The problem is: you will be selling a $199 product to a guy with a $3999 device, but the product will be used on a $399 device because the guy who bought your product is not the same using it.
False--price is largely dictated by what new users (who can't afford to buy a new device) are willing to pay, not what the seller (who used the device) wants.
Well, like I was trying to say, simplify it even further. Make it exactly the same product, some sold at price A and some sold at price B. Just because I can afford to sell some at a cheaper price doesn't mean I can afford to sell all of them at a cheaper price. Right?
We can take issue with the software lock without saying something silly like "the lowest price must be the correct price". Sometimes the lowest price actually loses money. That's why I brought up loss leaders.
The actual device is worth 150 EUR from Germany (where Tomed is located). The US-distributer sells it for $500. Somehow, the markup got all the way up to $1000 by the time it got to me.
Clearly, something, somewhere, has gone wrong in the system. This is a 150 EUR mouthguard that is being sold to me for $1000. As in, what I've literally paid for. Why?
> For example, if the features are identical, then the price can be different.
Just a reminder that pricing "cheaper" isn't always a good idea. Newbies often think they'll charge less, but without having the data competitors have of how long the product takes to develop & maintain, how much support is involved, how much advertising costs to acquire a customer, how often you need to upgrade your equipment etc.
Please make sure that your competitive advantage is not "selling at a price you can't possibly make a living from".
(Hint: being found first can also be an advantage. Even if you're not better or cheaper than the competition, if they try you first and think "meh, good enough, I can afford that", that can still get you the sale. Not everyone exhaustively researches the competing products.)
A related mystery: what's stopping greedy practitioners from using the cheap device but still charging the old price increasing their margins even more?
But Company A has reduced product price be 60% because the biggest cost center is now halved. Customers like some new features from B but not justifying the price.
Manufacturers typically dictate reseller pricing and marketing to serve the needs of their brand ("you can't sell below x as that makes our product seem cheap") so dictating a sales tactic isn't unimaginable. Especially if the tactic is designed to sell services and what not the manufacturer offers via the resellers.
My other guess is that the resellers have figured out that while they cannot fleece you on the price of the device - they all sell the same, identical hardware after all - they can charge you extra for services, support insurance and extra options as long as those prices aren't readily available for comparison.
It's all about what's called the consumer surplus. If someone is willing to pay $350 for a pair of headphones, but they only paid $200 because you didn't have a $350 offering, you just lost $150.
The trick is to effectively capture that surplus without pissing off your customers or making them feel they're being ripped off.
I think this is called price discrimination[1]. Joel wrote a good article on this topic called Camels and Rubber Duckies[2]. Here is a quote:
>You see, by setting the price at $220, we managed to sell, let's say, 233 copies of the software, at a total profit of $43,105, which is all good and fine, but something is distracting me: all those people who were all ready to pay more, like those 12 fine souls who would have paid a full $399, and yet, we're only charging them $220 just like everyone else!
>The difference between $399 and $220, i.e., $179, is called consumer surplus. It's the extra value that those rich consumers got from their purchase that they would have been perfectly happy to do without.
>It's sort of like if you were all set to buy that new merino wool sweater, and you thought it was going to cost $70, which is well worth it, and when you got to Banana Republic it was on sale for only $50! Now you have an extra $20 in found money that you would have been perfectly happy to give to the Banana Republicans!
I think the argument here is that they were forced to sell the competing product to a new vendor (due to stifled competition) whom are now pricing at $4500, which they weren't.
I think the argument here is that they were forced to sell the competing product to a new vendor (due to stifled competition) whom are now pricing at $4500, which they weren't.
Basically, the problem the vendor has when selling a product with a large appeal is that they want to sell it at the highest price the buyer will bear. If portion A of the buyers budgeted $100, and portion B of the buyers budgeted $150 for your gizmo, how do you price your gizmo to extract maximum value from the buyers from A and B? If you sell it for $150, A won't buy. If you sell for $100, you're missing out on $50 from B.
The solution is to make minor modifications to your product to sell the Basic version to A for $100, and the Premium version to B for $150. If you've done your manufacturing right, the cost of one over the other is minimal, and you're getting the maximum value from both portions of buyers-- I mean market segments. :)
And to expand on your your issue with the availability of 16GB models... you represent a small enough niche at this stage that it's not worth Lenovo's effort to design and source parts to accomodate your segment.
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