The New Generation Media...... THE NEW WAY

This is a continuing series of articles in PhotoStockNotes by publisher Rohn Engh. In face-to-face meetings with stock photography decision-makers across the nation, Rohn gathers together the thoughts and opinions of these leaders in the field. We present this series to you to keep you in the forefront of the forces affecting our industry.


Part II
FUTURE NET WORTH

Photo illustrators who subscribe to our market listing services here at PhotoSource International, use our market letters not only to make sales, but to make contacts.

They add each new contact that fits their own interest areas to their specific Market List. While many commercial/corporate stock photographers have broad general Market Lists, our subscribers have found success focussing on a particular niche in which they enjoy working.

They specialize in photographing in those specific market areas.

Their specialized Market Lists rarely include buyers outside the perimeters of their own keen interest areas.

In other words these photographers are new generation stock photographers. They work from their home-office, be it a cabin in the Rockies, or a high-rise in Dallas. Unlike the classic stock photographer, who is a generalist, with a wide variety of stock, they are specialists, who know their specialties well.

THE FUTURE NET WORTH
This is `vertical marketing.' Our subscribers make contacts with a dozen or more buyers in each of their vertical market areas.

A photographer stays with a publishing theme market an average of 10 years, and can count on that market for consistent sales. This is called the "Future Net Worth" concept and is the core of vertical marketing.

Every time a photographer makes a match with a photobuyer who needs photos in his or her vertical market, the cumulative sales can pull in $20,000 to $50,000 stretched over a ten-year period. These figures are based on my own experience and that of many of the photo illustrators who have subscribed to our market lead services over the past 18 years.

SPECIALIZATION IS THE KEY

The media world is now specialized. TV channels, let alone different TV programs, are targeted to definite market niches. So are magazine and book publishers, and radio stations. When interactive TV (New Media) arrives, it also will be targeted to vertical (specialized) audiences. To ignore this is to limit your photo sales opportunities.

In the past, before the media world became so specialized, stock photographers had to be "generalists." Then, as stock photo agencies began blossoming in the early 70's, the independent generalists, working on their own, had to compete with the massive generalized files of stock agencies. An impossible task.

Nowadays photo illustrators are finding success by choosing a select number of categories they enjoy, and staying with them, to become "experts" in those areas.

Physicians do this. Musicians do this. As consumers, we all turn to a specialist when we need the best and the latest.

Vertical marketing for photographers has an added benefit. Classic stock photographers, who are oftenrequired by agency art directors to produce generalized trendy pictures, face the dilemma that many of their photos become stale and dated after a few years. By contrast, a vertical marketer's images can become more valuable precisely because they are highly specialized. Depending on subject area, they can offer long illustrative life, rare insight, and historical perspective.

A major example is the work of Flip Schulke. In the 60's he turned his camera to covering demonstrations and political unrest, and extensive coverage of Martin Luther King Jr., at formal events, at church, and at home, capturing images of that man and era that will ever be valuable.

In the 60's, Flip could have made the quick buck by working with ad agencies to turn out exquisite cliches, but he took the long view. Today it's paying off. His windows on the "times he was living in" are bringing him substantial residual sales. If he ever puts his photos on CD-ROM, he can sell them in that manner too, without fear of infringement because his photos are content-specific. They are unique to Flip Schulke. It's next to impossible to infringe on a content-specific image.

 

YOU ARE YOUR OWN ART DIRECTOR

Many photo illustrators enter the marketplace believing that their photography is judged on how pleasing it is aesthetically. They soon discover that in vertical marketing, buyers buy a picture not because it has won an award or they personally like the picture, but because they need the picture.

Photobuyers may have their office wall adorned with pleasing scenics or trendy photo-art decor, but they are buying photos that fill their needs in their specialized subject area. Photographs outside this area may be pleasing to them, but they are signing purchase orders for images they need.

The most successful of the new generation media photographers we work with here at PhotoSource International are those who have found a niche they enjoy. They enjoy it so much, that wild horses couldn't pull them away from it. As they build their Market List of buyers who are seeking photos in their interest area, the incoming checks become more consistent.

Unlike classic stock photography where the photographer must tussle to please the art director, new generation photo illustrators whose pictures match the needs of their chosen Market List need only please themselves. They have developed themselves as "experts" in these areas. If they themselves are satisfied with their photo results, they know they will please their photobuyers and the buyers' readership.

In new generation stock photography, you step out of the marathon of classic stock photography to run a select race in a targeted area where the competition is manageable.

