Theta Digital offered upgrades. I put them in almost from the beginning. The only problem was there were no prior precedents in the audio biz. So I followed my gut and experimented away.
The problem is that it is difficult to balance in terms of what is fair to the users and to us. I know, I know, Schiit has no loyalty programs, show specials, etc. This is so the guy who just bought his Chingadera from us at no discount will not feel bad when the discount was later offered. Unfair!
So what happens when we upgrade the Chingadera to an Uber-Chingadera? Let's dissect the economics a bit. So let's say the Uber costs 50% more to make than the non-uber.
Since the Uber then sells for 50% more, and since I am not being a typical high-end audio company, I am not going to discontinue the non-Uber and introduce the Uber at 50% more money, just to sell more units.
So since, I am selling a relationship with my company and in a perfect universe, I sell upgrades for the 50% difference and every one is happy, right?
Not that simple – if I factor the entire cost of the original Chingadera and the cost of the new parts, then the total cost will be much higher because of the parts sold in the non-uber which are now replaced by the parts on the new PCB, the cost difference is now much higher – say 70%.
So, if I am going to stay in business, I can't absorb that cost. The easy way out is to just replace the model as mentioned above. If I am going to offer an upgrade, and the offer is intended to be a perk for my original users, how do I do it?
This is what I did at Theta – If the upgrade user was a registered user of the original product, his cost on the upgrade was 20% less than someone who was not an original user. I was flying by the seat of my pants. It did work and it was fair.
This made it so the original customers did not have to subsidize those who bought the units second hand. A true loyalty discount. As fair as I can figure.
We still had a few whiners – “Well I bought mine used because I didn't have the money for new, etc.” They are still getting a tremendous discount even with a surcharge given almost everyone else's policy of not upgrading at all.
So the summary of the policy was:
1. We offer upgrades which save money to our users. All users save money on upgrades.
2. We give original users a price break - loyalty is rewarded over opportunism.
Have we instigate this policy at Schiit? No, not yet. But we may well do so in the future as our upgrades become a more and more significant portion of the product.
Those who think this unfair were advised during the Theta era they were free to purchase anybody else's gear at the time when we were the only manufacturer with an upgrade policy at all. This would still apply today.