Making More Money From Art-3 – Economics Of Art
This blog post will introduce the concept of the economics of art, and how understanding some simple economics of art can help you with pricing your art, making more money from art, and your art workshops.
At the end of my last post, I briefly mentioned the situation where some of the artists I know have too many customers, and too little time. I said that one answer to this situation is to just raise your prices. The problem with raising prices though, is that you might get more customers as a result of raising your prices. Please read on.
Pricing Your Art
What is the price of a product or service? Very simply, the price of a product is the price that the customer is willing to pay for it. The customer puts a value on your art or workshop based on a number of factors. These factors could include liking the size, liking the colour, somewhere to put it, do they want it? Some customers also will place a value on your name. But the money has to be there to buy your art. If the money is not there, then you art will not be bought.
Pricing Your Art Workshops
Once again, the price of art workshops is the price that someone is willing to pay for them. Factors could include the art to be reproduced, the venue, the cost, and of course the teacher. Once again though, if the money is not there to pay for your workshop, there will not be many attendees.
Basic Economics of Art Workshops
The economics of art workshops are the same as the economics of anything else. You have fixed costs, and variable costs. Your fixed costs are the costs that are the same regardless of the number of people present – room hire, your cost to travel, your time etc. The more attendees you have, the lower your fixed cost per person. Variable costs remain the same per attendee, regardless of the number of attendees – canvas, paint, chocolate biscuits etc. You don’t make any profit until your number of attendees cover your fixed costs and the variable costs associated with them. Once you have covered your fixed costs, every additional attendee will significantly add to your event profit.
There is supply (you) and demand (the customer). When there is more supply (people doing workshops) than demand for workshops, you cannot sell all your places at the price you want. This means that you could make less profit than you wanted, or even make a loss.
When there is more demand than supply (oh happy day), your workshops have more people than you can deal with and you have to turn people away. This usually means that you make a nice profit though, but could make more, if you could fit them all in.
Possible Solutions For Over Supply (Too Few Customers)
Have an up-to-date customer list made up of previous attendees, and it should be used to keep customers informed. Do a newsletter once a month and email it to them. If some people don’t have email, send it snail-mail. Keep in touch with your customers, and they will remain loyal to you by spending their art workshop money on you and not on someone else. You won’t grow the cake, but you will get a bigger slice of the cake.
If you have too few attendees (over-supply) who have paid the full price, there are some options.
Advertise to get more attendees.
Although an American retailer by the name of John Wanamaker said “Half of my advertising budget is wasted, the problem is that I don’t know which half”, it does pay to advertise. You are not advertising for the upcoming workshop, you are advertising yourself and the workshops you will run in the future. Furthermore, the companies that increase advertising in a recession, gain customers. Also, the companies that that cut advertising in a recession lose customers. This will apply to you too. One way that you can advertise is by using Adwords, and I will cover this in a future blog post.
Phone around your past customers.
See if you can get them along, they might not know about the workshop. A little of the personal touch goes a long way.
Offer a price reduction.
You could offer a price reduction or add an extra that costs you very little, but has a high value. You then go back to the customers who paid the full price and offer something similar to them. Offer a discount in either cash, or even better, a voucher to be used at the next workshop. Be careful about having attendees who have paid different prices. Customers who pay the full price, get a bit annoyed when they find others paying less to make up the numbers. Giving a special discount to senior citizens and the disadvantaged though is considered acceptable and desirable.
Cancel the event if you cannot cover your costs.
I personally don’t like the idea of cancelling an event. Once you cancel (except for emergencies), your reputation begins to slide. If the venue cost is low, or even free, carry on with just one person, and next time they might bring a friend or two.
Differentiate your events from those of your competitors.
Think of ways that you can differentiate your workshops to give better value. Stress the better venue, the secure parking, the closer proximity of the shops, the fact that you will provide chocolate hobnobs, rather than digestives that the artist down the road is supplying – anything that you think makes your event the better event. Don’t cut your prices just because the guy (or gal) down the road is charging less. Maintain your prices and sell yourself on your quality. If the guy (or gal) down the road raises their price, then raise yours a little. Funnily enough, a higher price might indicate a higher value (see next section) and thus lead to more customers.
Possible Solutions For Over Demand (Too Many Customers).
Raise your prices.
This can reduce demand and get the same number of attendees paying more. The problem with this is that you might price the senior citizens, or the disadvantaged out of your class (see next paragraph). Strangely though, higher prices could indicate a higher value leading to more customers. If you are in this lucky position then good for you.
Operate on a “first come, first served” basis.
The moment you get your maximum numbers, you close the booking. The problem with this is that, once again, it is usually the little old lady and gentleman, or the disadvantaged who lose out. This does not make us, as artists, very happy. The reason for this is that we artists have a well developed social conscience (even me who would have voted for Donald Trump if I could have). We do want to help those less fortunate than ourselves and bring the beauty of oil painting, and art in general, to as many people as possible.
Actively ration places.
This ensures that someone who missed out on a previous event gets priority over someone who attended a previous event. This is a fairer option, but might upset customers who think that you prefer others to them.
Differentiating your events.
Why not run a lower priced workshop just for senior citizens, or just for those disadvantaged in some way. You can then run higher priced events on a first come, first served basis. Instead of just increasing your prices, you could increase your prices and supply something extra that costs you little. These extras could include for example, a bigger canvas, extra refreshments, chocolate hobnobs, a high quality picture file of their artwork.
You could also just try raising your prices. If your competitor is charging 75 for a workshop, try charging 80. If your competitor lowers their prices then at least keep yours level.
Think Of The Extra Money
Profit is not a dirty word. The Government can only tax a profit. The more profit you make, the more the Government can take in taxes to help those less fortunate. If you have 100 workshops a year, with 10 attendees in each. An average of an extra 10 bucks per attendee gets you an extra 10,000 bucks a year. The higher priced workshops might bring in 25 bucks more per attendee, but the lower priced workshops might bring in 15 bucks less per attendee. The overall benefit though to you might be an extra 10 bucks per attendee on average, and that totals 10,000 bucks a year.