Economics

[Grizzly]

I'm sure I have this all sorts of backwards and I'm sure Hogg and BS will explain to me why this is so.

This has always been my economic theory. I've never been a real bourgiousie, capitalist pig(in fact, I did a 4 year stint as a pinko ) but it has always seemed to me that making the highest quality goods possible and selling them at the lowest price possible would be the best way to make money.

If you create the best, but sell it for the price of others(or even less) then wouldn't you make up in volume for what you lose on markup?

Look at the UG market, for instance. Some of them make great gear and some of it is so-so. However, I would bet that the euro gear market has taken a major hit since the prices are so much less.

Why isn't this practice followed more often?

I've thought of marketing a line of laundry detergent. Make it just as good or better than Tide, but sell it for the price of All. By the same token, for those who believe price is indicative of quality, I would market the same shit with a higher than Tide price tag.

Here's my commercial:

Hey, folks. We're not going to do some side by side, fake comparrison. Instead, we will assure you that this stuff is of the highest quality. Grizzlabs believes in providing high quality products at the lowest possible cost.

Our founder, Grizzly, has staked his personal name on this product and he will be damned if his name gets ruined by selling a garbage product.

With this in mind we are now offering to you, the public, a dual line of products for your laudering needs. The first is the same as the second, but it costs less. The second is the same as the first, but it costs more. Whichever will make you feel more secure in your purchase is the one for you.

If you want to save money and still have the highest quality availabel, we offer you "Grizzlight". If you wish to allay any fears of cost cutting methods, we offer you "Grizzlicious" at a mere pittance of 75cents more per bottle.

 

[Bob Smith]

There is ususally a difference when it comes to marketing black/gray market goods as compared to legit products. Comparisons between the two dont usually hold up.

Also, buyer psychology plays a very important role in marketing and peoples buying habits. With your idea of selling the highest quality for the lowest/lower price, that would be like selling the Mercedes SL55 AMG for the same price as a Corvette. Not that a Vette is the highest of quality, but the SL 55 blows it away in always every aspect. Lets say Mercedes COULD sell it for $50k. They wouldnt. People would switch to a BMW M5 or a Porsche before going to the Vette.

Its a combination of social status, quality, and so on that makes the high end brands more expensive. Compare how a Porsche is built vs a Vette. There really is no comparison other than that they both emply some robots (IIRC, Porsche only uses 3 in their entire prodcution) and some manual labor, some skilled, some not. Near the end of the production of Porsche, and before paint, every 996 is hand rubbed to feel for imperfections, as unnoticeable to the eye as it may be. Attention to detail is WAY higher than for an assembly line-only vehicle like the Vette or just about anything else. Rolls Royce also uses a great deal of hands on, labor intensive quality control. Both companies command premium dollar.

You could also look at resale value of cars. American cars typically do not hold their value well. Its because build quality and reliability, historically, have not been in the same ballpark as that of Jap builders (even if they are produced in the US). Honda, Nissan, and Toyota all hold their value much better than a comparable American product.

Whether the volume increases enough to offset lower profit isnt really an issue. Why have a lower profit per vehicle (or box of Tide, etc) when you can make the same or better overall profit while keeping production costs lower. More production equals more manufacturing costs (raw materials, labor, insurance, etc).

Using Porsche (or other top-end manufacturer) as an example, they dont want everyone to drive their car. More 996s on the road will weaken their brand. It loses its prestige. Plus, Porsche produces nearly the exact same amount of cars every single year, regardless of what the demand is. They are still made in the same factory as they have been since the 356 came about back in the 50s. For them to produce more cars selling at a lower price, capital expenditures would increase dramatically as new facilities would have to be designed, built, heated/cooled, and so on that goes with adding another facility.

As with Ferrari, they dont let just anyone buy them. For the top of the Ferrari line (the Enzo) you cant just walk into a dealership and buy one. Doesnt matter if youre Bill Gates and could buy the entire Ferrari company. Unless you have already owned a Ferrari for a number of years, and also pass their background check/info gathering, you have no chance of buying an Enzo. Same with other models like their anniverary F40s, F50s, and so on.

Grizz, your idea sounds good in theory but would never work in reality. Marxism sounds great on paper but has failed every time when implemented in reality. Same applies to your idea.

 

[Grizzly]

So, then, basically what you are saying is that my notion of "more expensive=better" is the driving force?

In other words, status is more important that quality? What sense is it to have something if everyone else does. If 2 vehicles are of the same quality, but one costs more, the latter is more likely to be bought because people have cockswinging syndrome?

This would be the reason that Marxism doesn't work, in part, yes? Given that everyone has the same amount, what the hell good is it because eveyone else can have a mansion so how are you special? It's better to gouge your employees(Pullman) so that you can say, "Hey, my house, bank account, boat, car, dog, children, etc. are bigger and better than yours."?

Now, I realize this isn't the only reason that Marxism doesn't work. There's the lack of incentive to produce good work when you get the same amount of cash either way. There are several factors, really, but according to what I got out of that post, the biggest factor is one upmanship. Is that what you were saying?

