## Thursday, December 16, 2010

### Price Formulae

A post by request from a reader of my blog (thank you), here is a post about pricing. I teach that posts should be brief, so succinctly, here is the nub of principles I teach that are usually met with interest.

Prices per Square Inch: A “price-per-square-inch” pricing system can sound too “industrial” or “commercial” to some artists at first, but it is a logical and proven method that guarantees price coherence and stability through a career as well as ongoing customer satisfaction. To calculate the price-per-square-inch of a work of art is simple: you multiply the length of the piece by its width to get the number of square inches, and then you divide the price of the piece by the number of square inches. (You can also use united inches instead of square inches.)

[ Height ] + [ Width ] = United Inches

[ Height ] X [ Width ] = Square Inches

(Retail or full) Price, divided by the number of square inches = the price-per-square-inch

(Retail or full) Price, divided by the number of united inches = the price-per-united-inch

Pricing-per-square-inch does not work for sculpture, installation work, video and film. For artists using these media or who do not like the price-per-square-inch formula, must develop their own coherent rationale. You must have one to protect yourself and your “investors” (buyers) if you are to create a business for yourself that lasts.

Robert Ashcroft’s FCA Research: In 2001, Federation of Canadian Artist (FCA) member, Robert Ashcroft, undertook some comparative pricing research, similar to what you can do. His work was published in "Art Avenues," the magazine of the FCA (Vol. 1, No. 3 Sept./Oct. 2001, pg.10). In his article, he analyzed the pricing of FCA member artworks pictured in the FCA magazine. (The many works reproduced in each issue are captioned with the artist’s name, date of completion, prices, dimensions and media.)

Mr. Ashcroft’s study was a quantitative evaluation of pricing. He determined the price-per-square-inch value of each piece based on the ninety-three artworks reproduced in the magazine done by thirty-four different artists. His research revealed average prices-per-square-inch as follows:

OILS: \$3.18 per square inch

ACRYLICS: \$3.32 per square inch

WATER MEDIA: \$4.48 per square inch

Nineteen artists had more than one work in the research inventory and were, therefore, evaluated for consistency in their pricing. Of the nineteen, only seven appeared to be using a rationalized pricing system.

The FCA is a very professionally run organization. Their members are professional in their approach to their careers. Many have vibrant careers that include several revenue streams; some are master artists and marketers. Ashcroft’s figures provide a snapshot view of market pricing for artists of considerable experience and sophistication in 2001 dollars in the Vancouver market.

Other Pricing Formulae: For artwork that is not 2-D, other formulae come to mind. Here are two with which I am familiar. The point is to develop a formula for yourself that works and to be consistent with it throughout your career. Also, you must be able to rationalize costs across the media that you use.

[Cost of materials x 2* ] + [ Time x 2** ] X Uniqueness Factor = Wholesale

[Weight or volume of materials x 2* ] + [ Time x 2** ] = Wholesale

* Using this numerical factor is a way to cover administration overhead. Use a number of your own choice that is apt.

** Using this factor can cover marketing overhead.

1. I don't like either formula because, while it works in the middle range, very large and very small painting prices become distorted. As a result I use a united inch formula that is divided into five categories of size. E.g. medium-sized paintings are \$17/UI, large paintings are \$19/UI etc.

2. Hi Chris:
When calculating selling prices based on cost, it is useful to analyze your costs. Divide your costs into fixed costs and variable costs. Fixed costs are those you pay whether or not your create and/or sell anything in any given year. Examples rent, insurance, heat, light and the like. Variable costs are dependant on output. Examples are labour (time), materials consumed, marketing, commissions etc.

3. Similar formulae can work for music too, I use this:
Time in seconds * Number of tracks/instruments * Extra = Price.
This works well, because for Extra I can add in things like orchestration or difficult effects.

4. I have to say I find the average prices per square inch quoted above to be completely nonsensical.

Let me explain.

In the UK, the convention for artwork of the same size is oil is most expensive, then acrylic and then water media. Given that there are a number of artists who work across a number of media it isn't too difficult to validate this notion in practice.

To arrive at an average for pricing you need to hold all other variables constant eg reputation of the artist, established track record of sales at that price etc.

Let's not forget that the prices do NOT equate to sales. Artists can and do sometimes price their higher than its perceived value. That doesn't make that price correct or one that should be used as a baseline for other artists pricing their art.

If you want a baseline to measure against, it's far better to look at the prices which have achieved sales for artists of equivalent merit.

5. Thank you for this post. I am new to pricing, and I find this very helpful. Current popularity and demade of the art and the artist will give more flavor to the numbers, but this is a good starting point for me.