New technology prices

Discussion in 'The Front Room' started by Maljonic, Nov 21, 2005.

  1. Maljonic

    Maljonic Can't get enough of FH

    I was just wondering about how new technology, or fairly new technology to the public like big flat screen TVs or whatever, is always grossly high in price when it first comes out in shops but becomes much cheaper after maybe a year.

    Now does it become cheaper because it's no longer new, because the seller needs to attract buyers with lower prices rather than the novelty of a new item; or does the price of the new technology drop as a result of manufacturing techniques becoming better, making it easier to produce the things and therefore cheaper to make.

    Are they ripping us off needlessly with high prices because we are suckers for anything new, or are they selling new things at a higher price because they need to cover intitial costs?
     
  2. Rubber Bullets

    Rubber Bullets Resident Freddy

    I guess it's a mixture of all that.

    New technology has high R&D costs that need to be got back, in addition to just covering manufacture, transport retail overheads etc.

    Also though it is all about supply and demand. If initial production runs are small, and there are punters willing to pay big money, then the companies would be stupid to sell cheaper wouldn't they? We may not like it, but we can't complain.

    RB
     
  3. MrHorus

    MrHorus Can't get enough of FH

    They need to cover R&D costs plus scale up mass production so its inevitable that things cost more initially.
     
  4. ECA

    ECA I am a FH squatter

    As production becomes more efficient throughout a products lifespan costs come down, its a combination of getting your pound of flesh for being at the bleeding edge, and high initial production costs.
     
  5. Vae

    Vae Resident Freddy

    It's also because you have early adopters who will buy new technology almost regardless of the price because they want/need it. Once the early adopters all buy your product at the high price you need to reach out to those who want it but won't pay such a high price and this continues over time until it effectively becomes a commodity you are selling by the truckload to the mass market at a lower sustainable price in the mature phase of the products lifecycle.
     
  6. Maljonic

    Maljonic Can't get enough of FH

    That's sort of what I thought. I never buy stuff when it first comes out because I know it's going to get cheaper in a few months, but I know there are people who just have to buy stuff right away (a few of them on this site I shouldn't wonder). Often people with plenty of disposable income. I think in some countries where people are poorer the new TVs or whatever are still released at the same time but don't cost as much. I also think there are countries that have as much money as richer countries like the UK for instance who just wont pay as much for new stuff, so they have to sell it a bit cheaper right away, like in the US for instance.

    I know that companies have to cover intitial costs, R&D etc, but some of them are pretty much dead certs' that they're going to sell no matter what, say from companies like Sony.
     
  7. old.Tohtori

    old.Tohtori FH is my second home

    Ofcourse we have to take into consideration that the rich buggers want their new toys to be "special" and not for the masses. It's the so called "milkage" period where the stores take the rich ones for a ride.

    "You see, good sir with thick wallet and thicker head, this is something people can't afford. But YOU can. Wouldn't it be a wondeful discussion item in your next high society lu-au?"

    Not saying that all buggers are rich or that all rich are buggers.
     
  8. DaGaffer

    DaGaffer Down With That Sorta Thing

    Actually that's not true at all. Most products fail; even from companies like Sony (in fact Sony are a good example of regular product development failure; the PlayStation division is keeping them afloat, while the Consumer Electronics division struggles). As a rule of thumb, 80% of products fail and you can expect 80% of your revenue to come from 20% of your business, so high R&D costs are not just defrayed across the product you buy but other products you didn't buy.

    Technology companies routinely price products high at the start of the life-cycle because a. They must, while production effeciency builds and economies of scale kick in, and b. because they can, which is often for two reasons; "early adopters" aren't price-sensetive, and early production often means scarcity which means more supply than demand, and in a perfect environment, higher prices. Of course its far more complicated than that, but it would take a three year degree course in Business Strategy, economics and marketing to explain it properly, so off you go :)
     

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