[Leica] I wonder if the price will increase

[Frank.Dernie at btinternet.com (Frank Dernie)]

Typically, in the industries I have worked in, manufacturing cost is 10% of 
retail. The rest covers R&D, tooling, marketing, warranty, margin and dealer 
margin.
The percentage varies a bit, being more for low volume items, where the R&D 
and tooling cost has to be amortised over a smaller quantity of sales.
When I got involved in doing a plan for a lightweight production supercar at 
Lola Cars it worked out, for example, that getting the engine through the 
various government tests would work out at ?200,000 per car and the tooling 
a similar amount. IIRC the actual manufacturing cost was about the same. 
They needed to sell direct from the factory at ?650,000 each to break even 
in the projected quantity, which was IMHO optimistic. This is for extremely 
small quantities, probably like the new Summicron  though.
Nikon and Canon sell more of their high end cameras (as a loss leader for 
prestige, I am told) in a month than Leica do in a year.
I am glad that Leica is now profitable. It made a loss, even at the prices 
the money-obsessed hated, for years. I hope they continue to exist and make 
a reasonable profit - why shouldn't they.
Some societies are much more obsessed with price than quality. These include 
here in the UK and the USA. I remember one of my old colleagues who worked 
for Mobil telling me a story. Mobil 1, which most have now copied, was by 
far the best lubricant available (we got 5% more power using it at race 
temperatures than the Valvoline racing oil we used to use). He said in the 
US and UK it sold poorly because the vast majority of customers bought 
mainly on price. In Germany, however, it was a big seller since customers 
there were more interested in having the best.
FWIW
FD
On 3 Dec, 2012, at 08:09, Jayanand Govindaraj <jayanand at gmail.com> wrote:

> I would estimate that their gross margins on these lenses would be upward
> of 60% - which really means that I am estimating their cost of production
> at a still lofty USD3000 or so. That should take care of any number of
> rejects, quality, raw material of the highest available specs, etc - when
> you consider that the highest price (I think) that any other manufacturer
> sells a 50mm for is around USD 1300 (Zeiss, and that too a Makro-Planar).
> On second thoughts, their gross margins are probably closer to 70-75%.
> 
> I will be really interested whether the new M and the new 50 would have to
> be sent to Solms for calibration (at an additional $$$$ charge, of course)!
> Not that most of the buyers would care, they would have to use the combo
> first to find out! (-:
> 
> Of course they will sell the whole lot. Their marketing strategy, as I
> mentioned before, is really pretty good and focused right now! Must be
> Blackstone's experience in these things commercial coming to the fore.
> 
> Cheers
> Jayanand