Important | Why Artists Need to Know Lifetime Art Collector Value
The concept of lifetime art collector value is foreign to many artists.
You don’t learn about it in art school.
I find artists don’t bother or have ways to track metrics about their business. It is understandable. Determining what is essential, and then finding ways to track them is not easy.
Are you a fan of the hit show, Shark Tank?
The show gives viewers a world-class education on how to assess a company’s prospects. The sharks ask many questions fast. They need to know the cost of manufacturing, retail and wholesale prices, and other expenses. Plus, they want to know what is the cost to acquire a new customer and customer retention. They assess other resources and then decide if they can invest and earn a profit.
The sharks don’t always ask about lifetime customer value because startups don’t have enough history. It does come up when established businesses are pitching to them. It gives them valuable insight into the potential profitability and longevity of the company. Knowing these things will do the same for you.
Getting the lifetime value of an art collector requires knowing these metrics:
- Cost of manufacturing.
- Retail cost.
- Wholesale costs.
- Distribution channels.
- New customer acquisition costs.
- Marketing plans.
Why knowing the lifetime value of an art collector is vital to an artist.
First, let’s look at the two categories of those who buy art:
- Art buyers – they buy art when they need it. For instance, to fill a space in a design. Otherwise, they don’t pursue purchasing art. This scenario includes designers and art consultants who do represent irregular future sales based on need.
- Art collectors – they buy art because they have a passion for art. They like to get to know about the artists whose work they buy. They often consider themselves patrons and benefactors. They purchase many pieces from artists whose work they admire.
Successful artists sell to both types of buyers. Sometimes they use different marketing methods to find them. I believe artists need to develop as many relationships with art collectors as possible. It is key to your success. You should not ignore other ways to get to market. They are also important, but should not be a top priority over building a direct buying collector base.
Direct buying collectors help you make more money and sustain your career.
Collectors are essential because they represent potential sales of many pieces to the same person. They also are your best source for referrals to other collectors, or to opportunities that would not be open to you otherwise. A devoted fan may make introductions to people who can make a significant impact on your career. You don’t get this from the casual art buyer.
Most important is the more direct buying collectors you have, the less you are reliant on third-party distribution. The bigger the pool of collectors who buy from you, the greater the control you have of your career. Taking control and making more money has universal appeal.
Selling Most of Your Originals to a Small Group Simplifies Your Career!
With enough collectors, you can sell most of your original work to a small group of people. This situation is ideal because one-on-one relationships put you are in control. Nothing can happen to alter your ability to sell to them. Facebook can become a ghost town, and galleries can close. When things happen, it has zero effect on your relationships your collectors.
Over your career, collectors will buy multiple pieces from you. While no situation is the same, it is realistic to expect to sell a collector three original artworks on average. They might buy two for personal use and one as a gift.
Your collectors represent a potential lifetime value in dollars spent with you. It will average out given enough time.
Use this equation to appraise your lifetime art collector value:
(Average Net Wholesale of a Sale) X (Number of Repeat Purchases) = (Lifetime Art Collector Value)
These figures will vary, but are believable and will work for illustration purposes:
$750 net wholesale per piece x three lifetime sales = $2,250 lifetime collector value.
In this scenario, a collector base of 100 collectors, you net a lifetime net income of $225,000.
This example does not include other intangible benefits. For example, if 5% of 100 collectors refer other buyers to you, you gain $11,250 in sales. (Five x $2250 = $11,250)
I know it is hard for artists to think about art buyers and art collectors regarding numbers. On a personal level, it is not about numbers, but in building a career, it is always about them.
Collectors are not the be-all to end all.
Most full-time artists aim to make more than $225,000 in their careers. That is why you use collectors as a base and build your third-party sales on top of it. Collectors will buffer you when other distribution channels fail. They give you the confidence and income to make the right decisions and even say no to tempting, but risky propositions.
There are only three ways to grow your art career,
- Increase your number of art buyers and collectors.
- Increase the average price of your art sold.
- Increase the average number of pieces sold to each customer.
We will talk about these three items in an upcoming post. In the meantime, you should make thinking about what you can do to work on each of these areas. Your long-term career success is dependent on how well you do.
What I write about lifetime art collector value is to motivate you.
I believe you must track metrics that are important in making decisions about your career. You will find knowing your numbers helps you make the best decisions about how to market your career, and in many other ways as well.
Advertising and marketing are always hard costs. Being clear on your metrics helps you decide where to use your resources for customer acquisition. I want you to see how a small group of loyal buyers can protect and grow your career. If you want more help on you can build a loyal collector base, read Guerrilla Marketing for Artists: How 100 Collectors Can Bulletproof Your Career.
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- Creating Fine Art Collectors with Passion