AIAP Newsletter 06/07/06

The Gentle Art of Fee Negotiations

Dear AIAP Members,

For those of us in the Northern Hemisphere, our busy season is officially underway.  Most of us see the bulk of our billing during these good weather months.  One of the most critical issues to real success in this business is the ability to negotiate a good fee when booking a job.  If you find yourself more inclined to ask "What's your budget" than offer a price, here are a few important considerations:


Make the First Move

We've all found ourselves in a discussion with a client about a potential project.  We spend time discussing the creative aspects of the shoot, but eventually the conversation progresses towards pricing.  For most of us this is make-or-break time.  Do any of us have a real strategy in place when negotiating fees, or do we simply cave in and let the client set the price?  Consider the following business school dictum: The outcome of a price negotiation is largely determined by the party making the opening bid. 

In plain english this means that setting a price at the outset of the negotiation will give you the advantage.  Setting a price in the beginning sends two strong messages:  First, you're a professional, and you know what your time is worth; Second, you know how to play the pricing game.  However, going first means you have to be on the mark with regard to market value.  If you bid low, your client may sense desperation and perceive you as less qualified; on the other hand, an overly ambitious opening bid may bring the whole deal to a screeching halt and send the message that you're simply full of yourself.

Going first allows you to draw that line in the sand that says "this is the ballpark price" for this particular project.   It's important to understand that both you and your client always have "reserve" prices in mind for the project--you know the lowest price you'll accept, and your client knows the highest price they're willing to pay. 


Meeting in the Middle

Knowing just where to set your opening bid is often an educated guess.  However, the Donald Trumps of the world hold to the strategy that it's best for your opening bid to be slightly higher than market value.  This brings up the second business school dictum: The final negotiated price is most often midway between the first two bids.  Let's assume that the project in question has a market value of between $13,000 and $15,000.  You and your client likely both know this if they too are an experienced professional like you.  

Using this strategy you make an opening bid of $16,000.  It's unlikely that you're client will counter with a low-ball offer of say $9,000.  A client who is a professional will likely counter in the $13,000 to $14,000 range.  You're negotiated fee will most often be midway between these two price points, or in other words about $14,500.  In this example you've reached a price that makes both you and your client feel like winners.  While the expression "win-win" has become cliche in the business world, it's still an arrangement that fosters good business relations and brings clients back again and again.

By bidding first, you've laid the ground rules for the negotiation and have come out with a price near the top of the market.


The Strength of Taking Charge

Admittedly, not every negotiation will be this simple.  However, the negotiating principles explained here are tried and true.  You'll find this practice in place in all high-powered corporate negotiations.

We all encounter clients who will never be willing to pay fair market value for photography.  Any Harvard Business School grad will tell you that you're always better off walking away from those clients.  Setting fair market prices for your services is good for your reputation and for future business.  As highly specialized professional photographers we have a duty to set prices for our work that makes a clear distinction between us and the thousands of generalist photographers out there.  

A professional demeanor and confident price bidding will strengthen any architectural photographer's reputation.  Often there needs to be a certain amount of education between you and potential clients.  To the client who's never hired an architectural photographer before your pricing may seem extreme.  However, a confident discussion that educates your client as to what you as an architectural photographer can offer over a generalist photographer will be adequate in most cases to justify your pricing.


Conclusions

We all know that we can drop our prices if need be, but can rarely raise them.  The lesson: Don't sell yourself short from the start!  Having the power of pricing on your side will always work to your advantage.  Now is the time of year to cement those new client relationships that will lead to a steady stream of assignments in the coming months and years.

Happy shooting,
Alan Blakely, Director
The Association of Independent Architectural Photographers
http://www.aiap.net