Quick Break for Econ 101
This is my friend Christina. She's actually a fantastic photographer. Very pretty too, which is why I'm using this ridiculous expression, because we're gonna do a little bit of Econ 101. We're gonna get into a little bit of graphs and things that are gonna make you go that. But it's not gonna be that bad, I promise. That being said, I get to embarrass her. Check out her work by the way, Christina Blanarovich, awesome film photographer, right up your alley, Shell. Does this look familiar? Okay. If you had business courses, it should. If you haven't, don't worry, not a big deal. I'm gonna show you guys what it is right now, and I'm gonna tell you how it applies to photography, 'cause that's the big thing, it's like, "Why does this matter?" This is a demand curve, okay? We have price on the Y axis, we have quantity on the X. Where our supply line meets the price point, we have this little spot, which we would call the equilibrium, okay? The equilibrium is where your price matches your sup...
ply. So as your supply increases, usually the price drops down, and as the supply decreases, usually the price goes up. And these two straight lines kind of describe a perfect market, until something odd happens, okay? So in a perfect market, price is where supply meets demand. Until you say, "Well, in the early 2000's, everybody and their dog got cameras," and instantly, there was a whole bunch more photographers. That's what that looks like in terms of a market model. So the supply curve shifted over to the right, because we're not adding more products, we're adding more companies doing it. So we shift the entire thing off to the right, and what happens to the demand and the price point? Where does it go? It has only one place to go, right?
Yeah, it'll go down. This is what we call inelasticity. Inelasticity has to do with your price points or the demand is not changing as much based on change in your environment, okay? That means for the commodity photographer, this shift killed you, because you're offering the same product that everybody else is, and your demand has shifted down and you're now in the dumps trying to figure out how to make money from $200 shoots, okay? But the luxury curve is a little bit different. In a luxury market, it doesn't change like that. And think about it this way, what are different luxury product that I'd want to have? Well, examples of inelastic products are like gasoline. Everybody needs it, right? Which means that the price goes up, we all still need to buy it to a point. Things are not completely inelastic, meaning that if the price on gas went up to $10 a gallon, most of us would still be driving. $15 a gallon, most of us would probably still be driving. $20 to $30 a gallon, we're gonna start considering other options of getting around, right? And at that point, there's opportunities for businesses to come in and say, "I have a cheaper way for you to get around." Apple. That's a relatively inelastic product, why? They've built this brand... Whether or not you agree with it, I don't even care. It doesn't matter whether you agree with the products they create or you like them or not. What they've created is a brand perception that they make these kind of products that are for creatives, and they are this, and they are well designed. They're the most beautiful piece of electronics you could probably get. That perception makes it so even at a higher price point, there's a strong demand for what they create, so it's relatively inelastic. Salt, another necessity. Alcohol and cigarettes, diamonds, lack of substitute. Alcohol, need and habit. Wouldn't it be great if photography was like a habit? (laughs) Just gotta have it? Like my mirror pictures, just gotta have them. Mental picture for y'all. Let that be the last thing you think about when you go to bed at night. Don't, that'll give you nightmares. Okay, so looking over here, this is an analysis of the products that we want to sell. And this puts different companies in different lights, and I want to relay this to photography. Over here you have cost leadership. These are people like Walmart, Honda, Toyota. And you can argue down to like, "Well Kia is more cost leader." Either way, cost leadership, yeah. They're Honda, Toyota, that's a cost leader, because they're differentiated brand is Acura and Lexus. So over here you have Walmart, you have Honda, Toyota, you have Costco, K-Mart photo. I have a new studios here with a warning. I'm gonna tell you about that in a second. So this means that your target is broad, and the way that you compete in that market is cost, meaning you're offering the exact same product that everybody else is, the only differentiating factor is somebody's cost. And if that's your only differentiating factor, how many times do you think you could be replaced by another studio who's just willing to do it for a couple bucks less? That's something that can... Well, based on my partner, this is what he says. "Competitive advantages predicated on price can be copied overnight." So we've tried to build all of our competitive advantages on things that people cannot copy overnight. And when you get enough of those, you create what's called a barrier to entry. Let's go back. A narrow target with a cost focus? This is like Michaels. They