. This calculator then tells us that our price elasticity is 2.33, which indicates elastic demand because that value is higher than 1. That means that our photography is very sensitive to changes in price – there is a strong correlation between the fee we charge and the number of sales we make, and if we want to change that, which we can, then we’d need to put a lot of work into the position of our brand and the marketing we use.
Let’s try some different numbers. Let’s say our price still went from $200 to $220, but let’s say we only lost 1 sale – so we went from 25 sales in a month to 24 sales in a month. Under those conditions, our price elasticity value is only 0.4, and since this value is less than 1, then we classify it as inelastic.
That’s great, but so what? Well, if you know for certain that your pricing is inelastic, then you can be pretty confident that any future price increases should have little impact on the number of photo shoots you do. Of course, that may change if your price increase is significantly higher than this one, but it suggests that if you keep slowly moving your prices up then your volume of work should remain steady. That’s what inelastic pricing means, and that’s where you want your business to be!
So go ahead and raise your prices, test what happens, and you might surprise yourself by either staying at the same level or possibly even increase your revenue. <NEXT> If you do lose a few clients then you’ll give yourself time in your week to work on your business so you can get better clients. Either way it’s almost certainly going to be a winning situation for you, but you’ve got to make that jump and raise your prices.
Now if that makes you nervous and you’d like me to help you with this then I run a coaching program for architectural and real estate photographers, and I’ve got over 500 modules to help you with marketing, pricing and photography. If you’re interested you can find out more by visiting https://buildaphotographybusiness.com/reps/
Alright, that’s it for today. If you like this video be sure to leave a comment, and then subscribe or like this page. My name’s Darryl Stringer, and I’ll see you next time – bye for now.