4.3 Setting the Right Price; International Pricing
Oscar Wilde once said, ‘When bankers get together for dinner, they discuss art. When artists get together for dinner, they discuss money.’ Valuing your work is one of the most difficult challenges in artistic life or creative activity (also because generally no artists or people working in the creative sector are taught that). Besides, it is very difficult to determine the value of something as personal as your own art, especially if you are emotionally connected with your work. It becomes even more complicated when you think about winning clients and international audiences: you do not know the customary rates in other countries, and besides, something (product, service) recognised in your country as very expensive and exclusive can be estimated in another country as too cheap and not worth attention. And no matter if you run your own creative business, work as a freelancer or sell handicraft, proper valuation of your work is crucial. From a commercial point of view, you should value your work in such a way that its value corresponds to the level presented, the artistic output, but also the costs you have incurred during the work.
In the beginning, it is good try to answer a few questions:
- What are my financial expectations?
- What factors do I have to take into account during the valuation?
- How to determine the risk of this project/activity?
- How to present the cost estimate to the client so that the price is best received?
- How to best clear the accounts with the client?
- How to maximise my profit with the client’s limited budget?
In addition, an important question that needs to be answered is the question of whether you sell your works through galleries, dedicated sites or rather directly, taking part in fairs, presentations and event. Working with international clients means that the majority of work is done remotely, so it will rather be a direct valuation without intermediaries and the costs/overheads of online platforms selling works.
Since the cultural and creative sector includes a multitude of segments that are very different from one another, below we present three most universal valuation methods as an inspiration to develop your own method (with the reservation that the art market has its own specific laws, but it does not apply to it).
Method 1: competition based (price benchmarking)
This approach relies on an analysis of the prices of similar services or products. It is necessary to investigate current rates (it is not difficult in the era of the Internet, available reports or analyses; it is also worth having liaisons in the sector to be up to date in the event of rate changes) and finally offer your client a similar rate.
However, this method has its drawbacks: first of all, it diverts your attention from the client’s needs and the uniqueness of your offer. It also does not allow a full insight into the components in which the valuation of the competition was the result (costs). In addition, every offer is slightly different in the creative sector; every artist or creator has different experiences, capabilities and techniques. Therefore, when you analyse competitors’ prices, you should take a broader look at what the service or product included: you should treat their prices as additional information rather than the main determinant of your decisions.
And you should remember that although the market context is important, it is not always the price that determines the final choice of your offering.
Method 2: cost based (time and material)
This approach is based on estimating the time it will take to complete the project and calculating the cost of the materials and resources needed to complete it, plus something extra for you as a creator. This method is based on the common hourly rate: it is a common, simple and fast method; in addition, it works well as a simple business plan (it gives you the knowledge of how much you need to earn to cover all expenses); it also gives you the knowledge of what the lowest rate in the project is below which you will simply have to pay out of your own pocket instead of earning on it.
However, similarly to the competition based method, it also has drawbacks. First of all, by focusing on rather mechanical calculation of your costs, you can often forget about the broader perspective: how much is the client willing to pay for your unique work? That is why it is so important to consider this extra component in this method, but looking at it from the perspective of the clients and their benefits.
Method 3: value based
The starting point for this method is, on the one hand, understanding the value you bring with your work and creativity, and on the other hand, the value of your work for your clients (sometimes someone is willing to pay for extensive research and analysis that will ultimately produce a result in the form of one or another project; sometimes you just want a fast, high-quality product and time spent on analysis and research preceding the process itself is considered wasted). On the one hand, the method has a great potential: it gives you a chance to have the highest margins; it allows you to look at your work from the client’s perspective, but on the other hand, it also has a disadvantage.
Its biggest drawback is its subjective evaluation of ... the value. That is why it works best for regular clients whose needs you know.
The analysis of these methods shows that it seems that there is no single, ideal way of valuing your creative and artistic work; every sector is governed by its own specific rules; every client is different; every creator or artist offers slightly different opportunities. Therefore, you should be aware of every one of them and apply them depending on the situation: limiting yourselves to one method will result in missing opportunities.
It is also important to see what distinguishes your offer or your product (unique design, unique production process, values, etc.): it is the originality that may be the key to convince clients that they should trust you. It is also worth thinking about the surprising form of presentation not only of yourself (for more information about the portfolio, go to 🡪 Building the Portfolio at the International Level and 🡪 International Portfolio and How to Share), but also of your offer.
You should always remember that the client is looking for the best offer, which does not always mean the cheapest one.
A few hints about what else to remember:
- record the time you devote to work: if you do something you love (and because you want to live by art, which is not easy, so surely you love it), then often the time spent in the studio passes like a blink of an eye and you simply underestimate the hours spent at work. You may think that designing a cover is an ‘hour’ of work, when in fact it could be four hours.
- diversify your products/services in terms of the price: there will always be clients who are in love with your work but who do not have wads of money, yet can afford a little something, but also those who will be able to invest in something really big and expensive (and the former, when they have a bigger budget, will surely come back to you);
- your work is not only how much time you spend on your works, but also the additional costs you have to cover, such as studies, accountant’s services, media and materials; and
- in creative work, it is not only important to win orders, but above all to price them properly.