What is this production worth?

Richard Alvarez · February 29th, 2008, 11:03 AM

Jay,

Ah, I see your point, I did mis-interpret it. But it is also true that dealers will price their cars based on what they think the buyer will pay. (That's part of negotiating.) It's why we all shop around. Dealer "A" might say their best price for the same car is 2k higher than dealer "B". I might be inclined to buy from Dealer "A" because - He has a better record for service after the sale, or he has the ability to work a better deal later on a fleet , or he has an advantage in proximity that might pay off later on, or - whatever. His job is to 'sell me' the higher price, because in 'the long run' I will get more value IE 'make' more money (often the same as 'saving') because of the initial expense up front.

It's a poor analogy, like I said - but we'll work with it.

In terms of the 'crapshoot' - I was addressing the ealier post by Jeff, and lumped it into the post. Should have said 'Jeffs remark'. Didn't mean to imply you said that.

If the buyer of the video looks at your 'cost' and figures that the other person is going to get the job, because their 'costs' are lower - and doesn't take into consideration the value added by experience or other factors - well, bottom line shoppers are always going to exist. One just has to decide if they will be a bottom line bidder - always cutting their prices to be as low as possible.

I once new a guy who made beautiful leather products. Sold them for five hundred dollars each. Anothe guy sold them for half that price. Same leather. Close design, shoddier workmanship. I asked the guy why he didn't lower his prices. "What? And work twice as hard to make the same ammount? No thanks. The people who pay my price appreciate the product, the people who pay his price - usually come to me later on."

Like I said. It's a marketing/sales approach. It's not a hard rule - just one way of determining your product's value. That's the point of this thread. There is no 'hard fast rule', there are many factors - My point being that beyond determinable fixed costs - there are more subjective 'values' that go into a bid.

Jay Gladwell · February 29th, 2008, 11:14 AM

Quote:

Originally Posted by Richard Alvarez

But it is also true that dealers will price their cars based on what they think the buyer will pay.

Again, you're attempting to twist what I said.

Dealers pricing cars on what they think a person will pay has nothing to do with pricing the car based on the buyer's use of the car.

The bottom line is what I do (legally) with any goods or services I buy is no one's business.

Philip Gioja · February 29th, 2008, 11:55 AM

Quote:

Originally Posted by Richard Alvarez

I asked the guy why he didn't lower his prices. "What? And work twice as hard to make the same amount? No thanks. The people who pay my price appreciate the product, the people who pay his price - usually come to me later on."

I think this is an excellent point. The thing I'm worried about from the things I was reading in this thread is changing your price constantly from customer to customer based on what you think they will pay. I guess that doesn't feel like a safe way to do long-term business to me, but maybe I'm missing something.

One other note I just thought of - if the first guy's 'shoddier' workmanship takes him half the time to do, he's actually making about the same amount as the guy who charges twice as much, and some of his customers probably appreciate the price break, so he's not necessarily a bad businessperson.... he just has to find at least twice as many customers.

He could also be somewhat more likely to stay in business when the economy dips.

Richard Alvarez · February 29th, 2008, 12:01 PM

As I said, it's a poor analogy. Mostly because the product in the case of the automobile dealerships, is absolutely identical.This will not be the case in the video production business structure.

And the buyers use of the car CAN affect what the dealer will charge. There's a reason for 'fleet' and 'commercial' pricing. The cost of a car to a police department or a city is often lower than the price to the average Joe. Same car, different price, and it's not always a matter of volume discount either. Especially in the case of small townships. But like I keep saying, it's not really a good analogy.

What you do legally with what I am going to sell you, WILL affect the price I decide to charge you. It's hard to build an analogy, but I'll try. Say we're looking at a five-minute interview with an exec, to be used on a website. Call it a 'testimonial'. Lets say the actual hours of production and such are roughly the same. A talking head, with lighting and sound, simple graphics. As near as we can get to 'identical products'. Will I price it differently depending on the use the client intends to make of it?

I might give it away at cost to a Non-Profit, and charge more for a multi-billion dollar Tech Firm. I might charge less for it to run on a website, than a national add campaign on television, or to be used in a Million Dollar documentary.

That's my approach. It's probably not yours.

EDIT To address Phillips point - I don't think you should yank your prices around drastically and arbitrarily - If you have a price for wedding videos that is "X" then it should be "X" for everyone who comes to the door. It might go up or down a bit if there are more elements in play... but again - there vagaries of the production schedule always affect the value of the product.
Absolutely.