If you have been a generalist in the past, this means taking a difficult plunge to move in a new direction.

VERTICAL MARKETING -- THE METAPHOR
"I think I'll choose a Pepsi," the lady says in front of the vending machine.

Out comes the soft drink can of her choice.

Vertical marketing works much in the same way. She makes a choice based on preference and makes payment for it. If you were to open the interior of the machine, you would find that the soft drink cans are all lined up in a vertical row. All soft drinks of one selection are slotted into one vertical column, ready for dispensing. There's no cross over. The cans must be lined up in the same dispensing vertical row, or they will deliver a wrong selection to the customer.

If you were the serviceman and haphazardly placed the cans in the machine in random positions, the results would be chaotic.

NO CENTRAL THEME


Most beginning photo illustrators make the mistake of building a stock file in random fashion with no central marketing theme. Their picture-taking choices are "all across the board". Because a photobuyer's publication appeals to a vertical market (gardeners, pilots, medical technicians, teachers, etc.) photobuyers turn to vendors who can supply them pictures within those specialties. They can't afford to waste time on a vendor (you) that does not supply the product in the vertical market they need.

NO TEARS MARKETING


If the customer at the vending machine is mistakenly served up a soft drink not of their choice, they become irritated and pound on the machine and demand a return of their money. "This is not what I

The soft drink they mistakenly received may be of excellent taste and quality, but it doesn't fit their needs. This may help to explain your disappointment when a photobuyer rejects your excellent submission of pictures. They may be of high quality but you are vending them to the wrong buyer. Stay within the vertical markets that you enjoy photographing in. this moment, buyers are searching for you. Don't waste film on time on picture-taking that doesn't fit into your vertical markets.

CONTENT-SPECIFIC
WHAT IS IT?

Sometimes, a classic commercial stock photographer will tell me, "I am a specialist. I concentrate on nature."

No. "Nature" is not content-specific. Nor is Animals (which is in the category of Nature). Nor Wildlife (which is in the category of Animals). When you zero in on, for example, Wildlife of Southeast Asia, then you have a specialty, and the resulting photos are content-specific.

To put this in perspective: If you were a photobuyer looking for orangutans of Borneo, who would you go to first? A nature photographer, an animal photographer, a wildlife photographer, or a photographer whose collection is strong in wildlife of Southeast Asia?

To be at the right place at the right time to make a sale, you can increase the Law of Probability by understanding the content-specific concept and employing the vertical marketing techniques used by hundreds of successful photo illustrators.

General-image, scenic photo illustration (landscapes, ocean waves, backgrounds, New England fall color, etc.) has been on the decline since reaching a peak in the late 80's. It still sells, but the monumental supply now far exceeds the demand. It has become inbred. The tell-tale signs of the trend away from generalized pictures are there: discounts, copycat photographers, "no research fees," slower payments to suppliers. Tear off the cover of any stock photo catalog and it is difficult to identify which agency the catalog represents.

However, there willalways be a need for strong photo illustration in new generation markets. You'll have the best chance of being selected by buyers if you are a specialist in their area of need.

When the great general magazines of the past, LIFE, LOOK, Saturday Evening POST (that's where I got my start), folded back in the 60's, the staffers and freelancers didn't want to concede that their treasure chest was dwindling. They had to face the reality, to survive. Some did, some didn't. To move ahead, remove yourself from the past. Look the fading classic stock photo in the eye and take that first step toward new generation photo illustrations. Tailor them to specialized vertical markets, the ones you enjoy, and the ones where photobuyers at this moment are looking for you.

* Vertical Markets: A number of markets that share a single subject area; i.e. various photobuyers and publishers who need photos in one related subject area. A new generation stock photographer with an interest in that subject, deals with those buyers. There are many such "theme publishers," who focus on a specific subject area -- environment, music, boating, deserts, medicine, rural, celebrities, outdoor recreation, landscaping, and so on. There are some 2,500 categories. The various publishers in each category each spend $10,000 to $50,000 per month on photography. Most photographers find they don't need more than two to five 'theme' market areas (which translates to a total of 30 to 100 photobuyers on their Market List). Our research shows that a photo illustrator stays with a "theme publisher" for an average of at least ten years. A specific photobuyer may leave the publishing house, but the theme of the publishing house remains the same, assuring the photographer a long-term sales relationship with that market.

A comparison........

The New Media photographer who stays within a vertical mrket has a jch better chance for success that the former method of stock photography development: Across the Board picture-taking based on what the market needs.

Here's what you're engaged in when you enter the field of stock photography.

