The Price is Right, Come on Down!

I was able to sit in this morning on a workshop presented by the Community Partnership for Arts and Culture (CPAC).  The module revolved around pricing structures for artists and the arts community, and how we all can apply typical pricing strategies from the corporate world to our own artistic careers.  The presenter this morning was Michael V. Marn, Director of Pricing Services for McKinsey & Company, Inc.  Michael led an extremely interesting conversation about tactical, perceptual and psychological barriers to getting the price you want for your work. Often, artists are made to feel bad about what they charge for their work, and Michael explains that in contrast, every artist, dancer, musician, or designer should actually take pride in the fact that they received the price they set out to get.

While not a complete transcription, the following are some notes from Michael’s presentation that I thought were interesting, and can serve as a springboard for many professional artists to start thinking about their pricing.   

Trying to Decrease Price to Increase Volume

McKinsey & Company’s research shows that changes in price, say a 5% drop in price, typically results in no increase in sales; the basic math of decreasing price to increase volume of sales just doesn’t work.  The extra volume needed to justify the decreased price doesn’t compute. 

Notes About what Sellers (Artists) are up Against

• Buyers are always trained to go for the lowest price; it is natural tendency.
• If you are getting no complaints about your prices being too high, you could actually raise your prices. Unless about 15% of your customers are saying your prices are too high, they are probably too low.
• “Pro-Amateurs” who undercut your own professional work by offering lower prices for sometimes inferior work. These are lower benefit competitors; if you as an artist can be articulate and clear to your customers that your benefit level is better than that of your competitors, you have much more headroom to charge higher prices. The Big Question is How do you make that case to your clients or buyers? That skill is essential for any artist entrepreneur to develop and put into place.
• Some buyers are using the economy as an excuse to try to negotiate prices. Even in a downturn, buyers will most likely still pay your fees, just as long as you can demonstratively show that your benefit is higher than that of others.
• Your customers do not care about your cost/overhead! They care about the best price vs. benefit tradeoff.

What prevents you from getting higher prices today?

• Fear of rejection
• Downturn economy, lack of discretionary dollars
• Buyers have price cap, existing reference price
• Fear of not moving the product; volume concerns
• Exercise for Artists: the next time you sell an item, after the sale is complete, ask the buyer if the price were $50 or so higher, would they have still purchased it? Use this information to inform your pricing structure.

Some pricing losers, or common misconceptions

•  Price=Cost+standard margin. Not an ideal equation.
• Price is set by the competition
• The objective of pricing is to win every order (commission, sale of artwork, gig, etc)
• Customers only care about low price
• Raising prices risks loss of business

 The Concept of Value

• Customer value=perceived benefits-perceived price
• The higher the perceived benefits (look, quality, service), the higher the perceived price
• When the buyer sees no difference in perceived benefits, they will opt for the lowest priced product or service.
• Mike related a story about a research study that showed the effect price level has on perception of value: a gallery in two locations had the same vase for sale, one location priced it at $45 and the other at $9. Exit surveys asked buyers about perception of quality for the vase they just bought. Overwhelmingly the surveys showed that the perception of quality for the $9 vase was lower than the $45 vase, even though they were the same exact product. Also noted were buyers who chose not to purchase the $9 vase because they perceived it to be of low quality-based mainly on the $9 price tag.

These are all interesting items to consider as you set your pricing, or restructure your prices for your artwork or creative services.  One of the most important points that came out of this discussion, as well as a COSE Arts Network Roundtable discussion led by Diane Helbig, is that in this downturn economy, there will be a shift back to quality: the best artwork and those artist entrepreneurs with the highest perceived value of their work, will rise to the top.   When the economy does improve, the innovative and high quality artists and their work will survive and be in the best position to be successful business people and entrepreneurs.

Another Reason to Love Cleveland!

Earlier this morning I attended a reception hosted by the Community Partnership for Arts and Culture (CPAC) to announce the 2009 class of Creative Workforce Fellowships.  Each of the group of 20 artists, which included painters, sculptors, filmmakers, and designers, will receive a $20,000 grant to be used as the artists see fit to further their careers and artistic projects, a free year’s membership in the COSE Arts Network, and access to business-management training through CPAC’s The Artist as an Entrepreneur Institute.  To see a full list of today’s recipients and more back story on the Fellowships, click here

This Fellowship program is an unprecedented effort in the Cleveland area to use public dollars to support the work of individual artists.  And it won’t end there.  In a few months the second round of Creative Workforce Fellowships will award 20 more grants to musicians, dancers and others working within the performing arts and literary fields.  The grant program was made possible by forward thinking and visionary leaders in our area, including, but not limited to Tom Schorgl of CPAC, County Commissioner Peter Lawson Jones and the entire Board of Trustees of CPAC. 