Jay Gladwell · February 29th, 2008, 01:19 PM

Quote:

Originally Posted by Richard Alvarez

As I said, it's a poor analogy.

But like I keep saying, it's not really a good analogy.

Yeah, you keep saying it, but that alone doesn't make so. Face it, you're attempting to twist what I've said and you can't.

Richard Alvarez · February 29th, 2008, 01:33 PM

Jay, I'm not attempting to 'twist' what you said, and it IS a poor analogy because an automobile dealer is a retailer of identical wholesale products, while a video producer is custom making an item, and providing a service for a client that will NOT be identical to his competitors. It's an apples/oranges comparison which is why its not really that accurate.

My point is that this thread has evolved/devolved into a discussion of two basic points or questions.

"To what extent can/should one 'standardize' the cost of a video production?"

and

"What elements might cause one to deviate from such 'standardization'?"

The answer to the first is - to the extent that the product itself can be 'standardized', then one might 'standardize' or fix ones prices. A wedding videographer for instance, might state "We deliver a one hour wedding video that includes these standard elements, for this standard price." Because the elements are kept more or less strictly controlled, the price can be more or less strickly determined. Again, this is easier to do with some sort of standard, 'repeatable' product like a wedding video. If one were to apply the approach to say - 'how to' videos, or 'Testimonials' - again, you could standardize your rates by already knowing in preproduction how much time, and what elements will go into such a product. Even so -it helps to give oneself a bit of negotiating room to work with contingencies. In the wedding videographers marketing - "Basic wedding packages begin at X dollars" or in my case, "This sort of production runs between 1-2k per minute".

The answer to the second question - "What elements might cause a deviation" - most people can see the obvious. Extreme conditions, extra serrvices . You want me to fly to Costa Rica to shoot your wedding? THAT'S going to boost the price. You want to OWN the copyright, and use it in a documentary about marriage? THAT'S going to boost the price - You see how a different use for the same product, done legally can change the price of the services and product?. In terms of documentary/marketing videos - WHAT the client is going to do with the product CAN (doesn't always) AFFECT the price I charge. The USE of the product is just ONE of the mitigating factors that can alter a 'basline' or 'standard' rate.

At least, that's how I do business.

Glenn Chan · February 29th, 2008, 02:28 PM

Perhaps a slightly different way of looking at it:

1a- As a whole (you and all your potential clients), you'd make the most wealth by doing productions for organizations which find it the most helpful. If you are doing training videos, your video is worth more if the audience is larger, if the audience absorbs more of the video, etc.
So suppose video A is seen by 5000 people, video B by 500. They might take the same amount of work, but video A is worth more.

So in a sense, you are more helpful to society if you focus on adding the most value, focus on the bigger audiences, and focus on those who need your services the most.

1b- The more wealth/value that is generated, then there's money to go around. If you get some reasonable slice of the pie, then that's more money for you. And depending on your point of view, it would be ethical to add as much value as possible and charge more money.

2- The other issue is how much can you get away with charging (if you want to deviate from a flat rate). Sometimes people make irrational decisions here. In some cases, you can sell more product if you raise your price. People also fall for the extended warranty upsell (we're bad at calculating the value of the really small odds involved in warranties).

In other industries like selling cars, the salesperson will usually try to milk you. One thing they do is to upsell you on an overpriced warranty. They'll also try to size you up and figure out how cheap you are. If you look like you're poor, they'll probably be more aggressive with the discounts.
Whether or not these practices are ethical is up to you to decide.

3- Here's what I suggest:

A- Try to solve the biggest problems. If driving school chain A has 5000 students and driving school B has 500 students (these are arbitrary numbers), I'd preferably try to get driving school chain A as my client.
Try to add as much value as possible. (Though of course you should keep costs low.)

B- Charge a price that both you and the client find fair. You can(should?) even say, "I don't want to charge you a price that's not fair."
Business-wise, this might even make the most sense. You'll waste less time negotiating, it helps build trust, and you will be more likely to get repeat/referral business.

Bill Davis · March 3rd, 2008, 04:49 PM

Quote:

Originally Posted by Jay Gladwell

Bill, that is pure speculation on your part. That's no way to budget a video project.

Would you buy your next car from a dealer who based the price on how much money you might make as a result of using the car he sells you?

Sure. Happens every day. If I needed a specific high load carrying truck, I'd expect to pay a whole bunch more than if I needed a standard F-150. And even THEN, I understand that the price I pay is going to be different than what the next buyer pays. Perhaps they have a different credit profile, or just better or worse negotiation skills. Maybe my purchase is the one that lets the sales person make their monthly numbers - so the sales manager lets them give me a few hundred MORE bucks off to close the sale that day.

