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> it always amazes me when people think they know how to price things. I
> note that Randy Whittle is in the graduate school of business, so no doubt
> you understand pricing, but just because *you* are willing to buy the
> TV tuner at $400 and not $1000 is NOT a measure of market elasticity,
> and of course you have no idea what the devlopment costs or even the
> cost of manufacture is.
True--and I don't have enough information to make a judgement
on how much it cost them to design this thing (though I don't doubt
that it probably cost them more than it would most other companies), so
its hard to say where they calculated their break-even shipment numbers
(i.e., the number of units they need to sell at this price to recoup
their development and ramp-up costs).
Perhaps having a brother that has worked for IBM in the marketing
area (helping to drive OS/2, for those of you who are interested) for
upwards of 10 years and hearing too much of the stuff that goes on in
the "inside" has jaded me a bit.
Far be it from me to suggest that perhaps political pressures
overshadow some good marketing decisions from time to time--on the other
hand, what the heck--I just said it. ;)
> There is a huge demand for these 1.2 gig disks at the (very reasonable)
> price that IBM is asking, and I would guess that they can sell all of
> them that they can make.
For a little while, this may be true (and maybe all the good
reason in the world for them to price it the way they have, perhaps
with intent to adjust to something more reasonable in the near future).
But I suspect it is largely because the drive is made to a
non-standard size and hence forces many people to have little choice
in the matter. A good captive-marketing ploy that works well with
razor blades in shaving handles, but has a tendency to burn one's
self when taken too far in the computing marketplace (Microchannel
architecture, for example).
Proprietary aspects are quite literally *key* to capturing
parts of markets, but if done in the wrong areas or in the wrong way,
it can alienate that very market.
I'm not saying that will happen to IBM with this one pricing
maneuver, but I *am* saying that I don't believe it is a step in
the proper direction. I also said that about the 170 and 340 MB drives
way back when. Prices eventually came into line (after virtually everyone
here bitched and moaned about the over-priced wonders). How did they
get away with it then? There were no substitutes--they made them just
*different* enough that you couldn't get non-IBM drives so most people
were forced to get the IBM ones. Is it safe to say that IBM was making
a *more* than healthy profit on those things?
Elasticity issues aside, the general rule of thumb is the
lower prices = more units sold thing. Perhaps IBM makes their
decisions based on maximizing dollar figures based on projections
showing fewer units sold but more $ brought in--I don't really know.
I do say that I wish that weren't the case.
----- ____________________________
Randy Whittle whittle@usc.edu | Making South-Central |
USC Graduate School of Business (Fight on 'SC!)| L.A. a better place by |
-Counselor, USC Business Expansion Network | helping small businesses |
| help themselves. |
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