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What justifies the price of... any consumer product

post #1 of 21
1/2/10 at 3:35pm
Thread Starter 
Especially headphones, but I did not want to post this in a headphone board.
There's the research, the cost, the marketing... and what else?
I find that price bloat is very present in the audio industry, such as certain brand of cable selling over $40'000 per system. Yes, forty thousand US.
How much of that is marketing?
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post #2 of 21
1/2/10 at 3:48pm
Very little of the cost is marketing, outside of the likes of BOSE. But that is an issue of cost.

Price is, and always will be, justified SOLELY on the basis of "how can we maximize profit?" very smart accounting firms are paid quite a bit to help the marketers find a key price, where the maximum profit is made by balancing an increase in per-unit profit, with the highest volume of sales.

besides produce (cabbage, etc.), very few items' prices truly reflect their cost
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post #3 of 21
1/2/10 at 3:48pm
Availability, manufacturing cost (usually = quality), raw material cost, R+D, corporate costs, competition, perceived worth by the general public.
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post #4 of 21
1/2/10 at 4:11pm
Enough people are willing to pay it.
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post #5 of 21
1/2/10 at 4:17pm
Research, development, design, raw materials, manufacturing cost, marketing, transport, administration, profit, and I am sure more...
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post #6 of 21
1/2/10 at 4:37pm
Price is always justified by the customers' desire, which need not comply to logic. That is, the more you can heighten your customers' desire, the higher you can set your price tag.

The different b/w honest and less-honest businessman is, honest businessman sets the price he is willing to pay for if he is a customer; Less-honest businessman sets the price just high enough not to deter customers with the most desire. In the real world, most businessman operate in between the two principles.
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post #7 of 21
1/2/10 at 4:49pm
Quote:
Originally Posted by ClieOS View Post
Price is always justified by the customers' desire, which need not comply to logic. That is, the more you can heighten your customers' desire, the higher you can set your price tag.
Diamonds are a really good example of this - they are not as rare as you think.
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post #8 of 21
1/2/10 at 4:54pm
Quote:
Originally Posted by ClieOS View Post
The different b/w honest and less-honest businessman is, honest businessman sets the price he is willing to pay for if he is a customer; Less-honest businessman sets the price just high enough not to deter customers with the most desire. In the real world, most businessman operate in between the two principles.
Great definition! I will quoting it at work.
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post #9 of 21
1/2/10 at 5:10pm
Quote:
Originally Posted by DanielCox View Post
Diamonds are a really good example of this - they are not as rare as you think.
Jewelry is a different business though. It exists largely to show off someones wealth so as long as people think it's expensive then it will be.

What justifies the price depends on the market the product is a part of. For fashionable products it's largely marketing. However for perfomance products it's mostly research and actual production costs. Though when you buy a product yourself nearly half the price will be store markup.
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post #10 of 21
1/2/10 at 6:47pm
G-r-e-e-d.
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post #11 of 21
1/2/10 at 7:15pm
Quote:
Originally Posted by 3602 View Post
... certain brand of cable selling over $40'000 per system. Yes, forty thousand US.
How much of that is marketing?
2, maybe 3% maximum.

The rest must be R&D, raw materials, highly skilled soldering, expensive criogenic technologies...

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post #12 of 21
1/2/10 at 8:11pm
Thread Starter 
^ Kinda nice to know that they researched unobtanium cryo'd in HanSoloCarbonite.
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post #13 of 21
1/2/10 at 8:28pm
Demand.

Which indeed comes pretty close to greed.
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post #14 of 21
1/2/10 at 9:16pm
Price is determined by what the market will pay. The price tag tells you nothing about quality.

Don't forget taxes the manufacturer has to pay, as well. They're taxed on all the materials they buy and usually get slapped with a payroll tax, as well.
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post #15 of 21
1/2/10 at 9:53pm
Total costs + supply and demand.
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