The discount in the retail industry is a very common, if not vital, technique applied by all businesses, big and small. But is the discount applicable and economically sound in the world of photography and filmmaking?
Economics 101
The discount in the manufacturing and trading businesses is lowering the price within a certain pricing margin. This margin is the difference between the price you sell an item and the price you obtain it, either by producing it or by purchasing it from a manufacturer or a distributor.
If you are in the retail industry you usually purchase an item, let’s say a camera, and sell it at a higher price. The amount you spend on the camera is what the distributor gives you as a price tag. The distributor usually sells you the camera at a price higher than they spent obtaining it from another dealer or the manufacturer. The latter has calculated the price of the device based on the cost of labor, materials, research and development, licensing, patents, etc. When you have a tangible item to sell, it’s much easier to calculate the price for the end buyer, because you already know the amount you can’t fall below — the amount you’ve purchased it for. This gives you one end of the pricing margin. It’s up to you to define the other.
Justified Discount
In the big industries automation of production cuts labor costs and increases profit. The production of items becomes cheaper as their number grows, and at the same time manufacturers can lower the retail price enough, so the end buyer is happy, and yet, the manufacturer may have a bigger profit than before. Automation is a key to increasing the price margin and gives the ability of making discounts that are yet profitable. Automation is most useful when the number of produced and sold item increases.
Price Margin for Photographers and Filmmakers
In photography and filmmaking things are not that definitive. If you merely sell digital files, being just ones and zeroes, the price should be the same for everyone. You sell skills, usage rights, your time, and so on. Abilities and craftsmanship are subjective terms and they can be priced arbitrarily. Those that practice photography and filmmaking as a business know, that there is a number called “cost of doing business,” which you don’t go below if you want to make any profit. Everything above that is that arbitrary number we can also call a price margin. One of the expenses you can measure is the time you put into a job. This is a valuable asset that you can’t get back and should be carefully spent and evaluated apart from craftsmanship. To me, the price margin for photographers and filmmakers should be somewhere above the the cost of doing business plus the time spent on a job. Also, in my opinion, it should not be a big margin.
Are Discounts Mandatory?
While people in the retail business are used to giving discounts, does that make this practice mandatory for all businesses? Imagine you make human-size sculptures and it takes you three days to make one and it costs, let’s say, $3,000 to the buyer. What would be your discount if someone asks you to make 10 sculptures? Most of you will think the retail way and will say a number like $27,000. This means one is given for free. What is the price margin of a sculptor? Is there any automation that can save them time to build 10 instead of one? Will they build 10 for less than 30 days? No. If it will take them a proportional amount of days, what is then their price margin?
That is a difficult question. I can ask the same one for those who do detailed retouch on images without using one-click filters. Will retouching of 10 images be proportionally slower than retouching 50? No. It will not take you less time if you retouch more images, because it’s all manual work and it takes virtually the same time for every single image. Then, why would you be tempted to give a discount on a greater number of retouched files if the client asks for it?
Charities Versus Shady Charities
You’ve heard stories of people doing charity, but somehow they get profit out of that. Doesn’t sound good, does it? If you are a photographer or a filmmaker who works at prices that are below your cost of doing business and the time you spend on the job, this means you either haven’t calculated your cost well (many people don’t include the amortization of their gear or the rental of their gear from themselves) or you are working for a charity campaign. If you work for a charity campaign and yet you make profit, this may not look quite right to some people. In my opinion, if you work cheap, better work for free. Otherwise, to me it looks like a shady charity campaign or someone who doesn’t know anything about business.
Eyebrow-Raising Discounts
Every time I see a business slashing their price so loosely, I think they are either shamelessly overcharging their clients or are incredibly stupid to make no profit of otherwise commercial deals. Imagine you see an offer for an ARRI Alexa Mini for $1,000. Big discount or a shady deal? Remember this next time you decide to make huge discounts. What is your price margin? What is your cost of doing business? Are you registering a loss when working at discounted prices? Are you a “shady charity?”
When Would I Make a Discount
This is my personal opinion. I would make a discount if I am able to make a profit in some other way now or in the future, like making valuable connections, saying “thank you” to a client who helped you work on your dream projects, working with someone multiple times on interesting projects. This is the way I think of an discount in photography and filmmaking, not just lowering your price to bring attention to yourself. If it’s the price that will make people look at you, you should consider switching to the retail industry and stop being an artist.
Final Thoughts
I think discounts should be applied mostly to retail businesses that sell tangible (even if it’s software) items. I don’t think discounts are very applicable for craftsmen unless they have ways to automate parts of their workflows and can deliver products that are still satisfactory to their clients. If you don’t have such methods, better don’t do discounts, because this will seem you are simply overcharging the other time. When working way cheaper than your regular price, this means you’re undervaluing your work, not to mention what former clients of yours would feel when they hear that someone got the same service for much less. If your prices are impossibly high, the market will tell you that and you can adjust them accordingly. However, I’m talking about fairly-priced businesses.
Do you do discounts in your business, when, and why?