By Marianne Lee, Wonderful Machine
Each month, we analyze a recent cost estimate, contract, or purchase order and present it in the form of a Pricing & Negotiating article. Redacting the names of the photographer and client allows us to share useful information that would otherwise be confidential. You can read more about our Pricing & Negotiating services on the Consulting Services page of our website.
Job Description: 7-day food and lifestyle shoot on a cruise ship
Licensing: Perpetual Publicity, Collateral, and Advertising use
Photographer: US-based food/drink and lifestyle photographer
Client: Major cruise line
A photographer came to us recently with a common challenge. A client they had been working with for several years was back for another shoot. In the past, the photographer had provided “all-in” price quotes that consisted of a single bottom-line figure rather than itemized fees and expenses, and they didn’t address licensing in their contract. Instead, the handshake agreement was that the client could use all the photos however they wanted, forever. Since the photographer had consistently delivered great results, they felt it was time to assert themselves a bit more in their contract negotiations.
Pricing vs. Negotiating
There are two parts to the way I help photographers. First and foremost, I help them quote on the project at hand (that’s the pricing part). But along the way, I look for opportunities to consider the negotiating part (this blend of art and science is what makes the process interesting — much like photography itself). Over the years, I’ve learned a lot of basic principles of negotiating, where a subtle shift in thinking can have a big impact on pricing.
In this case, the first rule of thumb I shared with the photographer was that you don’t get what you deserve; you get what you negotiate. Being a freelance photographer is different from having a full-time job, where raises and bonuses are usually built into the system. Freelancers have to periodically (and respectfully) modify their pricing and terms as they gain leverage in the relationship. As photographers develop their creative, technical, logistical, and interpersonal skills, they deliver more value to their clients — and gain more leverage to raise their prices or limit usage. In this situation, I was preaching to the choir. The fact that the photographer came to us suggested they already knew it was time to make a change.
Itemizing Fees and Expenses
The main correction that they needed to make was to move away from their “flat rate” pricing structure and adopt a more descriptive “fee plus expenses” pricing structure. A flat-rate approach will make sense for wedding photographers who are working with retail (business-to-consumer) clients who are either going to accept or reject your proposal. In contrast, it’s not uncommon for commercial photographers to go through multiple rounds of price quotes with a client, as the parties hone in on exactly what needs to happen and what the client needs to get in the end. And especially with price-sensitive clients, breaking out fees and expenses gives both parties the information they need in order to come to an agreement.
Psychologically speaking, a commercial price quote will usually benefit the photographer, and all-in pricing will usually benefit the client. We often see this when a client comes to a photographer with what appears to be a big budget, but once you take a hard look at the expenses, you realize that the fee is quite small.
In addition to separating the expenses into line items, it will usually benefit both the photographer and the client to describe creative and licensing fees in detail (creative refers to what you’re going to do and licensing refers to what the client is going to get).
Commercial photography licensing falls into 3 main types: Publicity, Collateral, and Advertising. Instead of simply describing the license as “Unlimited Use,” breaking it into types and sub-types (in addition to the number of images, the territory, the duration, and exclusivity) allows the photographer to incrementally adjust the fees and/or expenses to meet the client’s budget, while delivering the usage that they need most.
It’s also important to understand that the photographer’s previous flat-rate “all you can eat” pricing model was dysfunctional because it didn’t incentivize them to be as productive as possible; it incentivized them to only be as productive as necessary. The photographer saw that it would be better to create a win-win pricing structure where the more productive they were, the more value they would deliver to their client and the more money they would make.
Reverse Engineering the Estimate
Since the photographer had previous experience working with this client, they had several invoices that allowed us to reimagine the new price quote in the form of itemized fees and expenses instead of a flat fee. We looked at how many days the previous shoot lasted, how many final images the client received, and what the final price was. That allowed us to “reverse engineer” the new estimate with the creative fees, licensing fees, and expenses broken out.
Last year, the photographer worked on a similar project (in terms of shoot days, number of images, and usage) for this client, where they charged a flat fee of $50k. Based on that information, here’s how we broke out the new quote:
Once we broke it all out, the numbers supported my initial impression. While most photographers wouldn’t ask too many questions if they were offered a $50k assignment, when you do the math, you see that the photographer is charging just over $1,200 per picture for perpetual publicity, collateral, and advertising use, which is fairly modest.
Results
The client accepted the photographer’s proposal.
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