How to price my artValuing art for an audience
The art market is based on conflicting contradictions: capitalist & art values. There is not a right recipe and the game rules are not fair. Here is a pragmatic approach on how to price my art as an artist.
Pragmatic approach on art pricing
#1: Compare to artists with a similar style
Look at your competitors, in this case, your fellow artists, how much do they charge? If you were graduated from an art school, ask your schoolmates. Look at the prices online on different platform depending on your art. Example saatchiart.com for fine art. If your plan is to sell locally, visit the galleries. But if you plan to exhibit in this specific gallery later, send a friend instead to ask for the prices!
#2: Keep a record of your pricing
If you have sold works at this price, you can continue selling works at this price! You can rely on your past experiences. This is what most of the companies do: if iPhone 8 was sold at 800, then iPhone X would be sold at 1000. Keep a record of your pricing on hand and actually use it. Understand the difference between wholesale and retail and keep your pricing consistent.
-Olav Velthuis “Talking Prices” 2007 @princetonupress
#3: Testing water
I know this one is a bit radical… A lot of times business professionals aren’t sure about their prices either. You can stick your finger in the air and feel, then price your art at a random price. You see what your potential customers say. They might say, it’s too expensive, or they might not say, but just buys without hesitation – then it’s too cheap. The key is to adjust your price until you find the right range.
#4: Get help
There are professionals, gallery owners or evaluators in art. They can help you price your art. Make sure the expert you consult has no conflict of interests. To assure that, you can hire a consultant in your region and who is familiar with your niche.
The r&D pricing method
The classic pricing rule
In business school, we learned that one of the most classic rules of pricing a product or a service is ‘cost + margin’. You might have seen this formula somewhere before:
- Retail Price = [(Cost of item) ÷ (100 – markup percentage)] x 100
You want to price a product that costs you $15 at a 50% gross margin, here’s how you would calculate your retail price:
- Retail Price = [(15) ÷ (100 – 50)] x 100 = $30
As you see, a product that costs $15 to manufacture is sold at $30, is quite normal, and your gross profit is 15$. This is typical for art galleries: you have the cost of the item (50%) and their margin is 50%.
In different industries, there are different kinds of margins. For example, in clothing, I know many clothes stores are getting a 60% margin, and it was considered a profitable business. If you are curious you can go online and see a list of gross margins by sector. But in art, as an artist, what is your margin?
Jason Bailey – Art market predictions 2019 www.artnome.com
This formula won’t work for the artist
You can spend $15 to buy paint, then you paint on a piece of paper, which can be sold at $1500. As you can see, making and selling a piece of your art could be very ‘lucrative’ and hard to demonstrate your rightful earnings as an artist.
That’s why perhaps your potential customers say:
- ‘What? Do you want to charge $1500 for this painting? It only cost you 15 bucks!’
You may say: yes my years of training to make this art makes it worth this much! Ok, let me interpret it into business language. What you are saying is although your gross margin is high, your ‘net margin’ is low. Because you have to amortize the years of training as an artist.
Outside of the box
This shows also in the biotech pharmaceutical sector: according to NYU data service, the biotech pharma has a gross margin of 70.71% but the net margin is -1,61%. That’s the difference between gross margin and net margin – the business overhead such as rent, payroll, equipment, utility bills (and what-not!).
The R&D pricing reason
Any industry with heavy investments in R&D, such as pharma, can have large gross margin but small net margin. When a customer is purchasing a box of medicine, he is buying an advanced tech. Same here, when he buys a piece of your art, he is not just buying the art, but all the research and development you have invested in. But, it is still not a very valid reason you could justify your price because you can’t show easily how much you have spent on R&D.
Support your price
I remembered having this class called ‘Luxury Products’ and we were talking about the branding and pricing of luxury products. I learnt a lot about how large luxury companies do their pricing. Basically, you can price however you want, as long as you can justify it (or defend it). In other words, you need to be able to reason it. Now it leads to the question: I want to price my art at 1K, 5K or 10K, how can I support my pricing?
#1: Use “noble” raw material
(Increase the Cost of Goods Sold). Here the raw material I mean, the stuff you buy to produce your artworks. If you use gold or diamonds, you can price higher! It’s the most basic and brutal way to defend your price.
#2: R&D (again)
As we mentioned in the previous video, if you spent a lot of money in R&D, you can charge a higher price. Imagine you are selling a painting that used the pitch black paint, then you can justify this. It’s like pharma companies producing medicines.
