How to Stoke Demand for a Common Camera: Jack the Price Up—Way Up

In late 2012, Sony (SNE) released a highly praised digital camera called the A99 that sold for about $3,000 with lenses and other accessories. Now it can be had for almost four times that amount.

Early this month, Hasselblad, a high-end Swedish camera maker, started selling for $11,500 a new model that is at best an extremely close approximation of the Sony.

The Hasselblad version is kitted out with titanium and “tough as nails” coatings, but the guts, according to serious camera critics, are essentially the A99—right down to the pellicle mirror lauded as a major breakthrough in the camera business.

Courtesy SonySony A99Photography Life calls it a “rebranded” Sony camera and notes “the changes are purely cosmetic.” Digital Photography Review says the product—and it’s price point—“has us scratching our heads yet again.” Those who comment on DPR articles, meanwhile, are a bit more colorful in their assessment, including a reader dubbed al_in_philly who writes: “After a while, you just have to ask yourself ‘Who has been slipping acid into the Hasselblad water cooler?’”

Hasselblad acknowledges that its new HV is for shutterbugs who not only want a nice camera, but also want to spend a lot of money on a nice camera. After all, with a slate of solid DSLRs available for less than $1,000, chunky Canons (CAJ) and Nikons (7731:JP) are ubiquitous. No Saudi prince or Shanghai statesman with a bit of flair wants to be seen toting around a Rebel.
 
Here’s how Hasselblad describes its target market in its press release:

“This camera is aimed at people who don’t just love taking pictures—but love taking them in real style. … There are growing numbers of very keen and often extremely talented amateur photographers and photo-enthusiasts all over the world that are willing to invest in the kind of high performance capture products that elite professionals enjoy.”

The company, which did not respond to requests for an interview this morning, seems to be banking on something economists call “the Veblen effect,” which is essentially when demand for a good moves in step with its price (rather than in an inverse relationship). Those in the business of selling fine wines—and other things that 19^th century economist Thorstein Veblen called status goods—know exactly how it works. The key is cultivating a product in which the value largely lies in what it says about the buyer, rather than in its utility.

Ferrari (F:IM), for example, would still sell a lot of sports cars if each cost half as much, but a fair share of the buyers on its waiting list would no doubt switch their orders to a competitor that keeps prices in the stratosphere.

From this perspective, the fact that a much cheaper version of the new Hasselblad sells under a different brand may even make buyers covet the Hasselblad more; the presence of the cheaper option makes the pricier purchase that much more conspicuous—and the “I-don’t-give-a-damn” cachet is worth more to the buyer than any single-lens transparent shutter.

The gambit could just as easily backfire. Neil Dutta, an economist at Renaissance Macro Research, said the Veblen effect works best for such things as handbags that are less functional. “(With) most technology items, prices go down and quality goes up,” Dutta wrote in an e-mail. “Hard to see why cameras operate under a different standard.”

Ultrarich shutterbugs who do their homework and are really hell-bent on dropping some dollars can always buy a Leica (LCA:GR) S2. Those cost at least $20,000 and are nothing but original.

Meanwhile, the biggest winner in the Hasselblad gamble may well be Sony, which is always struggling to assert itself against Canon and Nikon, the dominant players in the DSLR game. The fact that a close cousin of its camera is selling for $11,500 via a chi-chi boutique brand may give it a bit of a reputation boost among shooters looking to spend a few thousand dollars on a professional-grade machine.

Even if Hasselblad does win over some wealthy hobbyists, those professionals who have to worry about camera bodies wearing out are likely to opt for the version that costs one-fourth as much.

How to Stoke Demand for a Common Camera: Jack the Price Up—Way Up