Nate Kaiser recently said on Twitter, “If I get one more inquiry from someone having a huge wedding at an expensive venue asking for ‘recession pricing’ I am going to explode!”
When I read Nate’s Twitter update, I laughed out loud! I understand people are looking to save money in this current economy, but the fact is, our expenses aren’t changing, so why should our prices? I can’t call the local grocery store and say, “I like to eat steak but the budget’s tight. Do you have recession pricing on your steak?” The grocery store manager would hang up on me.
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Photographer Carly Bishop Cheney confronts “Recession pricing“
Photographer Carly Bishop Cheney confronts “Recession pricing“
Andrew Warner
on 07 Sep 09Everything in business and life is negotiable.
My entrepreneur friends have gotten everything from rent to computer hardware reduced by asking for “recession pricing.” A well-known entrepreneur told me how he reduced his company’s expenses by 1/3 because he worked the phones and demanded lower prices because of the recession.
Anyone who’s too embarrassed to ask for a discount shouldn’t be in business.
Sarah, have you ever negotiated for a lower price? If you have a better way of doing it than talking about the realities of this recession, teach us how you do it. I’m always looking to learn more effective ways of doing things. And you guys @ 37signals have taught us a lot based on your own experiences. How have you negotiated?
Milan Davidovic
on 07 Sep 09Instead of asking for a lower price on the standard solution, why not ask for a simpler solution (at, of course, a lower price)?
SH
on 07 Sep 09“Sarah, have you ever negotiated for a lower price?”
I actually do not do this for service-based transactions. I find it cheap and unreasonable for people to think it’s ok to ask for or demand a “better price” on something when the price is clearly listed. Have I asked for a discount when something I pay for does not work as expected? (ie cable tv or internet) Yes, I have, because I feel it’s compensation, not something I am owed.
This post isn’t about a cable company, a telephone service, or how a major business is run. It’s about independent people and the services they provide.
The idea that I’m entitled to an unlisted or “special” price for services like professional photography, a hair styling or even a car wash just because I ask for it is self-involved. Professionals aren’t charities, and neither are companies. They are businesses where the owner’s set what they believe is a fair price for the service they are providing. That price is based on certain recoupment, but it’s also based on what they believe their service or product is worth.
If you do not believe the price is fair, or if you believe you are owed the service at a lower cost, you’re devaluing the service. If the service isn’t of value to you, then pass on it. If you can’t pay for it at the published price, save until you can, or find an alternative. The cheaper version is definitely not going to be as good as the higher priced version, but if you’re willing to accept that, it’s your choice.
Dick Kusleika
on 07 Sep 09The market sets prices. Your expenses don’t have anything to do with it.
Charlie Maitland
on 07 Sep 09I think this you tube video which I was pointed to when haing a rant about how the client vendoe relationship had such conflicting expectations sums it up so well. http://www.youtube.com/watch?v=R2a8TRSgzZY
Charlie
Andrew Warner
on 07 Sep 09I see your point Sarah. Negotiating for services is different from negotiating for commodities. Nobody wants to hire someone who feels devalued later because he/she accepted a lower price.
EH
on 07 Sep 09Following on to Charlie Maitland, here also is a timely post from the Reddit world:
http://www.reddit.com/r/programming/comments/9hwmh/if_architects_had_to_work_like_web_designers/c0cugkr
scotts
on 07 Sep 09”...the fact is, our expenses aren’t changing, so why should our prices?”
Because during a recession our income IS changing. Businesses are going under. Would you prefer smaller revenue or no revenue?
scotts
on 07 Sep 09SH: “I find it cheap and unreasonable for people to think it’s ok to ask for or demand a “better price” on something when the price is clearly listed.”
Clearly, you are too easily offended. :) What’s the harm in a customer asking? Better than a customer simply walking away without having a conversation of any kind.
Berserk
on 07 Sep 09Rarely have I seen my own thoughts on any subject expressed so spot-on by another person. (I am referring to Sarah’s reply, not the quote.) Perfect.
@scotts: The decision to lower the price of anything should be (imho) on the seller by their own free will, not because they are pushed by advantage-taking customers. I am much rather at the receiving end of a free pair of $10 socks thrown in by the seller, without being asked for, when buying a jacket than bargaining $10 off on the jacket. Or in this case, if you can afford a big flashy wedding, do you really want to go cheap on the person being hired to take pictures of what is hopefully one of the most memorable days of your life?
