Question
I'm planning to launch an ecommerce site selling art prints on fine art paper, canvas, tech and fashion accessories. But whereas bigger websites work with thousands of artists, I'll focus on a very specific niche of artists. Because of the size of my business (small, self-financed and bootstrapped), I'm not able to have production costs as low as the bigger sites. Is the fact that I'm niche enough to justify the higher prices? What else could I do to bring more value to my offering without lowering the prices?
Answer
In the 1980's, there was a famous experiment conducted: the "Beer on the Beach" experiment. If you and I are sitting on a beach on a hot day, and I say to you "I'm going to the 5 star hotel at the end of the beach to get us two ice cold beers...how much are you willing to pay?" You'd say (in 1980's dollars) around $2.60. I then tell you I've changed my mind and I'm going to the run down grocery store at the other end of the beach and they have exactly the same beer at exactly the same price. How much are you prepared to pay now? You'd say ~$1.50. There is no logical or rational difference in the willingness to pay, other than the context or environment in which the purchase is being made. How do you make yourself the 5 star hotel?
