One of the wisest men in business I know is Jim Collins. No, not that Jim Collins. (although, I hear he’s pretty smart too. 😉 I’m talking about the CEO of my long-time client Pictage. Jim was brought in as CEO almost two years ago. I will not go into details about the changes he and his team have made over the past two years because 1) to honor his genuine humility, and 2) I just don’t have the time. 🙂 But, if you’ve been a client of Pictage for three years or more, you know. But, In light of the blog posts I wrote this week about the bleakness or brightness of the future of our industry, I recalled some wise words Jim mentioned during his keynote address at the 2010 PartnerCon in New Orleans. Jim made a few economic points that really bring to light a positive and encouraging way to look at this business and what’s happening. Three of his key take-aways were:
1. The Axiom of Supply and Demand: Jim literally gave a mini-economic 101 course during his presentation. One key point he made was the idea of the economic axiom of supply and demand. He shared that an axiom is a statement that is always true, and that there are very few economic principles which are axiomatic. One of them is supply and demand. When supply goes up, and demand goes down, prices will fall. Period. Right now, in this economy, that is what we’re seeing. Supply of photographers (and for that matter videographers) is going up and demand is going down. Prices will therefore fall. All the bitching and moaning and groaning you do about photogs who lower their prices to get them to raise them again will be like (and I’m quoting Jim here) “trying to push a river back up the hill. You’re fighting an economic principle against which there’s no winning battle.” There are things you can do to protect your pricing, but trying to get others to change theirs via peer pressure won’t work.
2. There’s Hope: For the first time in the course over the last year, a significant number of photogs entering the business are over the age of 40. Why? Because they’re getting laid off from their day jobs. When that happens, they fall back onto those things they love, i.e. photography, videography, etc. But what’s happening is that these guys who are used to working a day job will realize that running a photography business is hard! Eventually, as the economy rebounds (which it always does), many of these guys will go back to a day job. Supply will decrease. And as discretionary income increases, demand will also rise. And when that happens, prices will rise again.
3. Ride it out: in light of #1 and #2, Jim shared that the right strategy is to ride it out. And that doesn’t necessarily mean lowering your prices. There are those out there who “buck the trend,” who set themselves so far apart that they themselves become a rare item, are in low supply, and therefore can sustain pricing. Jim talked about experiential differentiation – creating that experience for your clients that sets you apart. What are you doing to offer this in every aspect of your business? He also talked about visual differentiation – what is unique about your work that sets you apart. Do your photos (or videos) look like everyone elses? Or does your work stand out?
Ultimately, you must find a way to differentiate yourself. If you don’t, you will be stuck competing on price. And when that happens, there’s another economic axiom you should remember: when you compete on price, those with the deepest pockets win.
So, ask yourself, what are you doing to ride it out, differentiate, and not succumb to these economic axioms?
So with the supply and demand example, it almost seems like you’d have to consider the supply and the demand of each individual price point. What I mean is that sure, there are entry level photographers who are crowding the market, but from what I’ve seen, there really hasn’t been a ton of increase in the mid to upper end photographer supply. If the demand stays the same for these markets (which it looks like it has), then an unchanging supply of photographers in these markets should mean the price stays the same.
Maybe the end effect for so many entry level photographers starting businesses over the past few years will be somewhat like the baby boomer trend. The bubble will slowly move through the different price points. The good news to those of us who already have photography businesses one or 2 levels ahead of theirs though is that we will probably stay ahead of the curve and there will probably still be demand for the price point we’re at.
What do you think? Am I way off here?
It’s been a while since my econ class at Berkeley (a side note, my econ professor was none other than THE Laura Tyson), but I think the answer to your question is “Yes” and “No.” Yes, technically, you could look at the supply and demand of service providers at every level. If you’re in the market for a Carlos Baez level photog, there are only so many of them around and the price he can charge will be affected by that. But, at a macro level, ALL levels will be affected by this general supply and demand. There ARE photogs who were chiefly at the high level, who have seen drastic changes in their business in the last couple of years. At PartnerCon, even Joe Buissink publicly shared some of the challenges even HE has faced. There will be fewer people able to afford the Joe Buissinks, Carlos Baezes, and Mike Colon’s of the world. Yes there will still be demand for them, but on the grander scheme of things, their businesses will most likely be affected just like everyone elses. Joe can still charge “Joe Buissink” level prices, but what he offers and where he has to go to get those clients have been significantly affected.
Regardless, there will always be exceptions to the rule. I’m sure there are photos and videogs out there whose business, for whatever reason, has INcreased over the past two years. More power to ’em.
Hmm – I’m suprised that Joe Buissink had to make adjustments. His target market is J-Lo and her friends. I wouldn’t have thought that market would have changed too much. For example, at least in our area, the upper end housing really hasn’t suffered nearly as much as the lower end housing. I haven’t heard anything recently on how the upper end housing is selling here, but I know that at least for a while when things seemed bad for middle-class America, the upper-class in our area was largely unaffected.