-Michelle Gaugy on Quora – gaugygallery.com
Gallery owner, author, art consultant
Do you have your favourite restaurant, fruit store or supermarket? Maybe they are not the cheapest in town, but you like them because you know what you will get. It’s the consistency in quality and supply. What you buy is peace of mind. This might not seem to be important when it comes to individual collectors, perhaps they buy one work from you in their lifetime. But if you work with galleries, this is one of the most crucial factors. The more consistent you are, the more you can get.
#4: Customer experience
My accounting professor always says: be the Starbucks. She meant that you need to sell your customer experience, not coffee. This way you can charge a much higher price. If you can give your customer amazing user experience, they will use again, and they don’t mind the price.
#5: Brand value and story
Like it or not, you are a luxury brand when you become an artist. If you want to charge a premium price, you also need to work on your brand identity, including your brand value and story.
Sell at every price
Quality and price map
Perhaps you have seen this before: this is the quality and price map, you can see some brands are high quality and high price, and some are low quality and low price… For example, H&M, Mango, Zara, GAP, Coach, Gucci and LV… Some luxury brands would launch different (cheaper) products into the market to fill this map, so they can reach more customers and block their potential competitors from entering into this market segment.
My advice for pricing
make sure you have different kinds of products that fill as much space as possible in your map. For example, make sure you have an artwork priced at $100, $500, 1K, 5K and perhaps more.
You can sell the following products of your art:
- Print: not signed and not numbered.
- Print: signed and not numbered.
- Print: signed and numbered.
- Print: hand embellished (intervened or manipulated print), sign and numbered.
- Sketches: signed and not numbered.
- Original works of art less than 12 copies, signed and numbered.
- Large works with even fewer copies and signed and numbered.
- Unique works that are super special, one copy only.
Apart from that, you can also sell merchandising alongside with the print. You might ask: why? I am not Disneyland! I don’t want to do this!
If you wait and do nothing, then you are f…
I tell you a story of my artist friend Li Wei. He is a well-known performance artist from China. One day he saw a T-shirt of his art when he was in an airport. He was too busy to develop his merchandising, guess what? It won’t stop people from loving his work and DIY the merchandising themselves. Make sure you give people opportunities to express their love for your art.
Make a discount
‘What? I have spent days and nights and my heart and my love on this piece of work and you just walked into it and asked for a discount?’.
Guess what, this isn’t outrageous. It’s quite normal. So how to react to this demand of your potential collectors?
Don’t get personal
It’s just what people do. I’m sure you have bargained at least once in your life, right? You are offering a piece of your art, a product, to a buyer. It’s great that they are interested in the first place!
#1: Give a small discount
A gallery owner friend of mine always told me her discount is 10% at normal and 15% at most. This is a good way because you are giving a bit but not too much. It shows the fact you are willing to reach out to them and make their dreams (of having a piece of your art) come true.
#2: Give a larger discount online
If you sell your art online perhaps you have seen some newsletters of selling work at 20% discount. Online marketplaces charge 40% commissions so this 20% discount won’t affect your payout. But online people are more used to have larger discounts, so I would say giving a 20% discount on your own website, just twice a year is still a reasonable thing to do.
BananaJamana youtube channel
#3: Payment in instalments
For some local collectors who pass by and shows interests in the artworks, my gallery owner friend would offer payment in instalments. First, they pay 50% and pay 10% in 5 instalments. If they are not sure, they can pay a 20% down payment to reserve and they have a period of time to collect the work.
#4: Offer an alternative
If your buyer is offering something really far from your asking price, then you can simply propose a print, or a hand-embellished print, that looks as good as the original.
#5: Throw in a freebie
Sometimes it’s not about the price, because they are just a frequent bargainer. They just want to bargain for a bargain.
Lastly, when you are discussing price, you are talking! No matter if they buy something or not, make sure you collect their emails! So you can send them Black Friday sales info and keep them informed with your upcoming exhibitions.
What is the sales channel?
Here we can see from Business Dictionary website: Sales channel is a way of bringing products or services to market so that they can be purchased by consumers. A sales channel can be direct if it involves a business selling directly to its customers, or it can be indirect if a middleman such as a retailer or a dealer is involved in selling the product to customers.
Artist’s sales channel
OK, in short, it’s the links between the producer and the collector. As an artist, your sales channels could be:
- direct: your own studio, your own social media, your own website
- indirect: consigned to a gallery, an online marketplace like Artfinder, a local home decoration store, an interior designer who helps clients decorate their spaces. Here we are talking about consigned works, which means the galleries do not buy from you, they resell on behalf of you.