New Generation
Media Photographer 		Classic Commercial
Stock Photographer
Vertical Markets Yes --
Specialized		 No -- Across the
Board,Generalist
Theme Media Yes, Always Sporadically
Well Being Clients: Easy to Please Clients: Hard to Please
Long Term Use Photo Matures
Long Shelf Life
Historical Use		 Short Shelf Life
Trendy
Stale Eventually
Model Releases Not Required Required
Unique
Content-Specific		 Highly Specialized Standard Cliches
Made in Taiwan Clones
Client Accountability Solid,Responsible
Always There
Permanent		 Not Always Accountable
Temporary
Your Knowledhe
-- Background		 Expands as you develop Jack of All Trades
Ard Direction None
You Call the Shots		 Usually
Art-Directed
Voyage Create the Trail Follow the Trail
Picture Use The Need to Know The Need to Buy
Relationships Worthwile, Long-Term Short-Lived
Need Meeting Your Needs Meeting Their Needs
Shooting on Spec Yes, To Build
A Stock File		 No
Not Advisable
Equipment Minimal Varied & Costly
In-Public
Photographing		 Easy Difficult
Revenue Less Up-Front
Less Overhead		 More Up-Front
Few Residuals
Filing Images By Subject
(Managable)		 By Number
Across the Board
Disputes Rare Frequent
Competition Limited Everywhere
Referrals Yes, No Competition No, Always Competition
Expectations for
the Future		 Fits the New
Media Concept		 Laboring Under
Antiquated Guidelines
Retirement Valuable Asset Unusable Asset
Gratification Yes Limited


The Long-Term Value of a Customer
(The most important building block in your marketing strategy.)

When you use the marketing methods recommended by PhotoSource International, you'll find that you are developing a potential long-term relationship with each of your markets, or customers, be they corporations, pr firms, publishing houses, etc. Publishing houses particularly lend themselves to a long-term affiliation, because of the usual stability of their focus and emphasis. The individual photobuyers at the company may change, but the theme of the publishing house remains the same. As long as you don't change your theme (your photographic marketing strength areas [PMS/A]), you will have established a lasting relationship. In my own experience and in surveys of other photo illustrators, I find that ten years is a reasonable average for length of time you can expect to stay with a publishing house. Sometimes it's much longer.

In my case, I've been dealing with many publishing houses for more than twenty years. The individual photobuyers move on, but the theme of the publishing company remains constant. As one example, at RODALE Press (Emmaus, PA) two generations of owners have passed on, but the original thrust (healthful living) by the original founder, J.I. Rodale, hasn't changed.

Because you have anchored yourself with a publishing house, i.e. with that particular 'customer,' new photobuyers that come along to work for that customer of yours will usually continue the same trusting relationship their predecessors had established with you.

As the cost of living increases, your original photos continue to increase in value as you continue to sell the same photos˙to new photobuyers at the same "customer" company, who are addressing a new generation of readers.

The Total Net Worth of a Customer

This idea of the long-term value to you of a customer can be stated as the Total Net Worth of that customer to your business. The Total Net Worth concept is a marketing principle that is rarely taught in business schools. Most accounting and marketing majors have never heard of it. But if you apply this principle, you will find that it can be the most important building block in your marketing strategy.

At first glance it may seem that the way to determine the average worth of a customer is to divide your total sales by the number of customers you have. However, this doesn't take into account your non-customers, that is, the customers (the markets) you approach who do not purchase photos from you. You nevertheless contact these markets, and this cost of "not acquiring" a customer must be factored into your assessments and projections.

$1,000 to $20,000 per customer


The positive side of this approach is that it allows you to determine just how much you can spend to obtain a new customer (i.e. publishing house) who eventually will pay you $1,000 to $20,000 or more over a ten-year period.

There are several ways you can market your collection of photos to potential customers: direct mail campaigns, personal visits, post cards, posters, calendars, telephone calls, news releases, speaking engagements, seminars, trade shows, and so forth. It is important that you begin today to start tracking the method by which you gain each new customer. Your data will show you which promotional method is the most successful for your particular operation, and thus which method to put your biggest promotional dollar into for best success (a computer is a handy tool for tracking this kind of data).

