I typically agree with everything Seth Godin writes. Even saying “agreeing” with him sounds weird, because so much of what comes out of my mouth when talking about creative business comes directly from him.
But in his Sept 20 daily blog post (which I highly recommend you sign up to receive in your Inbox), he wrote something that made my heart sink:
Too often, we’re tempted to price things based on what they cost us to make. It’s more useful to price things based on what they’re worth to those that might want to buy them.Seth Godin, Labor and Value
Well, Seth, that sounds terrific and would definitely be “useful” if the things you’re making are already, actually, worth enough “to those that might want to buy them.”
I just wrapped up an arts business incubator program that I developed and led through Creative Waco, our local arts agency. Twenty-two artists completed the six-month program in three groups over two years. The most difficult and eye-opening part of the program for the artists was the process they went through to look at their pricing model. They had to discern how much they were paying to make their creative work – in materials, overhead, and their time, both to create the product/service and to run the business – and therefore what the customer (patron, listener, audience member, whatever) should be paying. I told them:
If you’re not at least breaking even between what it costs you and what it costs them, you’re actually paying the customer to take it off your hands.*Luann, about 100 times and places
As they discovered what it was really costing them to create their visual art, plays, music, etc., I pressured them to raise their prices. Here’s what it may have sounded like:
You see, as Seth very wisely pointed out, how much the potential buyer is willing to pay has everything to do with how much they value the product or service, and nothing to do with how much its creator values the product or service.
What made my heart sink when reading Seth’s post is that, in the arts, we have so few buyers who already believe our work is worth even what it costs us to make it.
If you read my blog very often, or hear me speak, you’ll hear about “value” a lot. Our “values” affect what we “value” enough to see a good “value” in what we buy.
If something is really cheap (a $.99 download on iTunes), we don’t have to value it very much to buy it. I’ve downloaded songs that I’ve listened to on repeat for 15 minutes, then never listened to again. It was worth $.99 to me, but I wouldn’t have paid $3 for the song while holding a $3 Starbucks coffee in my hand that would be gone before I stopped listening to the song on repeat.
If something is expensive (and expensive is relative) it has to really be valu-able to me before I’ll spend (what seems like) a lot of money on it. I’ve dropped $100 on a ticket to a play in NYC that I really really really wanted to see, at a time when I didn’t think I could “afford” a $3 Starbucks.
So the artist has a few choices:
- Reduce the cost of making it to the point that enough people will buy it for what it costs to make.
- Find the people who value it enough to pay what it costs.
- Teach people to value it enough to pay what it costs.
- Pay the customer to take it off your hands.
My goal is to help artists make more money so they can make more art. So, yeah, you’ll be hearing more from me about this….
*The phrase “paying the customer to take it off your hands” only works for things like visual art where there’s a product that’s going to go home with the customer. For other types of artists, like musicians or filmmakers or dancers, they’d be “making a donation” to the customer of their time or of the cost of materials, equipment, and business operations that it takes to do what the artist does. So if a musician has calculated that their break-even rate for playing music is $75/hour, but the bar is only offering them $50 for two hours of playing, if the musician takes the gig they’re making a donation to the bar of $100. Which they can certainly choose to do. Making a donation to the bar might be better than staying home and earning nothing. Or they can find other bars to play at that value their time more. Or they can try to teach the bar what their music is really worth.