Archived posting to the Leica Users Group, 2007/08/31
[Author Prev] [Author Next] [Thread Prev] [Thread Next] [Author Index] [Topic Index] [Home] [Search]On Aug 31, 2007, at 7:29 AM, Didier wrote: > I dont think much about those inexpensive and slow kit zooms, if > from Panaleica, Olympus, Nikon, Canon or whoever. If the body costs > only $100 less without kit-zoom, one may imagine at which cost > these lenses are produced. You get what you pay for. Don't buy into the "You get what you pay for" canard. The price of a product has relatively little to do with its cost of production, save only that the product not sell for too much of a loss. In general, the actual production cost of most manufactured items, cars, cameras, or cookies, averages about 20% of the retail price. What you pay is dependent primarily on the distribution system, the number of markups prior to reaching your hands, and the actually demand for the product. For products whose actual performance can only be judged by experts (i.e. Leica lenses), consumers often use price as a surrogate cue to quality, believing, as you do, that "you get what you pay for." The less certain you are in your judgment, the more likely you are to regard price as an index of quality. 'Taint so. Leica branded lenses on Panasonic products cost just as little to make as lenses on competing brands that don't carry a distinguished German name. In film camera days, Canon and Nikon both supplied normal lenses at one tenth the price of competing Leica lenses. Were the Leica lenses any better? Perhaps, but not ten times better. Some fairly rigorous reseach at the time showed that quality difference were almost inconsequential in normal use. Leica kept their prices at the high end even after they were well into the learning curve and production equipment had been fully amortized to bolster the brand's image. Indeed, marketers are so sure that the public regards price as an index of quality on luxury items that they often increase the price to raise the brand image in the public psyche. Loreal's "It costs more but I'm worth it" was lauded as one of the most effective marketing campaign slogans in the cosmetics industry. For most necessary items, lower prices mean greater sales. For luxury items, raising the price often increases sales. Negative price elasticity reigns. Case in point. My wife and I are friends of the owner of a major art gallery in NYC. The gallery specializes in "psychiatrist modern" paintings - the type that a wealthy psychiatrist's wife buys to hand on her husband's office walls. These run in the $10,000 to $20,000 range. If a painting doesn't sell in a few weeks, the owner of the gallery raises the price by $5000. A visitor to the gallery often says "That painting was only $15,000 last week. Today it's $20,000. I'd better buy it before the price rises again." Every one is happy. The owner because the painting was sold. The buyer because she got an item that she felt would appreciate in value. The artist because he or she got a few thousand extra. Remember only that the price of most luxury products, lens, camera, or Tilly hat, depends on the buyer's willingness to pay. It has very little to do with inherent quality. Sorry about that. Larry Z