[Leica] Re: Negative price elasticity

[leica at screengang.com (Didier Ludwig)]

Larry

I agree in your economical explanation how a price is composed. I use the 
"get what you pay for" never in general, but in this particular case it 
seemed apposite to me. 

Most luxury products including Leica are wildly overpaid because of fools 
like us who are willed to pay so much more for a few % more perfomance (if 
there is) and a famous colored dot. I know that. But I'm not believing cheap 
is automatically bad, otherwise I wouldn't own and appreciate several CV 
lenses, finders, adapters, lightmeter. 

These dslr kit zooms are dirt cheap because they're are designed on a purely 
low price marketing strategy. The dslr entry level is a hard-fought 
marketplace and these kits are the manufacturer's weapons. 

I would be the first to buy such a lens, if it has f2.8, less distortion in 
the wider half, acceptably better performance wide open, less chromatic 
aberrations, less plastic feel and handle. Alas, I'm wanting too much. But 
they're very, very affordable so I shouldn't beef about. Finally, "you get 
more than you pay for" with such prices, and my statement was indeed 
misunderstandable.

Didier






>>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