The next step is to determine how many dollars you can put into the promotional method you have found to be the most effective. Using the chart below as a guide, you can determine what a customer's Total Net Worth to you is. For example, using a worst case scenario:* working at the entry level with low budget customers and figuring extremely conservatively that a customer will last only one year, you find you could spend up to $100 to acquire that customer and still break even. (You'd break even because $100 is the net profit you can expect from one customer for one year at this level). Since your promotional package would cost about $1.00 (an industry average), you could afford to contact 100 potential customers (100 x $1 = $100). If out of those 100 you contact you land two, or three, or five, steady customers - you're in the black. With experience gained through analyzing your data, you'll learn how many contacts you need to make, on average, to land one consistent customer.

Then you'll know the least amount you can afford to spend at the low budget level to acquire a new customer! This method provides insurance against making a bad business decision.

* In this example, we've arrived at $100 per customer by averaging all your customers in this level.

Naturally, there are several contingencies involved here.
Here's a check list:

Other variables:

In addition to selling and reselling slides and B&W's to your customers, you may start to offer other products such as panoramic photography, or digital pictures. This will increase your activity and probably increase your profits. On the other hand, you could decrease your profits if you slide backwards in the area of prompt service or quality work, or if you don't continue to update your photo collection with fresh, new images. If you acquire just one consistent customer photobuyer (just 1%) in your promotional campaign to 100 prospects, you will break even. If you acquire 10 (10%), you can make a potential net profit of $1000 for the year, and ultimately $10,000 based on the total net worth of each customer over a ten year span. The law of probability is on your side. And this is just the most conservative scenario.

I have broken down your target customers into three levels of buying range. The following are conservative averages. You may experience different numbers, either higher or lower. I have arrived at these averages by comparing my own numbers with those of other stock photographers in the industry. This is therefore an unscientific "general" average.

To arrive at your own chart is simple: Analyze your own market list. How many markets have bought from you once, twice, five times, twenty times in one year? What is the average for one year? How many years have they stayed with you? (If you are just starting out, the chart below will serve as an educated guess to go by until you accumulate your own averages.) What net profit do you get from each sale, on average? Be prepared to find that your photobuyers are hesitant to buy frequently or in volume from you initially. Once you have established a relationship, they are more prone to make multiple purchases from you. The reason: once you become familiar to them, they want to encourage you to continue submitting to them -- you become the "easy" transaction, not the unknown quantity of someone new and perhaps undependable.
ONE CUSTOMER:
Low Budget Customer
Purchases per year Average $ order % Profit on order Profit in one year Profit in 10 years
10 $50 20% $100 $1,000
a "customer" may be one photobuyer (at a publishing house, pr firm, magazine, ad agency) or one company (with several different photobuyers whose purchases represent your sales to that one "customer" company.)

Medium Budget Customer
Purchases per year Average $ order % Profit on order Profit in one year Profit in 10 years
10 $500 20% $1,000 $10,000

High Budget Customer
Purchases per year Average $ order % Profit on order Profit in one year Profit in 10 years
10 $1,000 20% $2,000 $20,000

From the above chart, it would seem sensible to aim for the highest budget possible. However, if you do, you can expect fierce competition. This puts the lower budget markets in a different light: if you start out with lower paying customers, you'll find that more customers are available to you, plus the competition is not as great, resulting in the chance for far more sales.

Each time you gain a new steady customer in the mid-range chart, for example, you know that the Total Net Worth of the customer is $10,000. You can effectively compete with competitors who are focussing on the top dollar markets. Here's a way you can match their incomes: Adjust your marketing plan to either: 1.) double the number of your customers, or 2.) cultivate your customers to a.) purchase twice as many photos on their average orders, or b.) double the amount of times per year that you make sales to them.

I have presented this system conservatively. Actually, if you are aggressive and confident of the quality of your work and confident of the targeted value of your mailing list, you could lose money on your promotional campaigns and still come out ahead. The long-term income from your acquired customers would eventually eliminate the loss you experienced initially in acquiring them.

The Total Net Worth method of operating your marketing plan is simple to carry around in your head and enables you to make snap decisions, because it synthesizes the "rules of your business" down to thumbnail answers. The Total Net Worth principle presents you with a model of your business, a mathematical relationship, as to how your business works, and what works. And it provides you with a warning signal before you make a bad decision.

Once you have done the tedious initial work of tracking and analyzing your customers, further analysis is easy and simple. A computer will help and most database programs can be designed to uncover this information. Getting the information by a pencil and data chart is also possible, just slower and less glamorous.

One final benefit is that once you have your numbers in place, you can put these figures into a spreadsheet program such as Microsoft Excel, Lucid or Lotus 1, 2, 3, and project the impact that different business moves or decisions will have on your profit or loss picture. You can guide your business ship with far more precision toward horizons of greater profits.
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