When it comes to pricing and commissions, it can be very different from a channel to another. How would you price your art then?
-William Goetzmann , Elena Mamonova, Christophe Spaenjers
“The Economics of Aesthetics and Record Prices for Art since 1701”
Set the same final price across all channels
I would recommend you to set the same final price across all channels. For example, if your art is priced at 10,000 dollars retail price, make sure you sell online and in an art gallery at the same price. You can authorize your sales channel to give a 10%-15% discount on your art if you are willing to share this discount as well. Otherwise, you can always tell them your price is fixed.
Here we can talk about 3 different channels.
Dears such as galleries are the most popular sales channels when it comes to selling your art. Of course, if the gallery decides to give a 20% discount from the cost of their commissions, there is very little you could do. Also, you might not even know about it at all, because you will be paid in ‘full’. If I were you, I would not be worried about it, because in any case, they are business professionals. Try to have only one art gallery in each region so they don’t have a conflict of interests.
#2: Online Marketplaces
It’s a bit tricky. When it comes to selling your art online such as on ArtFinder, I must make a correction. When I registered as a new user, I received a 15% discount for my first purchase. I thought the 15% discount was given by the ArtFinder because I could buy anything from any artist, regardless of the works are in its discount program. I simply assumed that it bares the costs to acquire new clients.
I was surprised to learn later, that there are so many kinds of discount programs you could join. Perhaps you are thinking to join so you have more chance to enter their promotional emailing list and other recommendations. My advice is, if you are working with art dealers, be very careful with giving generous discounts. This discount information is public, so your dealers can find out. If you are giving so many discounts, you are competing with your dealers (who won’t be happy at all).
#3: Direct via your own website
You can certainly sell your art directly to collectors via social media or your own website. This is the best kind of business because you are not paying any commissions and you have more control over your prices.
What you can do
You can give seasonal discounts, 4-5 times a year at most. But you shouldn’t do it to the pieces of art that you also consign to the galleries. You don’t want to create a price war against them. What you can do, is to do promotion on special kinds of series, formats, merchandising, that are not sold elsewhere.
Avoiding channel cannibalisation
Channel conflict is a serious issue, not only for artists but also for all kinds of brands. Luckily, artworks are quite unique when compared to iPhones. So you can use this as an advantage. You can sell large formats via galleries, sell smaller works on your own website, sell special formats or mediums on ArtFinder, sell art prints on Society6. This way, your channels are not cannibalising each other. If they can work well together, it will bring you more money and peace of mind.
The common mistakes in pricing art
#1: Price by hours of work:
I don’t think people should pay for the hours you spent in doing this work. If it takes too long for you, it’s your problem!
I saw an art consultant suggested young artists price their work by the hour plus material. For example, if materials cost $50, you take 20 hours to make the art, and you pay yourself $20 an hour to make it, then you price the art at $450 ($20 X 20 hours + $50 cost of materials). I don’t think this is suitable for most of you. It might work for landscape oil paintings, but not for… calligraphy, for example? The total time spent drawing the work is like 5 minutes? But the work can be $5000 for an experienced calligrapher.
#2: Price way above or below your competition without good reason
We have talked about in another video how to justify and defend your price. This is where you need to be able to defend your price, so you can charge above other similar artists at your level. If you price your art lower, then you need to make sure it doesn’t make you look like if you are dumping. Dumping is so out of date! Disrupting the market by lowering your price is the least innovative way.
#3: Anchor pricing (the wrong way).
There is a famous saying: ‘How to sell a 2000 dollar watch? Put it next to the 10,000 dollars one!’ Let’s look at what is anchor pricing.
The anchoring pricing is a bias. It uses the fact people rely heavily on the first piece of information offered in an interaction. This initial information, establishes a frame of reference and decision makers base their decisions around that anchor.
Anchor pricing is not always the higher priced product as the anchor.
For example, $14,99 software for a single user and $19,99 for an unlimited user. People would choose the higher price which seems to be the better deal.
If you work with an art dealer, perhaps sometimes times your artworks are used as an anchor in the art gallery, but you don’t know. Make sure you get some information from other artists the same dealer is working with and their prices.
#4: The biggest mistake ever: Occult pricing
Occult pricing (undisclosed, mystery). In many art galleries and art fairs, the prices of artworks are not shown. This is very uncomfortable because a lot of times it creates this second thought: is this price real? Is he pulling my legs? If you have put in your work and time making and pricing this work, putting it out there in the market, you should be able to say it to the buyers with pride.