We recently participated in an event that included photos taken by a professional photographer. The photos are OK and they're of my wife while she's 8 months pregnant - a pretty special time.
Unfortunately, we were only told after the event that the photos would be $125 to get the high quality digital version of the file. Right, one hundred twenty five US Dollars. I have a hard time imagining that any of her customers are going to buy more than one photo. Maybe two...but that's it. We will not buy a single one. I bet a lot of her other customers are that way. So, here's what I propose:
Simple price differentiation for professional photos
The problem is that some of her customers will pay $125 for some of the photos. And for those customers it is worth it and she makes a pretty good amount of money from it. But she is leaving some value uncaptured. We would probably pay $20 for a few of the photos of us. And some of the other people would probably pay $50 for their photos.
The classic econ 101 perspective on this is that you choose a market price and go with it. Supply and demand intersect and there you go.
Graduates of Econ 102 (or marketing 101) should get into the next layer, though: price differentiation. Price differentiation is charging different prices for the same product.
I put her $125/photo price point above the equilibrium point (the intersection of the supply and demand curves) because I believe it is. That is obviously debatable, but as the $25 price point on the next graph shows, there is more money/value to be captured by price differentiation even if $50 were her price and were the equilibrium price points.
- My proposed scenario is that with price differentiation she sells those same 2 photos to make $250 and sells 5 more of the photos to folks at the $50 price making another $250 and finally sells 10 more of them to folks like cheapskate me for $25 each netting $250. Total revenue is now $750!
Obviously if she offers all the photos for $25 she will not capture the value of the people who value them at $50 or $125. So, she needs to segment the market somehow and only offer the lower price photos to the people who would not buy a photo at $125.
So, from a practical perspective, how does this work? I'm not entirely sure, but I've got some ideas. These could be used independently or in combination:
- Campaign one: lower prices over time. Just have the website automatically lower the price by $5 a week or something.
- Campaign two: offer discounts a month later via e-mail to people who didn't buy any photos.
- Campaign three: offer deep discounts a year after the event happened.
And that, my friends, is how you get rich(er).