Okay, a little Monday afternoon math and no calculators are required.
Consumers want the most value for their money. Value can be defined by the benefits provided by a product or service, divided by the cost of that product or service:
Value = Benefits / Cost
This over-simplified equation shows that for a given set of benefits, as the cost decreases, the value to the customer increases. It might seem that maximum value would be reached if the cost is zero. But if you remember your grade school math, you cannot divide by zero.
As the cost of a product or service starts to decrease, the cost itself becomes a benefit. Why do people buy something only because it’s on sale? How often have you heard someone say, “At this price, you can’t afford not to buy it” ?
But if the cost reaches zero, an interesting thing happens.
From the above equation, you might think that value would skyrocket when the cost is free. But the opposite is true. We want a product to be as inexpensive as possible, but if that product is free, then we no longer want it. This is the Paradox of Price. When something is free, it’s perceived to have little or no value.
In a 2007 study, “Zero as a special price: The true value of free products”, Dan Ariely and Kristina Shampan’er showed that decreasing price decreases demand.
In their 2005 research, “Placebo Effects of Marketing Actions: Consumers May Get What They Pay For”, authors Baba Shiv, Ziv Carmon and Dan Ariely showed how price affects consumer perception. Low price creates low expectation and low customer satisfaction. High price does the exact opposite.
Although it may not be obvious at first, all of this does make sense:
• Consumers think that if something is free or too cheap, there must be something wrong or there must be a catch. For example, when a photographer offers free or cheap photography, there must be something wrong. Are corners are being cut or is something is being left out?
• When something is free, it’s no longer desirable because if it’s free, it’s considered worthless. If it was worth anything, it wouldn’t be free. High price creates status and desire.
If Rolex watches were free, would you want one? If the watches were free, they would no longer have any status or exclusivity because everyone would have one.
Photographers who work cheap shoot themselves in their own wallet. These photographers instantly devalue their work in the minds of their customers. What’s the point of a photographer saying, “Hire us because our photography has little value” ?
Customers who use the cheapest photographer also shoot themselves in their own wallet. When a business is looking for photography services, one would think it would choose based on photography not price. After all, what does a company show in its marketing, photography or an invoice showing how much it saved on that photography?
A corollary to the Paradox of Price is that as you pay more, you get more, but not in the sense you might think.
Friends of mine, who bought themselves Rolex watches to reward their achievements, did not buy the watch and then rest on their laurels. They’ve said that wearing the watch reminds them to keep working hard, to keep reaching for the next step. The watch is really a silent reminder, telling them that what got them here yesterday won’t keep them there tomorrow.
Companies that use high quality photography have a habit of benefiting from that photography. Good photography reminds companies that good marketing is needed to fully utilize that photography. Or to rephrase it: first-rate marketing efforts can only afford to use first-rate photography.
Companies that use cheap photography have a history of staying the course by doing only cheap marketing and not bothering to reach for anything more. Or to rephrase it: cheap marketing can only afford to use cheap photography.
A simple analogy:
When you’re wearing jeans and a t-shirt, where do you feel like eating: a fancy restaurant or a cheap take-out joint?
When you’re wearing an expensive suit, where do you feel like eating: a fancy restaurant or a cheap take-out joint?
Where would you rather be seen: at a fancy restaurant or a cheap take-out joint?
It’s a self-fulfilling prophecy. Cheap photography leads to cheap marketing which leads to cheap photography. First-rate photography leads to first-rate marketing which leads to first-rate photography.
When a company’s marketing success depends on photography, you don’t need a prophet to make a profit.