Following the introduction of the Fellows, time was given for the recipients to comment on their awards.  The overwhelming feeling was one not only of gratitude for being given the financial support of a $20,000 grant, but of pride and appreciation that they live in a region that cares enough about artists and the arts community to support the creative workforce on an individual level.  Many talked about coming back to the Cleveland area and being pleasantly surprised at the level of support for the arts, that frankly, some of the long time residents tend to take for granted.  These types of grant opportunities, coupled with a strong arts infrastructure, affordable studio and warehouse space, business support from places like COSE and CPAC and a low cost of living/ high quality of life really exemplify why our area is a great choice for any artist to settle in and create inspiring work.

hoops and jazz

I like most sports, and growing up I was a huge fan of all the Cleveland sports teams, including my favorite, the indoor soccer team the Cleveland Force.  I’ve watched live the majority of the Cleveland sports “disasters,” conveniently rubbed in when  the Cavaliers were recently ousted from the NBA Playoffs.  This year’s loss in the Eastern Conference Championship is now the most recent on that list of failures, and yet another reason it is so hard to keep the faith in Cleveland professional sports.     

I don’t know if it is cyncism about our current Steroid Generation of baseball, or the ongoing futility of the Browns, but the only pro sport that I really follow any longer is basketball, and in particular the Cavs. 

I got to thinking about the game of basketball itself, and how it is more organic than baseball or football.  Basketball and soccer are in my mind more graceful and flowing (more so the latter) than any other sport.   I’ve always tried to convince my non-sports fan music friends that basketball is the “jazz quintet” of the sports world, and that many parallels exist between the musical art form and the sport.  I am not alone either.  Recently the New York Times ran a small video feature with Wynton Marsalis explaining the connection between jazz and basketball.  Years back Basketball Hall of Fame member Kareem Abdul Jabbar did a TV piece on the similarities between jazz and the sport, and even appeared in a documentary about famed jazz label Blue Note records.  Larry Blumenfeld, writing for the Times-Picayune, also notes the connections.

Marsalis points out that both jazz and basketball feature a give and take between the members of the group, and that the success of the whole often depends on the players acknowledging and carrying out their roles, even if it means deferring the glory or limelight.  Great jazz albums don’t get made without a solid, capable rhythm section of upright bass and drums.  These instruments lay the musical foundation upon which the soloist or vocalist improvises.  Many times these musicians play every beat of every bar of music for the entire album, sometimes never getting the chance for a improvised solo feature.  In basketball, LeBron James might have a hard time driving the lane and throwing down a windmill dunk were it not for the power forward teammate who set a hard pick at the top of the key seconds earlier.  These same players are the ones sacrificing their bodies on defense as they try to stop oncoming opponents, or battle other 7-footers for a loose rebound. 

Marsalis also notes that both jazz and hoops often begin with a standard form and deviate from there, as players are free to get creative with the standard song and chord progressions in the case of jazz, or in the case of basketball the play called out by the coach.  In each case the players are reacting to the actions of their band mates or teammates, and working as a group to create something new out of the established form.  Rhythm also dominates both areas.  Obviously jazz music would not be worth listening to if the musicians didn’t play with a compelling and driving rhythm; it’s what gives the music its flavor and uniqueness.  B-ball players also have their own rhythm that they try to follow during the game.  Jump shooters talk about timing and rhythm in regards to their shot, and when it is inconsistent they relate that they were “out of rhythm.”  Whether its a team running a half court set offense, or LBJ slicing through the defense to the top of the rim, they all play with a cadence that is unique to each player or team; much like each small jazz combo has its own unique sound and feel.

I don’t know if many other jazz musicians think about basketball and jazz along the same lines as I do, but on this Monday morning it is all I could do to not be depressed that the Cavs are on summer vacation early, and that the best basketball player in the world will not be in the NBA finals for the second year in a row.