Wells Oliver
on 08 Sep 09“I find it cheap and unreasonable for people to think it’s ok to ask for or demand a “better price” on something when the price is clearly listed.”
That’s a really weird opinion. Life is one big negotiation, and the price of goods is not fixed. It’s always OK to ask. One never gets anywhere in life without asking.
pwb
on 08 Sep 09Agree with Wells, all of life is a series of negotiations. Wedding services are notoriously over-priced with an expectation that buyers will negotiated (but a hope that they won’t).
Benjy
on 08 Sep 09I kind of go both ways on this issue and think it depends on the overall situation for both the customer and the service provider. On the one hand, if business is slow wouldn’t the service provider be better off taking work for less than usual rate rather than not working? After all, aren’t most grocery stores hyping their rolled back prices, etc.? So her analogy doesn’t quite work. But maybe it’s ribeye on sale and not strip steak… may be ways to offer scaled back packages, etc. instead of just cutting rates.
I think it also depends on where the customer is coming from. If a potential client is having a space-no-expense wedding with 300 people at the Four Seasons, and sees an independent photographer as having less leverage in terms of holding prices, then it’s taking advantage of a small business to demand recession pricing. On the other hand, if somebody’s financial situation has changed over the course of wedding planning, or it’s a more modest event to begin with, then perhaps it’s more acceptable to feel out flexibility on pricing. Of course, the photographer is free to consider or not taking on the client in a free market.
J.J. Merrick
on 08 Sep 09I don’t think that his comment is about people who want to negotiate. It is more about the fact that someone who is already spending a HUGE amount of dough on an expensive wedding is wanting to nickel and dime you about your services because it is a “Recession”... I mean if it was such a recession why did you book the Waldorf and not the local VFW? I think that is his point.
George
on 08 Sep 09If a business were interested in giving recession-pricing, that would be reflected in their published prices. By asking for recession-pricing, you are basically telling the company that you feel you are more affected by the recession than all their other customers, and should receive better pricing. As Sarah stated, that’s a bit self-involved or more bluntly put, selfish.
Businesses that have a comfortable profit margin could in fact increase their sales and get more customers by offering lower pricing during the recession, stealing customers from other businesses not willing to do so. In the end, though, this is something each company needs to decide on their own, and you shouldn’t go around begging for better pricing due to the financial situation.
There are more people than just you who are hurting, so don’t expect special treatment!
Anonforthis
on 08 Sep 09I recently lowered the price of a monthly service for a customer because they complained about the pain they are suffering from the recession and needed me to lower my price.
Now I make less money from them for the same service and they still expect JUST AS MUCH as they did before.
Dumbest fucking thing I ever did.
If even 1 more customer catches wind that I did/do this, I’m done.
If 37s says, sure, $99 is too much for you, you can pay $49 per month, and then that customer goes out blogging about the price cut he received, everyone is going to get half-price services, and, as Sarah explained nicely, 37s expenses haven’t changed. What now? Fire Sarah?
Scott
on 08 Sep 09I just finished a microeconomics class (I’m doing in MBA—and yes, I see your eyes rolling). I’ll try to apply some theory that I learned.
One always faces a trade-off between price and quantity. The trick, usually, is to find the price that maximizes profit. But how to find that magic price? Well, on a theoretical level, there exists a demand curve and a supply curve and with a bit of calculus and algebra, one can find that profit-maximizing price.
From this, two points: the demand curve can indeed change during a recession. Therefore, even though your costs (supply curve) may not have changed, the demand curve may have. Therefore, you should consider adjusting your price. the demand curve applies to a market and we are setting a single price for a “market”, mostly because its too much work to work out the willingness to pay for each individual or explicitly segmenting. However, by negotiating with an individual, you can learn the willingness to pay of an individual and possibly create a transaction that creates value (profit) for you. The keys here are: 1) will you make a profit given your costs? and 2) what is the actual cost of negotiating (@Anonforthis makes a good point here)?If there is still value to be made, you should consider lowering your price.
GeeIWonder
on 08 Sep 09It’s a free market. If you can keep your price high and do a suitable level of business, good for you. If not, and you’re not willing to lower it, well good riddance to you.
