Archived posting to the Leica Users Group, 2011/06/14

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Subject: [Leica] Product price (was M9)
From: jayanand at gmail.com (Jayanand Govindaraj)
Date: Wed, 15 Jun 2011 08:07:35 +0530
References: <BANLkTi=k2QUPko3+e=63rhof9jq5rkjL8Q@mail.gmail.com> <4DF81863.2010606@panix.com>

Rei,
Stocks are the only assets in the world that humans routinely love to buy
expensive and sell cheap. What price discovery?
Cheers
Jayanand

On Wed, Jun 15, 2011 at 7:56 AM, Rei Shinozuka <shino at panix.com> wrote:

> 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
>>
>> _______________________________________________
>> 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
>


In reply to: Message from lrzeitlin at gmail.com (Lawrence Zeitlin) ([Leica] Product price (was M9))
Message from shino at panix.com (Rei Shinozuka) ([Leica] Product price (was M9))