Julia paints. Yes, pictures. It is not quite that straight forward but it suffices for the sake of discussion on pricing theories , which is something we, often, toss backwards and forwards in our day to day chatter, especially prior to an exhibition where a piece of her has been selected .
When selling a piece of Art, there a number of considerations to consider that are not dissimilar to selling anything else .
- Cost of materials
- time and labour (for artists this a little bit of a conundrum, as in many cases is this was done properly most art would not sell as the true labour cost even at minimum wage would extraordinarily high)
- location -Central London Vs Middle of Nowhere, City centre gallery Vs local art exhibition
- cost to sale(most galleries and exhibitions will charge over 40% commission)
- Artist Rep-If Any ? Banksy Vs Jeremy Catchpole (of no fame whatsoever)
- Media-eg Oils, Prints, Water Colour etc
- Size- 20cmx20cm Vs 1,5m x 1.5m
- Framed or unframed
Then comes the finger in the air bit , which is probably what most ‘reputable’ suppliers would say is Research or knowing your customers. Therefore after considering Milton Friedman’s theory of Pricing, the cost basis , potential demand at a certain price , we ignored the lot and made up a number .
Why is a Banksy worth several million? Whereas a very accomplished artist with appealing finished work will struggle to make a living unsupported by any other form of income . The answer because people will buy a Banksy because it has a value that at a point in time someone paid that sum . Not scientific, does not conform to any specific economic theory (especially not supply and demand ,which can really only relate to dead artists ) nor any real understanding of true value. So how does this fit in with every day product pricing , initially it would seem not a lot .
How for instance are the prices for the watches below calculated ?
What for crying out load does POA mean ? Yes, of course I do. But why, keeping it from your competitor ? If you need to ask , you can’t afford . well the price does not seem to bother Bulgari, Chanel , or Audemars Piguet . Some sort of completely bonkers inverted vanity . If I saw someone wearing the Hermes watch I could just as easily think it was Fifty quid. Whereas I would know how the ‘Pillock ‘ paid for the Bulgari. Anyway, what sort of price is £90,500? What’s wrong with a traditional £89,999 or at very least £90,999 The watch makers may indeed write tomes about the craftsmanship involved , the precious metals, and the jewels but the latter two items are only highly valued because they have been deemed to be as opposed to having any real material value . Functionality, design, and performance can be created at a fraction of the price, so what is the balance ? It has to be primarily vanity . Only this morning I read a high end watch advert which emphasized how accurate it is and is not affected by a mobile phone. Well even if it was, you would only have to check your mobile phone for pin point accuracy.
How does this relate to products much further down the price chain ? Sometimes I think more than we are prepared to admit . At least with High End Cars , the bystander will have some idea what the marque is by the giant animal logo on the bonnet or at very least the name splashed across the back. You show off to your flash mates by giving them a ride. With a Watch you have to stick it under their nose before they have an inkling of the amount of money stuck on their wrist.
For many years retailers of real product have been transfixed by price points. Whilst I have for a long time firmly believed that selling an item for £2.25 as opposed to £1.99 will make a great difference to your revenue but it will to your profit margin. Yet I have had many a customer suggest to me that is not the case. The price point is a key focus in many product areas. Going back to cars. You will see many an ordinary car priced at something just below a particular thousand mark eg £14,900 against £15,100.
Today, and I mean now when retail has just started to get back on its feet but there is a shortage of stock, there are other influences coming into play , shortage of stock and potential inflation . Before exploring these influences let me go back to the end of 2019 .
Your prices might be going up 3% ? What planet are you living on ? My customers wont pay for that sort of increaseVarious Customers
I will go back even further to the early 80s
What your prices are only going up 18% ? What good is that to me when inflation is 18%Different Various Customers
Now, at very least within the party industry, there is a completely different consumer mindset. There have been a not inconsiderable number of price increases within our market during 2021 and the consumer does not seem to be at all bothered. Retailers have been saying over recent weeks that they are making price changes within their stores almost on a daily basis, and it makes not one jot of difference to consumer behaviour . Or rather it has, they are,currently, buying without pricing considerations. Of course this is , maybe temporary and we are talking, in the main about low cost items. Yet, to me it underlines the fact that within our market it is not all about price. Those that say they cant compete with supermarkets or discount stores on pure price . They can’t, but in most cases they are not competing with price even if the discounter is next door. Moreover, I know a number of retailers who are actually next door to a discounter and do very well .
Two good reasons:
a) They are next door and benefit from footfall
b) They are next door and the consumer sees the different between a range of max 50 items as against 5,000
Does this ramble actually take us anywhere ? We are in a very complex environment, but there are various principles that remain the same . All that changes is the value of each principal.
I feel very strongly that many often price according to threat or even lack of. Whereas, the focus should be on maximising the returns that are available within your sector of the market . On occasion that involves a little more art as opposed to science .
Back to Julia’s conundrum. We worked out all the costs , especially labour and time and came to the princely sum of £700 . So the piece was priced at £325. Told you it was not a science. Maybe it is Art ?