Prices and margins and profits are ALWAYS in flux. It's the nature of business.

Are you trying to say that car dealers don't alter their price based on a WHOLE BUNCH of these kind of intangibles that have little to do with the ACTUAL cost of the car?

My original point is that there is a world of both perceived and ACTUAL value that anything as powerful and flexible as video communication can deliver.

The reason I work with very comfortable budgets today isn't that I'm a better shooter, or a better editor, or even necessarily a better videomaker than anyone else here.

It's the result of being very professional at *all* of that PLUS. And the PLUS is actually what the clients are paying me the MOST for these days.

I speak their language because I've studied their business needs. I can sit with the CEO as easily their administrative assistant and make each of them feel CONFIDENT that I can handle their work in an excellent and professional fashion with little of no hand-holding.

Then I do exactly that. With virtually no stress or excuses.

It's years of developing a "he won't let us down, we can depend on him" reputation - which (by the way) has NOTHING to do with what format I shoot in and what my gear costs.

When I was starting out, I thought I could only justify charging more money if I had higher time or equipment expenses.

I was dead wrong.

To stretch the automobile analogy's that cropped up here - nobody in their right mind thinks that the MATERIALS or the LABOR in a $500,000.00 exotic sports car cost that many times the materials in a family car.

What's different is the PERCEPTION of value - and understanding that there is always a part of the market that will pay premium prices for premium results and outstanding personal service.

THAT is why one video maker puts in 100 hours and gets $3000 - and another one puts in the same 100 hours and gets $30,000 (or even $300,000!)

And if you're stuck in a "time and materials" attitude, you're NOT gonna make the leap from $3k to $30k.

That takes re-defining what you do in your own head - followed closely by the ability to make the world believe you when you tell them you're worth more.

FWIW

February 29th, 2008, 11:03 AM	#46
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	Jay, Ah, I see your point, I did mis-interpret it. But it is also true that dealers will price their cars based on what they think the buyer will pay. (That's part of negotiating.) It's why we all shop around. Dealer "A" might say their best price for the same car is 2k higher than dealer "B". I might be inclined to buy from Dealer "A" because - He has a better record for service after the sale, or he has the ability to work a better deal later on a fleet , or he has an advantage in proximity that might pay off later on, or - whatever. His job is to 'sell me' the higher price, because in 'the long run' I will get more value IE 'make' more money (often the same as 'saving') because of the initial expense up front. It's a poor analogy, like I said - but we'll work with it. In terms of the 'crapshoot' - I was addressing the ealier post by Jeff, and lumped it into the post. Should have said 'Jeffs remark'. Didn't mean to imply you said that. If the buyer of the video looks at your 'cost' and figures that the other person is going to get the job, because their 'costs' are lower - and doesn't take into consideration the value added by experience or other factors - well, bottom line shoppers are always going to exist. One just has to decide if they will be a bottom line bidder - always cutting their prices to be as low as possible. I once new a guy who made beautiful leather products. Sold them for five hundred dollars each. Anothe guy sold them for half that price. Same leather. Close design, shoddier workmanship. I asked the guy why he didn't lower his prices. "What? And work twice as hard to make the same ammount? No thanks. The people who pay my price appreciate the product, the people who pay his price - usually come to me later on." Like I said. It's a marketing/sales approach. It's not a hard rule - just one way of determining your product's value. That's the point of this thread. There is no 'hard fast rule', there are many factors - My point being that beyond determinable fixed costs - there are more subjective 'values' that go into a bid.

February 29th, 2008, 12:01 PM	#49
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	As I said, it's a poor analogy. Mostly because the product in the case of the automobile dealerships, is absolutely identical.This will not be the case in the video production business structure. And the buyers use of the car CAN affect what the dealer will charge. There's a reason for 'fleet' and 'commercial' pricing. The cost of a car to a police department or a city is often lower than the price to the average Joe. Same car, different price, and it's not always a matter of volume discount either. Especially in the case of small townships. But like I keep saying, it's not really a good analogy. What you do legally with what I am going to sell you, WILL affect the price I decide to charge you. It's hard to build an analogy, but I'll try. Say we're looking at a five-minute interview with an exec, to be used on a website. Call it a 'testimonial'. Lets say the actual hours of production and such are roughly the same. A talking head, with lighting and sound, simple graphics. As near as we can get to 'identical products'. Will I price it differently depending on the use the client intends to make of it? I might give it away at cost to a Non-Profit, and charge more for a multi-billion dollar Tech Firm. I might charge less for it to run on a website, than a national add campaign on television, or to be used in a Million Dollar documentary. That's my approach. It's probably not yours. EDIT To address Phillips point - I don't think you should yank your prices around drastically and arbitrarily - If you have a price for wedding videos that is "X" then it should be "X" for everyone who comes to the door. It might go up or down a bit if there are more elements in play... but again - there vagaries of the production schedule always affect the value of the product. Absolutely.

