When I mention to people I co-own a web & email hosting company, they usually ask how many customers we have. After I tell them, they are often surprised. “Why would someone pay for email?” they ask. Gmail, Yahoo Mail, MSN Mail, and many more offer it for free. Web hosting, too, is free. Want to post photos? Flickr is free. Want to blog? LiveJournal is one of many free options. Facebook and MySpace are free. With all these free options, how do paid hosting companies stay in business?
The answer is simple: Customers are willing to pay for perceived value. If a user accidentally deletes their email from Gmail, will Gmail restore it from backups? If a user is having problems setting up their iPhone to work with Yahoo Mail, can they get tech support from Yahoo? These are all example of value provided by paid hosting companies; as long as paid hosting companies continue to provide value to the customer that the free sites don’t, they will continue to thrive. Of course, some customers do not assign much or any value to these items; they will stick with the free sites.
A good analogy is in restaurants. Outback charges $15 for a steak; how does Ruth’s Chris stay in business selling $50 steaks? The answer is obvious — Ruth’s Chris’s customers perceive at least $35 of extra value in the better quality of their steaks and better table service.
One of the hot topics in professional wedding photography is “shoot and burn” photographers. In a recent podcast, David Ziser from Digital Pro Talk discussed the challenges shoot and burn photographers pose to traditional wedding photographers. While shoot-and-burn photographers are not free, they typically charge about 80-90% less than a traditional wedding photographer. Of course, they do a lot less than a traditional photographer; unlike a traditional photographer, who would carefully retouch every image in Lightroom or Photoshop, go over proofs, put together a photo album, and order prints, a shoot and burn photographer typically dumps the photos directly from the camera onto a CD or DVD and lets the couple handle everything else. Also, shoot-and-burn photographers can afford to charge much less because they generally are not trying to make a living in photography; as long as they cover the cost of their (relatively minimal) equipment and make a few extra bucks on top of that they are happy. This undercuts professional photographers who often times can barely make a living at their current prices.
In my opinion, a large part of why shoot and burn photographers are doing well is because many traditional photographers do a lousy job of providing perceived value to their customers. Telling potential customers they should pay ten times as much because “I’ll provide you an album and prints” only works if customers value an album and prints. News flash — many don’t. In my experience, the younger generation views photos as something to share online (on sites like Flickr and Facebook); prints are mostly superfluous. Physical albums take up space, and can only be shared in person. Online albums can be viewed by anyone, anytime, from anywhere. You may say that they will regret not making prints in the future; whether that is or is not the case is irrelevant. Until time travel is invented, their future regrets will not affect their buying patterns today.
For a traditional wedding photographer to continue to be successful, I think they need to do several things:
- They need to understand how the Internet has changed how people view photos. Prints and physical albums are nice, but most people want to share their photos on Facebook and view online albums. Despite the best efforts of Shutterfly and Snapfish, the Internet is not just an easy way to order prints.
- They need to convey the value they provide in terms of image composition, image quality, retouching, and professionalism. A traditional photographer is not better because of the extra end products they produce, but because they produce better pictures. Remember that some people will never perceive any additional value in high-quality photos; they will always go with shoot and burn photographers (at best). They are not a traditional photographer’s target market.
- Do what customers value; don’t bother doing what customers don’t value. If a customer only values digital files, sell a package that only provides digital files. If your customer perceives the value you provide in terms of image quality, they will be willing to pay more than they would to a shoot and burn photographer.
- Accept that the proliferation of digital SLRs has permanently reduced the perceived value of photography. This is the natural progression of technology. Cell phone companies no longer can charge $2/minute for domestic calls, and domain registrars no longer can charge $100/yr per domain. Just because you could make a living as a pro photographer in the past does not mean this will remain a viable full-time occupation in the future. Complaining about technology, commoditization, or competition does not make it go away and just makes the transition harder.
- When marketing themselves and their services, photographers should remember that positioning is important. Are you McDonald’s, Outback or Ruth’s Chris?
Of course, these tips are not limited to photographers. If you own any business, you should always ask yourself what your company’s value proposition is to your customers, and always make sure you charge customers for perceived value, and only for perceived value.