Nate and Carly can try and make people feel stupid for asking for lower prices before choosing someone else and other people can try and make them feel stupid for that in turn.
I think they doth protest too much though and Carly almost sounds like she trying to make a case to keep her services at a higher price point than the market thinks it’s worth.
So yeah, take her advice: order the chicken. Sometimes chicken tastes better than steak anyhow.
Anonymous Coward
on 08 Sep 09Agree with Scott. By negotiation with each individual you can extract maximum each will pay for your service.
If this revenue – cost of negotiation is more than what you would have made by not negotiating you are better of by having customers asking you for “special prices”.
But this is self-evident so I also agree with Wells Oliver – Sarah position on this is really weird.
RNM
on 08 Sep 09I also find this weird…if less people are buying ANYTHING, the seller is probably more willing to look at reducing prices (whether that be through sanctioned sale prices or negotiating with an individual, depending on the type of purchase) and what does it hurt for someone to just ask?
Most of my experience hiring wedding vendors, there was some amount of negotiating – I think it’s somewhat expected, and is completely a industry affected by the market. They were able to inflate prices because the wedding industry boomed and people were willing to pay. If the trend has gone the other way, why shouldn’t they be reconsidering their pricing and why shouldn’t people at least ask? Worst that happens is the answer is no. So what? I don’t see how this is any different than stocks or the real estate market or anything else – would you honestly say you wouldn’t negotiate on a house? The owner probably priced it for what they think is fair…but that doesn’t mean the market agrees. Now, do I think people should negotiate no matter what even if they find something that is fairly priced? No, but I don’t think people should be ridiculed for seeing what’s possible in this economy, the same way anyone would negotiate for other market-relative purchases like a house.
Gordon
on 08 Sep 09I think the key here is the customers who ask for lower prices just because they’re low on funds. There’s nothing wrong with a customer saying, “OK, I really want A, B, and C, and here’s my budget. What can we do?”.
What’s tacky is for that customer to come back after they’ve received a quote and say, “Hmm… any chance we can lower this, what with the recession and all?”
When we already provided a cost breakdown, don’t expect us to just lower our prices for you because the entire world is in a recession. That’s ridiculous. If you can’t pay for all the items in your basket, put some back.
Wells Oliver
on 08 Sep 09What’s tacky is for that customer to come back after they’ve received a quote and say, “Hmm… any chance we can lower this, what with the recession and all?”
Minus the recession silliness, I still don’t get what’s wrong with asking “can we do anything about the price?” If there’s not anything to be done, the answer’s no, and you move on. I’m just not getting the opposition here.
mikelee
on 08 Sep 09you can blame the media for how widespread bringing up “recession pricing” has become. apparently even big chain retail stores were willing to negotiate prices when the market was at a bottom. mainstream media was all over it. blogs picked up on it and started offering negotiating advice. now businesses have picked up on the phrase “recession pricing” and use it in signs and advertising.
MSN money actually had an article where you can find this quote: “I have a friend that’s been walking into every boutique she goes into and asking for the ‘recession price.’ Amazingly, she’s getting 25% to 30% off just by asking for it,” Delilah said. http://articles.moneycentral.msn.com/SmartSpending/FindDealsOnline/how-to-haggle-with-kmart.aspx
i saw that tip in blogs all that week as a simple way to ask for a better price without having to haggle over it. “just ask for the recession price. like omg it works!”
here’s some more on haggling at mainstream stores though they don’t mention the phrase, “recession price”: http://www.associatedcontent.com/article/1670677/negotiate_for_the_price_you_want.html http://www.nytimes.com/2008/03/23/business/23haggle.html?_r=4&ex=1364011200&en=5ce6c96a2c5037be&ei=5090&partner=rssuserland&emc=rss&oref=slogin&oref=slogin&oref=slogin
Ryan
on 08 Sep 09pwb: I am a wedding photographer myself. Our prices sometimes do create a “sticker shock”, but the price is what it is for a reason: we have to stay in business. The time required for an average wedding is about 40 hours, not just the eight or so you might see the photographer on the wedding day. A $2000 wedding photography package from a reasonably successful photographer in this area works out to about $40/hour after product costs and equipment amortization is accounted for.