specifically just do crafts, but it's inexpensive. Bella Weddings, does anybody remember that name? Okay. They're out of business now. They were a narrow target, cost focused wedding studio. They were nationwide, and I think they might have even been a public... I don't think they were public, but they had investors. And they were targeting the not-brides, the $1000 to $1500 to $2000 range, and they would source out all their photographers from all over the place to do this. They're out of business. That's why I have a red flag in this area, because you're inherently offering a luxury product with the wrong business model. If Bella Weddings is sending out people that aren't that great to be shooting something that in a consumer's mind is still relatively expensive, you can't sustain it, and you can't find quality people to go and shoot for $200, $300. So to get to that price point of $1000 or $1500 to shoot your wedding, I would have to be paying the staff that did the shooting $250, the staff that did the editing $100, $200, the rest is in margin and basically admin, marketing, all the other expenses, to leave themselves with a 20% margin. It's not sustainable. And I said that, when we were coming in the industry, I'm like, "I don't know how they would do that. That can't be sustainable," and sure enough, within a couple years, they're out. Dangerous spot. This is though, where a great spot to start. So I put new studios in here, because that's not a bad place to be. Honestly, well actually it should be a narrow target. Should be a narrow target, new studios. So new studios are fine to be in these categories, you just need to get out of it quickly. And you have two options. On the differentiated side, we have companies like... So on the Walmart side, you have say kind of more boutique places, like you have Trader... Well, I guess Trader Joe's is pretty inexpensive too, but you have Whole Foods, that would be like the differentiated broad target, okay? Nordstroms to a K-Mart. Acura and Lexus to a Toyota. Mercedes Benz, BMW to Toyota. Nike, large boutique studios. This is kind of becoming our focus, where we're starting to branch into multiple arenas and say we can do all these things well, they're different companies, but this is a broad market differentiation. Currently, I'd say we're probably still positioned here, 'cause most of our stuff is wedding still. This is where I want you all to aim though. Narrow focus, differentiated products. Does that make sense? This is Porter's. Porter's applied to our business. So the people in your arena is a Neiman Marcus, a Saks Off Fifth, a Bentley, small boutique studios. And if that's the case, do you think you might learn a lot by walking into a Bentley dealership and just seeing what their experience is like? Yeah, the people that are gonna be shopping for your product are in that category. If I can afford to spend this amount of money on photography, which is a luxury product, then I can afford to spend money in other areas. And that gives us a great opportunity to learn how these other businesses are crafting their experiences. Does everybody here agree that photography is a luxury in this day and age?
[Audience Members] Yes.
Yes, good. I hope so. And we all know now that this is not a place that we can sustain a long-term competitive advantage. We can make a name for ourselves though. This is where you make a name for yourself, and you jump to this side, does that make sense? Okay. Julie?
What about a studio that offers mini sessions?
Studios that what?
Offer mini sessions?
It's still the same thing. A mini session doesn't mean that your product's not a luxury product, it's really what you offer, what you do after.
So you can offer mini sessions and still be luxury studio?
Let me give you an example. I have a mini session, it's $ to come in, this is just an example. After your mini session is included a design consultation. This is a $300 value. Come sit down with me or our designer, and then you bring them into that process. Maybe they come into your home, maybe it's into a studio, doesn't matter. But you sit down, you have drinks, and you go over this shoot that you just created for them, and you give them options. I love your home, your home is amazing. Let me show you what this would look like on the walls of your home. Do you actually have a picture? I'd love for you to bring a picture to this meeting. That's a luxury experience, right? But me saying, "Oh, $49, come over and I'll take your pictures and I'll give you a disk." That's not a luxury experience, but that's what a lot of people do, and then you get frustrated and flustered that you can't make money doing this. So like we mentioned, this is the relative inelasticity of luxury products. This is where positioning your company to be a luxury brand gives you some safety against environmental threats, right? Because Apple, Tesla, Bentley, Rolls Royce, Neiman Marcus, Louis Vuitton, Tiffany, Cartier, these are all brands where if you just want those products, you gotta pay. And they're products that are all very desirable, are they not? And that's where we want to get and position our product. Problem is it's not gonna happen in 12 weeks, so we're gonna aim to come in as a cost differentiator, and we're gonna work into luxury leadership.
