Archived posting to the Leica Users Group, 2011/06/13
[Author Prev] [Author Next] [Thread Prev] [Thread Next] [Author Index] [Topic Index] [Home] [Search]As an economist, while I recognize the anecdotal evidence cited by Larry, I refuse to believe that there are goods with an upward-sloping aggregate demand curve, except in very special situations that have little to do with luxury goods (the classic example in economics textbooks are potatoes in Ireland in the 19th century). Cheers, Nathan On 14 Jun, 2011, at 5:19 , Jayanand Govindaraj wrote: > Larry, > "Inverse Price Elasticity" only works with ignorance - where the buyers > have > no idea of quality, only prestige (Rolex, Montblanc, Glenfiddich, etc). I > have had several discussions in my time with luxury goods manufacturers and > marketers, and they come back with one thing every time - the customer they > really want is the one who knows what he is buying, and does so for his own > satisfaction, not to announce to the world that he has 'made it'. These are > the repeat customers who are highly sought after - they will stay loyal to > and buy multiple products from the same marque, provided the quality is not > compromised with (Patek, Pelikan, Lagavulin, etc). > Cheers > Jayanand > > On Tue, Jun 14, 2011 at 8:36 AM, Lawrence Zeitlin <lrzeitlin at > gmail.com>wrote: > >> h >> In marketing speak this is called "inverse price elasticity." Normal price >> elasticity implies that when the price of a product is reduced demand and >> sales go up. Certainly this is the case for most consumer items. But there >> is a group of products where the prestige of the product is more important >> to the consumer than the actual quality. Included in this group are >> cosmetics, wines, designer clothes, jewelry. fine arts, antiques, and of >> course Leica cameras. The main determinant of prestige is price. The more >> expensive the item, the better and more prestigious it is deemed to be. >> Raising the price often acts to increase the perceived value, and, at >> least >> for affluent consumers, increase the demand. >> >> Years ago I consulted with a several firms in the cosmetics industry. The >> ingredients of lipstick, no matter what the price, are mostly the same, a >> stiff greasy base, pigments, and scent. With the exception of the case, >> the >> contents of a tube of lipstick cost about a nickel to make. Yet the retail >> price of lipstick varies over a 100 to 1 range. And in department stores >> the >> expensive brands far outsell the cheaper ones. "It costs more but I'm >> worth >> it." >> >> My son in law owns a wine shop in an upscale suburb of Washington D.C. He >> tells me much the same story about the relationship of wine quality to >> price. Is a bottle of wine really worth the cost of a Leica M9? Some sell >> for as much. >> >> My wife sells paintings in a New York Gallery. When a painting doesn't >> sell, >> the owner marks up the price. Visitors to the gallery say "That painting >> only cost $3000 a week ago. Now the price is $4000. I better snap it up >> before the price rises again." >> >> Ans so it is with Leica. There is precious little objective evidence that >> a >> Leica is a better camera than one substantially lower in price. (See the >> current Pop Photography comparison of the Fuji X100 and the Leica X1.) >> But the higher Leica price adds prestige to the product and increases >> demand >> among those who feel that "they are worth it." >> >> Viva inverse price elasticity. It has kept Leica alive. >> >> Larry Z >> >> _______________________________________________ >> Leica Users Group. >> See http://leica-users.org/mailman/listinfo/lug for more information >> > > _______________________________________________ > Leica Users Group. > See http://leica-users.org/mailman/listinfo/lug for more information > Nathan Wajsman Alicante, Spain http://www.frozenlight.eu http://www.greatpix.eu http://www.nathanfoto.com Books: http://www.blurb.com/bookstore/search?search=wajsman&x=0&y=0 PICTURE OF THE WEEK: http://www.fotocycle.dk/paws Image licensing: http://www.alamy.com/search-results.asp?qt=wajsman Blog: http://www.fotocycle.dk/blog