I fully agree with Sarah on this topic. Prices I set are fair, and I expect the same from others. Prices I don’t think are fair I will not pay nor will I ask for a better price. It’s disrespectful and shady in my book.
GeeIWonder
on 08 Sep 09It’s disrespectful and shady in my book.
I’d encourage all photographers who feel this way to let us know so we can all steer well clear of you.
That’ll save your head from exploding, and it’ll save us dealing with judgmental pricks.
RNM
on 08 Sep 09ryan: I still don’t know that I understand why it’s disrespectful. I work for a small consulting firm and I don’t think there’s a single deal that’s done without some sort of negotiation. Why is that disrespectful? We think we’re worth $x for a whole project or an hourly rate, but depending on the circumstances we may be willing to look at other numbers, offer additional services in the whole project package, etc. and sometimes we come to an agreement with a client and sometimes we don’t. I find it hard to understand why it’s disrespectful – sure if you’re taking advantage of the situation or demanding things or whatnot, but if you approach the situation in a respectful way and ask if there’s anything you can do for $x less, why is that such an obnoxious thing?
Again, I go back to a house…I realize a house and a wedding photographer are very different things, but still – if you were interested in a house that you thought wasn’t priced “fairly” would you truly just walk away instead of making an offer? That doesn’t make sense to me. Not trying to antagonize, just wondering why negotiating is such a dirty thing to you, and at what level it becomes appropriate or inappropriate. I can’t honestly believe you don’t think you should negotiate at all when buying a house, so what’s the line? When is fair or respectful to negotiate and when is not?
Ryan
on 08 Sep 09GeelWonder: Why resort to ad hominem attack instead of arguing your point?
RNM: In the original context of the quote, a client is asking solely for a cheaper price. In my experience, they’re not willing to give up anything of their own in exchange. They just want YOU to lower your price because they feel they’re entitled to it because of the economy.
Negotiation, in the literal sense of the word, requires each side to find value in the concessions made by the other. In commercial photography, this might be made by offering more limited licensing terms in exchange for a lower rate, but with certain things there isn’t room for adjustment.
With our wedding photography packages, for example, there is a certain minimum profit we need to make, and the packages are designed around that. Each wedding takes one specific, full day of time, and does not allow for double-booking with how we do it. There is no value for us in removing items from the package to give you a cheaper price when it puts us below the profit we need to make.
“Negotiation” when buying a house is typically not negotiation in the sense of the word I’m talking about. It has evolved that way largely, I believe, because the actual value of the house is so subjectively determined by the market at that point in time. If Seller lists the house at $100,000 and Buyer offers $90,000, there’s no benefit in it for Seller aside from money in the pocket sooner, but it also may be that $90k is the market-determined rate and Seller was off.
In the end it comes down to the difference in the underlying, unchangeable costs, I suspect. Selling a house has a few fixed costs, but the majority of the costs are based on the actual selling value of the house. Commodity products, services, and other fixed-price purchases have almost entirely fixed costs (taxes being a notable percentage cost).
GeeIWonder
on 08 Sep 09GeelWonder: Why resort to ad hominem attack instead of arguing your point?
Sheesh. Ad hominem, eh? Sure about that? When somebody lies, and you point out they’re lying, that’s not an ad hominem attack. Even calling them a liar after they lied is not an ad hominem attack. When somebody pronounces others as disrespectful and shady - for inquiring on pricing of photography of all things - pointing out they’re being judgmental and prickish is an attack on their words and actions.
Saying that you can’t be expected to use ‘ad hominem’ correctly because you’re a simple minded photographer is an ad hominem attack. Once you do it, saying that you have used ad hominem wrong is not.
Enough remedial english and latin though.
I do agree there’s a big difference between pricing of commodities and services, and this is a point against Carly’s supermarket analogy and several other that have been made here.
Jake
on 09 Sep 09Sorry but this is ridiculous BS.
Asking for pricing discounts is absolutely not disrespectful, especially when high-end service professionals have spent the past decade raising rates on the back of the bubble economy. Expect your rates to go down during a time like this, thinking otherwise is naive. There is also nothing wrong with refusing to offer discounts if you are booked at your current rates. If you are sitting on an empty calendar and acting like you are Annie Liebowitz, you are the problem, not the (potential) customer.
