Today I want to talk to you about using a loss leader in your photography business.
The portrait industry didn’t start out using loss leaders, but once corporate, multi location studios began popping up everywhere, the loss leader became the name of the game for portrait photography. I imagine most of you already know what a loss leader is, but for those of you who don’t, this is how it works. You run an ad. It’s a very attractive ad, because it offers a ridiculous number of portraits for a very small price. The photography ad draws in lots of business! You take lots of pictures. You even sell some. It works, right?
Well, let’s look a little deeper. It’s called a loss leader because is leads your customers into the studio… but at a loss. A loss, you say? Yes… you see, you can’t possibly stay in business offering portraits for less than they cost you to produce them. So, why would anybody do that? The supposed logic behind this strategy is that you will attract lots of buyers, and you will, but the only way for you to keep from losing your shirt in the process is for people to buy more than the deal. If they don’t, you will spend more money than you make, and that’s a terribly bad losing strategy for any business. You might as well be sitting on your butt watching tv rather than taking pictures at a loss. So why did the photography industry build it’s entire marketing model on this strategy? It sounds terrible, doesn’t it? The reason is that it works… at least it did for a long time. And, not only for photographers. The big box stores still use this strategy all the time. They advertise a few items at a big discount, knowing they will lose money, just to get you into the store. Why? Because, when you take the time to get your kids dressed and into the car, to drive all the way to Walmart in 100 degree heat (in Austin anyway), you sure as heck aren’t going to leave the store with just that one little item on sale. So yay for Walmart. It still works for them, and probably will continue to do so.
But the loss leader doesn’t work for photographers. It worked for the big chains at one point, but even they can’t use it much anymore. Why? I believe there are several reasons.
1. Digital has made it possible for people to scan their photographs and make more themselves. When Olan Mills gave you one 8×10, they expected you would buy more for friends and family… and you did. But, when your client can essentially steal your images from you, they have no incentive to buy more. Even some people who would never consider taking a piece of candy from a grocery store without paying, won’t think twice about copying and distributing your images without permission or compensation to you. That’s not a judgement about the morality of our clients… it’s just a fact about the way most of our society has come to view digital images.
2. One of the main reasons why the loss leader works for big chains is that they are BIG. They can spread out the risk. If 100 people buy their deal, and only 50 of them buy additional items, they are probably still going to come out ahead. But if you, as a photographer, only do 10 sessions each week, and half of them only take the deal, well, how can I say it… You’re Screwed!
3. Your work is custom. It takes a lot of time, energy, skill and creatively to produce a portrait. When Walmart’s client doesn’t buy an additional item, they might lose a dollar or two. But when you give something away for free, or, God forbid, at a loss, you lose $100’s or $1000’s of dollars. Why? Because you are one person, spending a lot of dedicated hours on that one client’s portraits, and you are not making any money. You also have an opportunity cost, because you cannot photograph another client or work on a paying client’s images during that time period. Walmart can spread out that labor, but even if you have an employee or two, your risk is extremely high.
4. Probably worst of all the loss leader is … well… deceptive. People are getting more and more marketing savvy. They can smell a rat. And they already know that the loss leader is a rat. They know you will want them to buy something else. Heck, they know you “need” them to buy something else. Even if they have no idea how much you really should be charging for your work, they know it’s more than what you are advertising. This sets up an adversarial position between you and your client, a psychological tug of war, and a very messy situation for both of you in the ordering appointment. Even if you get away with it and they do buy, you probably won’t get this client back in the future, and they sure won’t recommend you to their friends, because they won’t want done to their friend what you did to them. Ick!
So, is there ever a time to use a loss leader? Sure! I just used it a couple of months ago… and very successfully. But my goal wasn’t to make money or even produce a profit at all. My goal was to get images for my marketing, and FAST! So, what did I do? I gave it all away. I ran a Facebook ad for a FREE newborn session with 5 high res digital files. WHAT, you say? Kate!?!?!? How could you do that? I told you, I needed marketing images, and fast. I had just returned from an amazing class with Julia Kelleher at Texas School on newborn photography, where I learned a TON of new tricks for photographing newborns. And, I wanted to completely update all of my marketing and pricing with beautiful new images that reflected my heightened skill level. I also needed a test run for my workflow. How long was it going to take me to do a session with all these new props and wraps and such? How would I track everything with all the new steps I was putting in place? Would I need an assistant? I had lots of questions that needed answers, and photographing a gazillion babies in a short amount of time was going to answer a lot of questions and provide me with exactly what I needed. So I did it. I photographed 22 babies in about a month and a half. I processed every image myself, presented every image myself, charged, tracked, culled, backed up, and posted to Facebook every image… myself. And I got exactly what I needed from that campaign. Did I make a lot of money? No! I had a lot of people take their 5 free images and go. But I also had a bunch who bought additional photographs, because I did a really, really good job for them. So, I said it was a loss leader, but as you can see, it really wasn’t. Because I was compensated in many important ways. And, I wasn’t being deceptive. I really meant it when I told them they were not required to buy anything and I wouldn’t be upset if they didn’t. Because I meant it. I knew I was getting something as valuable, if not more valuable, than the money. I set up a complete newborn studio system that creates repeatable, consistently beautiful images, that thrill my clients in less than two months, and I couldn’t have done that without using my Facebook “loss leader” ad. Will I ever do it again? Probably not. Everything I needed from that ad I got photographing those 22 gorgeous babies. And, my work got MUCH better because of it. So, now I’m worth more.
The loss leader does permanent damage to your brand. If you train your clients to expect a deal, they will expect a deal, every time. Be straight with people about why you charge what you charge, and don’t discount it. Can you run a special every now and then. Sure. But I would run specials that add value, rather than take away money. Then it is more like you are giving gifts. And most clients would rather receive a gift than a “gotcha” any day.