February 29th, 2008, 01:33 PM	#51
Richard Alvarez Inner Circle Join Date: Sep 2002 Location: San Mateo, CA Posts: 3,840	Jay, I'm not attempting to 'twist' what you said, and it IS a poor analogy because an automobile dealer is a retailer of identical wholesale products, while a video producer is custom making an item, and providing a service for a client that will NOT be identical to his competitors. It's an apples/oranges comparison which is why its not really that accurate. My point is that this thread has evolved/devolved into a discussion of two basic points or questions. "To what extent can/should one 'standardize' the cost of a video production?" and "What elements might cause one to deviate from such 'standardization'?" The answer to the first is - to the extent that the product itself can be 'standardized', then one might 'standardize' or fix ones prices. A wedding videographer for instance, might state "We deliver a one hour wedding video that includes these standard elements, for this standard price." Because the elements are kept more or less strictly controlled, the price can be more or less strickly determined. Again, this is easier to do with some sort of standard, 'repeatable' product like a wedding video. If one were to apply the approach to say - 'how to' videos, or 'Testimonials' - again, you could standardize your rates by already knowing in preproduction how much time, and what elements will go into such a product. Even so -it helps to give oneself a bit of negotiating room to work with contingencies. In the wedding videographers marketing - "Basic wedding packages begin at X dollars" or in my case, "This sort of production runs between 1-2k per minute". The answer to the second question - "What elements might cause a deviation" - most people can see the obvious. Extreme conditions, extra serrvices . You want me to fly to Costa Rica to shoot your wedding? THAT'S going to boost the price. You want to OWN the copyright, and use it in a documentary about marriage? THAT'S going to boost the price - You see how a different use for the same product, done legally can change the price of the services and product?. In terms of documentary/marketing videos - WHAT the client is going to do with the product CAN (doesn't always) AFFECT the price I charge. The USE of the product is just ONE of the mitigating factors that can alter a 'basline' or 'standard' rate. At least, that's how I do business.

February 29th, 2008, 02:28 PM	#52
Glenn Chan Inner Circle Join Date: Jun 2003 Location: Toronto, Canada Posts: 4,750	Perhaps a slightly different way of looking at it: 1a- As a whole (you and all your potential clients), you'd make the most wealth by doing productions for organizations which find it the most helpful. If you are doing training videos, your video is worth more if the audience is larger, if the audience absorbs more of the video, etc. So suppose video A is seen by 5000 people, video B by 500. They might take the same amount of work, but video A is worth more. So in a sense, you are more helpful to society if you focus on adding the most value, focus on the bigger audiences, and focus on those who need your services the most. 1b- The more wealth/value that is generated, then there's money to go around. If you get some reasonable slice of the pie, then that's more money for you. And depending on your point of view, it would be ethical to add as much value as possible and charge more money. 2- The other issue is how much can you get away with charging (if you want to deviate from a flat rate). Sometimes people make irrational decisions here. In some cases, you can sell more product if you raise your price. People also fall for the extended warranty upsell (we're bad at calculating the value of the really small odds involved in warranties). In other industries like selling cars, the salesperson will usually try to milk you. One thing they do is to upsell you on an overpriced warranty. They'll also try to size you up and figure out how cheap you are. If you look like you're poor, they'll probably be more aggressive with the discounts. Whether or not these practices are ethical is up to you to decide. 3- Here's what I suggest: A- Try to solve the biggest problems. If driving school chain A has 5000 students and driving school B has 500 students (these are arbitrary numbers), I'd preferably try to get driving school chain A as my client. Try to add as much value as possible. (Though of course you should keep costs low.) B- Charge a price that both you and the client find fair. You can(should?) even say, "I don't want to charge you a price that's not fair." Business-wise, this might even make the most sense. You'll waste less time negotiating, it helps build trust, and you will be more likely to get repeat/referral business.