[Leica] Product price (was M9)

[shino at panix.com (Rei Shinozuka)]

Akerlof would term "ignorance" "informational asymmetry."

And even in the capital markets, price discovery is frequently a 
non-trivial exercise.

-rei


On 06/14/2011 01:56 PM, Lawrence Zeitlin wrote:
> "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
> - - - - -
> I partially agree, but not entirely. If a consumer has a good idea of the
> true quality of a product, he chooses one with the highest quality at the
> lowest offered price. This is normal marketing procedure. But for many
> products, especially technical or luxury products, the consumer has little
> direct knowledge of quality or suitability. Marketers search for a magic
> number to tout their wares in the hope that it will convince the buyer that
> their items are the best. For years digital camera makers hyped megapixels
> as a magic metric. Computer manufacturers advertised computers in terms of
> megahertz CPU speeds. Fabric manufacturers, in terms of threads per inch.
> Even Leica talked about the little Black Forest Elves that made the
> wonderful cameras the HCB used.
>
> Numerous market research studies have shown that for complex products of
> unknown or hard to determine product quality, most consumers use price as
> the main quality index. How many times have you heard the canard "You get
> what you pay for." Actually you do not.
>
> The manufacturing and distribution price of a product has minimal
> relationship to the retail price. Price is primarily a marketing decision.
> The same medicinal drug you buy in India may cost ten times as much in the
> US. The same drug, manufactured on the same production line, sold in Canada
> costs half as much as in the US. Typically marketers increase the retail
> price until demand falls off. In cases where the manufacturer has limited
> production capability (Leica) the price is set at the point where demand
> matches production.
>
> So take the self serving comments of the luxury goods manufacturers with a
> grain of salt. Few manufacturers are going to admit in public that their
> products are no better than the competitions products but that they have
> managed to convince the stupid consumer to pay twice as much. Of course 
> from
> the consumers point of view, if everyone knows the item is more expensive,
> he gains prestige amongst his peers.
>
> Conspicuous consumption anyone?
>
> Larry Z
>
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