Your Dream Studio: Building Your à la Carte Price List with Jeff & Lori Poole
It’s Time to Build your Price List
For the past three months in The Business Corner, we’ve been building your price list from the ground up. We started with cost-based pricing as a foundation (October), and then looked at alternative pricing methods for products (November) and digital files (December). While it would appear that we now have a price list, there is more consideration that goes into price list design than simply listing every product you offer. What we have now is a list of items to sell, which we are now going to curate into a functional price list that sells for you.
The Role of the à la Carte Price List
The à la carte price list is your list of products that your clients can buy individually outside of or in addition to a package. This is in contrast to a package system, a create-your-own-collection system or any other system you might use to encourage clients to buy more than one item. Ultimately, your total sales system will likely employ multiple methods to yield the best results.
A fully à la carte price list gives your clients maximum freedom. They can choose any products they want in any combination. While your clients may love the flexibility, a strictly à la carte price list can yield lackluster sales. When clients see a price tag next to every item they purchase, they may feel like they are overspending, and they may end their purchase prematurely. Any à la carte list with too many items can lead to decision-making fatigue. Clients feel overwhelmed by all the choices, and may abandon the sale rather than make a decision.
Conversely, a package system or create-your-own-collection system simplifies the buying process. Products are prearranged in popular combinations, reducing buying uncertainty. Clients are rewarded for purchasing multiple items with a discount. We all are confronted with packages and bundles every day. Flo at Progressive Insurance wants you to bundle your home and auto insurance. McDonald’s sells you a value meal with a burger, fries and a soda.
Any package system must start with the foundation of a strong à la carte list.
If They Only Bought This…
It’s important to think ahead to the sales process. A client shopping from the à la carte list is planning to buy only one or two items. When considering whether to place an item on your à la carte menu, ask yourself: “If the client buys only this item, will I make a profit?” The answer lies in your target sales average. (For help determining your target sale, see our August 2018 article, “Your Dream Studio: Creating an Annual Plan.”) If your target sale is $1,000, it doesn’t make sense to include low-dollar items like gift prints on your à la carte menu. For your first step, remove all low-dollar options from your menu.
If variety is the spice of life, too much variety is the killer of sales. When Jeff and I mentor photographers on their pricing, we frequently see photographers offering too many products, and the products are not different enough from one another. This leads to confusion and fatigue for your client.
Photographers love to offer their clients multiple album options. These options often have very subtle differences, such as paper type and printing (press versus fine art)—technical details only photographers care about. If you have to explain to your client how the albums differ, they are not different enough. You are making the client work too hard to buy the album. If your client can clearly see the difference between your album lines without any explanation, then you may have viable variation. But even if they are obviously different, having multiple album lines is superfluous. A more suitable variation would be offering obviously different styles of wall portraits. Clients can easily see the difference between canvas and metal, and will choose whichever they like best.
Photographers must pare down the number of choices for clients. We geek out over technical details our clients don’t care about. Or we are afraid of making the wrong decision: “What if my clients want X but I only offer Y? I should just offer X and Y, and maybe also Z and W and V just to be safe.” If we suffer from analysis paralysis when making our own price lists, imagine how our clients feel. We must choose the best options rather than pass that work on to our clients. This is your studio. You are the artist. Narrow it down to the option you like best.
Next, simplify your product lineup by removing products or options that are too similar, keeping only options that are obviously different.
Once you’ve pared down your offerings to those that are obviously different, let’s create a hierarchy. There should be a linear progression of size and quality of the options you do have, and this hierarchy should be apparent to your client.
DO: Album hierarchy
Good: 8×8 / Better: 10×10 / Best: 12×12 – The hierarchy in sizes is clear. The client understands why each option costs more than the previous one.
DON’T: Album hierarchy
8×8 and 9×7 – These are simply different. There’s not one that is better than the other. The pricing feels arbitrary.