About how long is that process? I mean, is it different for just your experience level? Or is there a timeline on that?
This is what's interesting about it, is like I could give you a timeline, and it would not matter, 'cause I've seen companies come in and do it in like two years, and I've seen people come in and still be stuck at one place. And I've seen for us it's taken... It probably took about five years for us, but that's 'cause we started at a time where we knew nothing about photography. We had nothing. So our learning curve was a lot steeper than all of your guys', because we didn't have the education. That's why we created SR Lounge, was because it wasn't out there, and that's why Creative Live had such a big room to grow is because the need. So I'm expecting for you guys that you could do this transition in two to three years. If you have a picture of who you are right now and where you want to be, two to three years. And guess what, along that way from cost leadership to luxury differentiation, you can make a lot of money, because there's a big market in between, where there's a sweet spot, right around the four to 5000 dollar mark. You can shoot and there's plenty of weddings and shoots and everything, like in the portrait range, for example, senior portraits. If you're in that 700 to 1200 dollar range, that's a sweet spot, and you can milk that range as long as you want, shooting 40, 50, 60, 70, those are easy to do and pump out. And then if you want to, in three years, you bring your price up to $2500 per session, and you shoot 30, because it gives you the lifestyle that you want. So that's gonna matter depending on you and the industry that you're going into, but I want everybody to understand that between those two places, there's a great spot to make a good living, and be happy and do what you love right in between there. And you don't have to ever make it to luxury to be successful. But I'm just telling you that's a safer place to be. Even if you're a luxury like... We would classify ourselves as luxury, but we offer a price point that's just on the edge of where you might be like, "Oh man, it's $7000 for this other photographer, but for eight, I could get Pye to come and do this. And that's that place where it's just like, a little bump and you can get them into it, you know what I mean? So there's a lot of different options, and we're gonna teach you how to get there. All right, I know this is a thing. "I want to serve every client." I hope, I hope we're getting this out of our mindsets by now, but I want to show you guys, for those that are online still, thinking about focus, I want to show you guys a funny study. This is Komar and Melamide, the perfect painting. Anybody hear of this study?
[Female Audience Member] No.
Okay, let me tell you a little about it. This is a study that these artists did, that they said, "We want to basically figure out what is the perfect painting in every different culture?" So we're gonna put out a survey, and this survey, they're gonna answer questions on like, "What should a painting have? What colors do you love? And what," all this thing, and they say, "We're gonna create paintings that are based on exactly what these people want, on the masses." Here's what we get to. This is the most wanted painting. Don't mind that little dash in there, I don't know what that is. But this is America's most wanted painting. Now I don't know who's looking at this, but I don't want to hang this up on my wall, okay? But it's great. I mean, we have George Washington right here. It's very patriotic, that was one of the biggest things. A painting should be patriotic. It should incorporate blues in the sky. And we've got blues in the sky. We love nature, that was like another big thing for the Americas, the nature. Also, we got deer, like a painting should have deer in it, honestly, and diversity. We have some you know, Asian and Native American children over here on the right side, I mean it's got everything. There's a little dude over here creeping, I don't know what he's doing. But this is what statistically is the perfect painting. And they did this, it's a really fun study to actually go look up. They did this for all these different countries, and every country had a different painting. And this is where we land as a business when we're trying to satisfy everybody. And this is what... I love Ed Sheeran, who doesn't love Ed Sheeran? If you don't love Ed Sheeran, I can't talk to you anymore, I'm sorry. I can't tell you the key to success, but the key to failure is trying to please everyone. It's just impossible.