 

[ijustmegdu]

wow, you guys must spend a long time in the gym and have no energy to do anything else but sit at your computers and type all day!

personal preferece is the answer to the eco problem. selling at a lower price and holding a large portion of the buying market isn't always as profitable as holding a smaller protion and selling higher. there is a nash equilibruim that occurs at highes possible profit in a price vs products sold graph.

why can't you get the whole market? some people don't care about quality, they want a cheap quick solution and want to pay dirt for it. a higher quality product can't be made for such a low price.

finally all those classes have had a purpose

 

[Bob Smith]

Grizz, its not just about personal preference. If two cars are the exact same quality, then you have to look at styling, fuel efficiency, etc, assuming that warranty, service, etc are all the same.

Lets look at computers for a second. You have 500 companies producing computers, some names we all know (Dell, Gateway, HP - Ill leave Apple out since its not a PC) and hundreds of mom and pop type places. If you look at price alone, assuming the same configuration, Dell is almost always the most expensive. Does that mean that HP/Compaq arent high quality? Not necessarily. But then you have to look at the other factors. Compaq has a terrible repair history. Their reliability is mediocre. Now look at Dell. Top quality, bar none. They simply dont break, or at least very infrequently. They are higher quality. You could look at customer service. Dell has won the awards for their customer service for 9 years in a row, as the best cust. service in the industry. That costs money.

So no, its not simply about who can piss further or who hangs closest to the ground. Would you compare a Vettes quality to a Porsche (even a Boxter) or a BMW M3, which is roughly the same price? No, the Germans win.

 

[Grizzly]

"So no, its not simply about who can piss further or who hangs closest to the ground. Would you compare a Vettes quality to a Porsche (even a Boxter) or a BMW M3, which is roughly the same price? No, the Germans win."

I know this, but that's my point. Given the same price, I will take the Porsche. I'm sure an awful lot of people would. By bringing down their prices, they gain a larger market share and still have the same profits.

Of course, apparently, this doesn't work as well as I think it does. This is why I posed the question.

I still think companies try and maximize the bottom line at the expense of their customers, employees, the environemtn, etc.(but that's the point of business, I guess) That's why I'm a terrible business man. I'm like, I can do it for X amount. I'm not making much off of that, but I don't want to take all your money.

 

[Hogg]

Lets consider two fairly equal items...lets say a bottle of wine. Making 10% on $ 10 in a single transaction is better than making 10% on $ 1 ten times.....the greater the volume of sales, the greater the volume of sales overhead. Now the implied difference here is quality and thus higher material on the more expensive product results in a higher market price. So the question is, why would someone want to make a $ 1 bottle of wine instead of a $ 10 bottle of wine. Well, in this case, perhaps the quality of material available in the market is not on par with that of the current vendor OR...perhaps the current vendor has a trademark name in the industry and thus commands a higher price as a result of a perceived higher standard of quality. I'll give you an example: Which car is better, an infinity or a Nissan? A Volkswagen Passat or an Audi A6? Clearly, market perception of a name establishes the price difference, there are few differences between either example in terms of construction and I can assure you that the A6 and Passat will be designed on Howard Hughes Parkway in Santa Monica at the new VW/Audi design center.

Now, a business with a good name can use that name and carry it as goodwill on the balance sheet......the business commands a higher price than the sum of its discounted cash flows and tangibles. Funny how that works.

Now here is where a market leader steps in. If a market leader sees that the $ 1 vendor is picking up some of his marketshare, he can introduce an economy version of his product at a higher price point than the $ 1 bottle and run the low-priced vendor's business down...or he can simply make $ 0.99 per bottle wine and go at the discount vendor tooth and nail, penny for penny until he breaks his back. He still has the revenue stream from his premier product and can thus take a loss on the discount product for sake of maintaining his share of the market or taking over a greater share of the market. Its amazing how it works. Now if the discount vendor tries to get into the higher end lines, he will have to build that same trademark name over time, meaning that he will be debt-burdened on the venture for 3-10 years before the deal begins to increase his earnings.

Capitalism...it is a wonderful thing


This has happened to many industries

"So no, its not simply about who can piss further or who hangs closest to the ground. Would you compare a Vettes quality to a Porsche (even a Boxter) or a BMW M3, which is roughly the same price? No, the Germans win."

I know this, but that's my point. Given the same price, I will take the Porsche. I'm sure an awful lot of people would. By bringing down their prices, they gain a larger market share and still have the same profits.

Of course, apparently, this doesn't work as well as I think it does. This is why I posed the question.

I still think companies try and maximize the bottom line at the expense of their customers, employees, the environemtn, etc.(but that's the point of business, I guess) That's why I'm a terrible business man. I'm like, I can do it for X amount. I'm not making much off of that, but I don't want to take all your money.

 

[crewboss]

price isn't always a function of quality or status either, it's also a reflection of the company's costs of operation. they've got to keep costs of materials, labor, and overhead low to maneuver the product's price-point into a value position in the market segment.


put short, you could have the best product out there, and have every intention on making it less expensive than the competition. but if operations and production are in shambles, it costs too much to make the product, and this too effects the price the EOM warrants for product X.

this is where management cosultants make their big $$$ - workflow solutions, job costing & efficiency models, productivity evaluations, etc..

 

[thick]

dollar general used to rock until it started charging 2-3 dollars for a lot of items

 

[Bob Smith]

dollar general used to rock until it started charging 2-3 dollars for a lot of items

Commie bastards!

 

[thick]

exactly, kinda like metallica. they sold out and went pussy. they shouldve changed their name to the new metallica. Dollar general should be the multi dollar general

Commie bastards!