Jeff and I recommend having three or four options when offering a variation. Clients will avoid the largest option, so if there are only two options, they will choose the smallest. If there are three, they will gravitate toward the middle. If you go with four options, make the top option extreme in size, quality and price. This is called the whopper. In the album scenario above, a whopper could be a 16×16 album that includes 10 extra pages and a cover upgrade. It will immediately make your “best” option much more reasonable, and it will show off your best options.
Ensure that any variations you offer have a clear hierarchy so the client understands what they are paying for.
Vote the Cannibals off the Island
Recently, a photographer Jeff and I met at ShutterFest asked for some mentoring on her price list. One of her struggles was in selling packages that included portrait albums. Clients were consistently avoiding albums and any package that included albums. A review of her price list revealed a nasty cannibal: She had a competing product on her price list that served the same function, but at a much lower price point.
Your client may view your products by their function. The function of a portrait album is to get multiple images in a single product. But other products serve this same function: accordions, folios, collages, album blocks, print boxes. The other multi-image product on her menu cost her much less, so she was selling it for much less than the album (cost-based pricing). Clients were comparing two products that both got them the same number of images, and were choosing the cheaper option. One solution would be to raise the price of the cannibal so that price was no longer the determining factor. Since she never loved the cannibal to begin with, we removed it from her product lineup. She began selling albums and tripling her sales average overnight.
View your product lineup through your clients’ eyes. Do you offer multiple products that serve the same function? If so, remove the products that are cannibalizing your sales.
Is It Boring Yet?
By now, you’ve probably removed many products from your à la carte lineup. You removed everything at the low end of your price range, such as gift prints and novelty products. You then removed products that were too similar, paring it down to products that were obviously different from one another. You removed items that didn’t have a clear hierarchy, reducing your variations down to obvious differences in size or quality. You removed products that cannibalized sales because they fulfilled the same function as your other products at a lower price point.
At this point, you should have a small list of your flagship products. For the average wedding and portrait photographer, your à la carte list most likely includes:
- Wall portraits in a handful of sizes, at most three styles
- A single album line with three to four sizes
- The complete set of digital files, but not individual files
And that’s it. Your list may not match the list above, but it’s probably pretty close. Pretty boring, huh? But it’s supposed to be. Remember that you want your clients to purchase from within your package system because that is where you are most likely to reach your target sales. You are going to lure your clients into your packages with more interesting products, more variety and better deals.
Speaking of deals…
Mark It Up to Mark It Down
Now that you have finalized the products that will make up your à la carte list, it’s time to set the pricing. Over the past three months, you’ve worked hard to come up with profitable pricing for each product. There’s only one step left to go. The price you’ve come up with is the bottom-dollar price that you can accept. This means you cannot discount the item within your packages; instead, you must mark it up for the à la carte list.
Clients expect packages to cost less than à la carte, but how much less is important. Too little difference, and the client is not incentivized to purchase a package. Too much difference, and the client will be mistrustful of all the pricing because it will seem arbitrary. As a rule of thumb, packages should be “discounted” about 20% from the à la carte price. This is flexible, of course, but it’s a good starting point. Now we just need to figure out how to mark up the à la carte price so the package price you’ve already calculated is 20% less.
Let’s say you need to sell Product X for $1,000 to be profitable. That means Product X will cost $1,000 within the packages but will cost more à la carte. To figure out the markup, simply divide the package price by 0.8 (or 80%, which is 100 minus 20%, the amount of your target discount):
$1,000 / .80 = $1,250
With this math, you can reverse-engineer the à la carte price to be $1,250. Then, when the package is discounted 20%, you are still selling Product X for your original goal of $1,000.
Your à la carte list is meant to be three things:
- Easy for your client to understand
- A tool to guide your client into your package system
- Profitable for you if your client goes à la carte
By limiting your product offerings, keeping things simple and marking up your à la carte products, you are primed for success. Join us next month as we delve into sales strategies to create packages that are profitable and sell themselves.