Oh and yes things like steak and lobster have decreased in price over the past year. SIGNIFICANTLY. Get a grip and come back to Earth.
killian
on 09 Sep 09It’s business- so don’t take it personal Mr. n Mrs Service Providers. If you don’t have any flexibility in your pricing then you are probably cheating your business.
Generally when I get the recession question you can hold firm, but if they insist, your clients will appreciate it if you ‘throw em a bone’.
It sucks when you have to ‘devalue’ your work but presumably it is better than not having a client at all!
I think the ‘entitled’ debate is funny because it cuts both ways- are you more entitled to ask for a discount or more entitled to ask for a certain price?
CRC
on 09 Sep 09Dick Kusleika nailed it. But I’ll expand slightly.
The price you can charge (for anything, at any time) is a function of the perceived value to the customer. And, as Dick Kusleika said, your expenses are irrelevant to the customer.
Scott
on 09 Sep 09Sorry, @CRC, but I don’t agree with your conclusion. Yes, perceived value is important. This is a customer’s willingness to pay, and they surely won’t pay more than what they value your service.
But you still face a trade-off between price and quantity because not everyone will perceive your value the same. Depending on your price, you will almost certainly exclude a certain amount of profitable transactions.
Now, sure, customers don’t really care about your expenses. But your expenses set a floor, i.e. you are not going to charge less than your expense just like no-one will pay more than their perceived value. But whether you charge a slight markup on expense or a high markup, indeed, comes to down to perceived value AND the understanding of the trade-off between price and quantity.
CRC
on 09 Sep 09@Scott, I’m not sure that your analysis refutes the basic conclusion.
“But you still face a trade-off between price and quantity because not everyone will perceive your value the same. Depending on your price, you will almost certainly exclude a certain amount of profitable transactions.”
Yes, but how does this disprove the premise? You’re simply saying that a certain set of possible customers will not buy from you because they don’t perceive the value (to them) to be more than the price you’re asking. That’s the way it works. If you want to get those customers you either need to increase the value to them or reduce your price.
“But your expenses set a floor, i.e. you are not going to charge less than your expense just like no-one will pay more than their perceived value.”
Agreed. But when you reach an impasse where the perceived value it at or below the cost to deliver, then you don’t have a viable business (or you need to go back to the drawing board). You must either find some way (again) to increase the value (perceived or real) to your prospective customers or reduce your costs (while retaining the same value).
“But whether you charge a slight markup on expense or a high markup, indeed, comes to down to perceived value AND the understanding of the trade-off between price and quantity.”
I’m not sure I understand where you’re coming from on the price/quantity trade-off. Are you saying at $X you’ll only sell to Y customers, but at $X0.75 (or some other multiplier) you’ll to sell to Y1.25 (or some other multiplier) customers?
If that’s what you’re saying, I agree 100%. That’s basic economic demand curve theory. But nothing I said refutes that. I’m simply saying that, at the margin, for a given customer, their perception of value must exceed their perception of (total) cost (NOTE: “cost” might not be calculated in dollars alone).
Scott
on 10 Sep 09@CRC, maybe we don’t disagree after all. I’m saying it not just the perceived value to a customer. Your expenses do matter when setting a price, even if the customer doesn’t really “care”.
And, yes, at the margin is where it counts. Is it worth serving just one more customer, or are we better off not transacting? The answer: it depends on your cost (however defined) and their willingness to pay.
Jacob
on 11 Sep 09I wonder why Carly pulled her entry. Maybe her commentary came across as overly harsh to potential customers? There’s a NY Times piece today explaining that even high-fashion prices are dropping.
Pies
on 11 Sep 09“The idea that I’m entitled to an unlisted or “special” price for services like professional photography, a hair styling or even a car wash just because I ask for it is self-involved.”
If I’m asking for a low price it’s not because I’m feeling entitled to anything, but because I want to emphasize that I’m price-sensitive. It’s the opposite of “spare no expense.”
lawrence krubner
on 13 Sep 09“The market sets price“
The market is a bunch of people negotiating a price. Your reasoning is circular.
lawrence krubner
on 13 Sep 09Hey, I’m getting a 404 error when I try to follow the link. I think Carly may have taken this post down.
This discussion is closed.