For photographers that we know around here, I think the ones with talent have seen growth over the past 2 years. There are 3 or 4 studios that have gone out of business, so that may be the reason for the growth of the other studios I suppose.
I guess it’s just a matter now of waiting to see how the photography market shapes up over the next few years. Thanks for the great article and insight!
There are so many factors at hand. Not the least of which is location. As far as the “J-Lo” market, I would guess there are a lot of “regular” people who hire Joe. People willing and able to spend $10K, but aren’t celebrities. Many of those people are perhaps more affected than the J-Lo’s of the world, so business can be affected. Not to mention that California as a whole is getting hit hard economically. Yes, it’s still as expensive as heck to live out there, but nonetheless, times have changed.
I would guess the three or four photogs in your market who went out of business contributed to the growth of the others. That’s supply and demand at work at a micro level in your area. 🙂
Thanks again for reading and contributing to the conversation.
Hi Ron. This post is great. And your Bright & Bleak posts are awesome.
I feel that the demand for an average wedding photog is fairly inelastic (straight vertical line). I mean, ALL brides get a photog. But I don’t think filmmakers are there yet. Only 10-20% of brides get video. What filmmakers need is to see the the demand for our services increase. Bigger pie, higher prices, happy people.
Ooooh Ross. You goin’ total econ on me with the whole elasticity issue. Are you also a recovering business major turn creative like me. 🙂 I couldn’t agree with you more.
Quick econ lesson for those reading. If something is inelastic, changes in price have little affect on the demand. As Ross pointed out, regardless of price, a bride will always get photography (in general. Yes. there are a few occasions where they don’t. But they’re as rare as a four leaf clover). If something is elastic, that means changes in price will have an impact on demand. Wedding videography is definitely more elastic then photography. Most brides opt out of it all together b/c it’s not worth the price. Fortunately, we are seeing that change.
Thanks for reading Ross and for your compliment on the bleak and bright blog posts. 🙂
Ron this is a good lesson for all creatives. It is a basic one and it’s important. I think it might be worth noting that beyond the basics of this axiom there is hope and it goes beyond your suggestion of “waiting it out.” While I agree that some photographers will drop out of the market because it is indeed hard, this isn’t the only event that would cause those who remain to have hope.
The supply and demand curve, as suggested by one of your other commenters is indeed influenced by demand AT A CERTAIN PRICE POINT. Demand curve shits and elasticity (often tied to price as well) can make the supply side less relevant – and therefore, can allow for greater success when the creative business person finds the optimum price point.
Example. If you work at the low end of the market, the supply will be far greater than the demand in today’s marketplace because most creatives have mistakenly decided that cutting price is the only way to survive. In making that decision, they have eliminated the middle. The folks working at the high-end of the market see less supply already due to people dropping down to the low end, so the demand there is proportionately higher.
In summary – you don’t have to just wait it out. If you move up market you can gain market share right now.
Thanks for posting Jim’s point of view. He’s a smart guy.
Ron,
Wow man. Thanks so much for posting this. You must have been recording it because when I wasn’t playing your amazing films I’m pretty sure everyone was sleeping!
Scott’s on target, no surprise there. There are two keys to success in a down market. One is being smart about your reserves and the other is creating a scarce resource of yourself (differentiation). What I see a lot, and what’s concerning, is that a lot of people actually do the opposite. In an effort to attract customers, they price and package like people who they perceive to be selling (reducing differentiation) and they spend money on elaborate branding projects, new pieces of equipment, etc., in the hopes that what that will yield is some form of differentiating sizzle.
The point about Joe is an interesting one. He’s a good friend so I don’t think he’d mind me saying this. It is true that he photographs J-Lo. In fact, over New Years he shot Kellie Pickler’s wedding in Antigua. (and the images are drop dead gorgeous!) These clients are willing to pay however much for what they want. For them money isn’t a decision factor at all. However, any celebrity photographer will tell you that if you try to build a business solely on celebrities you better live a pretty frugal lifestyle. There simply aren’t that many celebrities. So, for his other clients he HAS had to lower his pricing some. (Joe is smart about how he does that as he also reduces what’s in his packages). In his talks he makes that very clear. With that said, he is still dramatically higher than the market and the reason for this of course is because ultimately, there’s only one Joe Buissink. (and that’s the best differentiation there is!)
Fun stuff Ron. I’m honored to be on your blog. Thanks Scott for the kind remark. Fun to read the discussion here as well…
Jim!
Great point here in talking about how Joe lowers his price AND what he offers accordingly. Cutting prices doesn’t have to mean cutting profitability. But if a person chooses to compete on price to the point they do reduce profitability, they’re on a quick road to commoditization and volume is your only hope. At that point your only route is multi-shooter studios.
While it’s difficult, I’m actually very excited to see the effect this is already having on my business. It’s sharpening the way I make decisions and refocusing my perspective on what I really offer.
Ron…thanks for starting the conversation!
Kevin