By Mitch Lipka
May 11 (Reuters) - Joan Fee is just the kind of customer the online photo industry is hoping for when it offers free prints and photo books. The 55-year-old personal assistant from Morro Bay, California, saw an email a couple of weeks ago offering a photo book for just the price of shipping, and she bit.
She uploaded photographs of a friend's bachelorette wine-tasting event and made a book on Shutterfly as a gift. With the $20 regular price eliminated and a $7.99 shipping charge, it seemed worth a try to her. And she was so happy with the results that she's now planning all sorts of projects. "I would pay full price if it was for a special occasion," she said. "Otherwise, I'd wait for a discount because I'd probably make several."
In the uber-competitive world of photo printing and photo books, you don't have to wait long for the next deal. Whether it is 101 free prints or a deeply discounted book, the deals keep coming, without any signs of abating. You've already missed your opportunity to grab one of those deals for Mother's Day, but with graduations and Father's Day next up, and who knows how many birthdays or other occasions in front of you, there are plenty more opportunities.
"Promotions are a great way to generate excitement," said Karl Wiley, general manager of Shutterfly Inc, the market leader. "In a lot of cases, it's about getting people over the hump to try this." Shutterfly wants its customers around for the end of the year, when about half of its revenue is collected from holiday cards and related gifts.
Among Shutterfly's competitors are Hewlett-Packard Co's Snapfish service, American Greetings' Webshots, CVS Caremark Corp, Wal-Mart Stores Inc, Costco Wholesale Corp, Vistaprint and AdoramaPix.
Another huge player in the market, Eastman Kodak Co's Kodak Gallery, was sold to Shutterfly as part of the parent company's bankruptcy, and its customers can move their photos to that site. Wiley would not discuss specifics of how much the company loses on the trial offers, and those who run Snapfish refused to discuss any aspects of the business.
CVS also did not address specifics, but the national pharmacy chain is increasing its offerings with an eye to expanding its presence in the business. It offers what many competitors cannot: more than 7,300 locations to pick up photos and certain types of photo books the same day -- without a shipping charge.
"We are always looking for ways to expand and enhance our photo product and service offerings for our customers," said CVS spokeswoman Erin Pensa. Dangling free prints and deep discounts is one way of getting the attention of customers, she said.
There are so many deals that it's hard to know where to start, or stop. The first thing to keep in mind, though, is that "free" is rarely free. But it can still be a good deal. You will still usually be on the hook for shipping and handling, which is where some of these companies help recoup the costs of the deals.
Shutterfly, a publicly traded company, provides a look into the money part of the business with its U.S. Securities and Exchange Commission filings. Shutterfly generates about 15 percent of its revenue from shipping, the company said in a recent filing.
In the same filing, the company reported: "The digital photography products and services industries are intensely competitive, and we expect competition to increase in the future as current competitors improve their offerings and as new participants enter the market or as industry consolidation further develops. Competition may result in pricing pressures ..."
That's good news for consumers. "You can save a lot of money if you are price sensitive -- moving from one site to another and taking the free deals," said Simon Blanchard, an assistant professor of marketing at Georgetown University's McDonough School of Business. "You're able to do this and take advantage of the companies. They're hoping you will eventually be a loyal customer."
As an amateur photo buff, Blanchard has used numerous sites to print photos and make photo books. There is much less differentiation in basic four-by-six photo prints, he said, than in the books. There, Blanchard urged consumers to be careful before choosing. Among the variables, he said, are the quality of paper, ease of use, the way the books are bound and the way images are printed. Prices, even when discounted, can vary widely -- from a few dollars to $200 or more, depending on size, quality and publisher.
Usually, the free books will be 20 eight-by-eight pages. The strategy of deep discounting makes sense, Blanchard said, "if they actually have a good service to back it up ... They're willing to take a short-term loss if they're going to get the business."
The companies want users to feel comfortable with their services, Blanchard said, knowing that they are easy to use and produce good results. In turn, consumers invest their trust in the company by taking the time to upload their images. "They're really trying to capture loyalty."
And, if the companies have their way, you are going to upgrade your order from the free photo book to something more elaborate. Or maybe you will order a few eight-by-tens on top of your 100 free prints.
Dr. Christine Tsien Silvers of Marshfield, Massachusetts, has pounced on offers (photo books, free prints, mugs, calendars) over the years from Kodak Gallery and then done exactly what the photo companies want. "I've gotten fantastic deals," she says. "I have, however, amongst my deals, still spent a few hundred dollars or more per year, for many years."
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