It’s no secret that one of the biggest challenges for major record labels, book publishers, and the film industry is getting more value out of their products (books, DVD’s, etc). With that said, one marketing tactic that has been used for years to allow entertainment companies to benefit financially from product releases is releasing different versions of the same product — a company can’t maximize profit if it sells a single product at a single price.

Your fan base/supporters should have different options to buy your products because you have two types of fans you have to cater to (high-value fans and low-value fans. The high-value fans are fanatics and the low-value fans are passive supporters).

For instance, a lot goes into a book release. Naturally, the publisher and author want to make as much money as they can. But if the publisher only makes the new book release available at a high price point, the publisher will only make money from high-value fans and lose income from low-value fans. Alternatively, a publisher could generate revenue from both high-value and low-value supporters by setting a lower price, but that would leave money on the table from the high-value fans who would have been willing to pay more for the book anyway. This is why you see major publishing companies like HarperCollins put out hardcover versions of a book before releasing a lower priced paperback version weeks later, not simultaneously. Hardcover books are considered to be of higher quality (this is what the die-hard/high-value fans usually want) and paperback books are considered to be lower quality (passive fans want to pay less for the content).

The same theory explained above applies to the music and film industry. For example, record labels leverage the releases of deluxe albums to cater to an artist’s die-hard fans. They do this because they know that they are more likely to pay a few more dollars for that extra content while they still sell the regular album to lower-value fans or customers. These people have a deeper desire to get access to those bonus tracks and the nicer packaging with the personalized signature.

In regards to the film industry, just think about blockbusters like Lord of the Rings! In 2005, when New Line Cinema released Lord of the Rings — Fellowship of the Ring on DVD, they sold three versions of the movie: a $30 double disc widescreen edition for casual fans, a $40 four-disc “platinum series” for serious fans, and an $80 collector’s gift set for the biggest fans.

Bottom line: For information goods like the one’s mentioned in this post, it’s really important to offer your target audience different options at various price points if you want to increase profits. However, you should note that the key to this price discrimination strategy is to make sure that your high-value fans aren’t tempted to trade down to the lower-priced product offering. You must clearly convey value! The quality of both product variations cannot appear to be similar.

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