Let us recap the news item. A spa in Japan offers Live Snail Facials – For $350 you can have five snails slink all across your face. It is a painful process even though it lasts only five minutes.
Who is the customer? Almost all women. Here is what the spa says about catering to men,
The service attracts a mostly female clientele in their 30s to 50s, and although men can also opt for the live snail treatment, none have done so yet. “I’ve observed that women will endure more pain and fright than men, if it’s for beauty,”
Let us set aside the fact that this non-scalable , one customer per day, service is not really the product. Let us ask, if this were a real product, if the spa would like to expand its market to men, what should it do?
Say men have less tolerance for pain when it comes to beauty. Could the spa offer lower price to men to help
slime grease the wheels? That is overt and egregious price discrimination. A no no!
While price discrimination is good, gender based price discrimination is NOT. So how can it put to practice an effective and fair price discrimination?
Two options – none of these need any gimmicks – both are tried and tested and rooted in economic principles
- Bundling – Offer couples package
Remember bundled pricing works when customer preferences are negatively correlated. Set a price that represents the sum of the higher and lower value perceptions of women and men. Say a $550 couples package could work. The man would think his cost is $200 while the woman would think her cost came down from $350 to $275.
Besides the couples package will help drive more customers as women bring their partners, like this Candy store CEO says.
Sure you give some consumer surplus in cases where both people value it at full price. As long as that lost revenue is smaller than what is gained from serving more customers with the bundle you should do it.
For complete fairness, you should offer the couples package to any couple.
- More Product Versions
Create an express version – 2 minutes for $200. That helps assuage men’s concern for pain and fright. And the lower price is attractive too. Brand it to signal something other than the best so women are less likely to choose it.
As long as you are creating versions, create another premium version, there exist customer segments willing to pay more and you should capture that.
Both these options implemented together would work as well.
There you have it – Live Snail Price Discrimination done fair and square.