Nikon's pricing is pretty smart

Started Mar 6, 2013 | Discussions
rudyr Regular Member • Posts: 359
Nikon's pricing is pretty smart
3

Start off pricing things high:

- Easier to lower the price in the future, harder to raise it.

- Extracts most $ out of the early adopters and professionals who need it.

Use rebates to lower the price to true market value:

- Can throttle rebates on / off based on inventory

- Higher price creates an "anchoring" effect with consumers, meaning "$2000 item" with $500 rebate seems like a great deal, versus just selling it with an original MSRP of $1500 to begin with.

People can complain all they want, but from a business perspective, I would probably do exactly what Nikon is doing right now in terms of pricing strategy.

slimandy Forum Pro • Posts: 17,133
Re: Nikon's pricing is pretty smart

On the other hand they might annoy loyal users who feel they are being taken for a ride. Those users might start to look more seriously at other manufacturers such as Sigma. Still, that's good for the consumer. Competition.

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onenote Junior Member • Posts: 32
Re: Nikon's pricing is pretty smart
1

rudyr wrote:

Start off pricing things high:

- Easier to lower the price in the future, harder to raise it.

- Extracts most $ out of the early adopters and professionals who need it.

Use rebates to lower the price to true market value:

- Can throttle rebates on / off based on inventory

- Higher price creates an "anchoring" effect with consumers, meaning "$2000 item" with $500 rebate seems like a great deal, versus just selling it with an original MSRP of $1500 to begin with.

People can complain all they want, but from a business perspective, I would probably do exactly what Nikon is doing right now in terms of pricing strategy.

Having spent many years in the CE business on both supplier ans retailer sides there is a growing move to align real costs of sales to real market demand. This has been out of whack for nearly a decade where suppliers were pumping money into retailers to influence slaes and gain position within assortments.

Think about it. In one retailer that I will not name, charged vendors 30,000 a month to place a product on a dedicated endcap in a store. That is seperate from the cost to design the fixture and brand materials to speak to the consumer. So if a product sold at msrp of 1000.00 then on average that translates in many good catagories to 500.00 dealer cost. Supplier landed cost might be around 250.00. However real net dealer cost might look something like this during non promotional times...delaer - 7% + 3% disctount for on time payment. During a promotional time the supplier might add an additional 10% to sweeten the pot. That said it takes real improvements in sales to make up for the discounting.

The first step all CE companies are dealing with is price stability on lower margin catagories. There are means to do this from trimming the dealer network (Nikon did this a few years back), putting in place new pricing policy (Nikon did this as move #2), then begin to develop new products and models to address channel needs (yep they did that too). Now you move form a build it and sell it model to a "market needs & how and what can the dealer sell" strategy based on solid forecasting. By doing this you trim massive amounts of excess inventory and leverage product availability as a key function of the business vs. discounting and promotions. (Nikon has done this too). The last step in the evolution is to align real costs of the business to product costs and that is what they have been doing with the latest intoductions. By pushing the retail msrps higher during a time when there is slower sales volume is easy. Short term they are not going to be saddled with the cost of inventory since most of it will ship into retailers. What is onhand is being sold direclty along with b stock which is a huge magin bump to the bottom line for them.

There is some built in headroom now in retail pricing to run promotions, but Nikon is controllng the when and where along with how much.

fft81 Contributing Member • Posts: 945
Re: Nikon's pricing is pretty smart

slimandy wrote:

On the other hand they might annoy loyal users who feel they are being taken for a ride. Those users might start to look more seriously at other manufacturers such as Sigma. Still, that's good for the consumer. Competition.

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Or the smarter loyal users will wait for the rebates to hit.

hypercore360 Contributing Member • Posts: 991
Re: Nikon's pricing is pretty smart

slimandy wrote:

On the other hand they might annoy loyal users who feel they are being taken for a ride. Those users might start to look more seriously at other manufacturers such as Sigma. Still, that's good for the consumer. Competition.

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Slimandy,

I believe your're an old dog around these parts, and would expect a better understanding than what you just said above... Business is not interested in what is "good for the consumer"... where do you get that sort of pie-in-the-sky nonsense. Business is there to make profit. The pro and a lot of wannabees (I include myself in that category) are not looking to "other manufacturers", although I will say Sigma have improved on some of their latest offerings, but only as of late.

The O.P. is spot on.

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Leonard Shepherd
Leonard Shepherd Forum Pro • Posts: 14,673
Re: Nikon's pricing is pretty smart

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

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Leonard Shepherd
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OP rudyr Regular Member • Posts: 359
Re: Nikon's pricing is pretty smart
1

I don't think it makes sense to compare an end-of-life product's inventory clear-out price vs. the price of a brand new product with newer technology and enhancements.  If you really want to compare them, take the original 80-400's debut price and adjust it with inflation to today's dollars.  I suspect the price differential isn't nearly as extreme as you make it out to be.

Leonard Shepherd wrote:

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

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Leonard Shepherd
Many problems turn out to be a lack of intimate knowledge of complex modern camera equipment.

clarnibass Senior Member • Posts: 2,024
Re: Nikon's pricing is pretty smart

hypercore360 wrote:

Business is not interested in what is "good for the consumer"... where do you get that sort of pie-in-the-sky nonsense. Business is there to make profit.

You're right and I'm pretty sure at least 99.9% of businesses operate this way. However, I'm also a type of business, and I don't charge the highest price that would allow me the most profit. Instead I charge what I think is a fair price to customers that allows me to live my modest life.

So as far as philosophy and approach, I definitely wouldn't operate in the same way as described in the OP. However, I have no idea whether needs to sell the lens at this price to afford making it. Maybe they do? I'm guessing they can afford to sell it for a lower price, but that's just a guess.

slimandy Forum Pro • Posts: 17,133
Re: Nikon's pricing is pretty smart

hypercore360 wrote:

slimandy wrote:

On the other hand they might annoy loyal users who feel they are being taken for a ride. Those users might start to look more seriously at other manufacturers such as Sigma. Still, that's good for the consumer. Competition.

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Slimandy,

I believe your're an old dog around these parts, and would expect a better understanding than what you just said above... Business is not interested in what is "good for the consumer"... where do you get that sort of pie-in-the-sky nonsense. Business is there to make profit. The pro and a lot of wannabees (I include myself in that category) are not looking to "other manufacturers", although I will say Sigma have improved on some of their latest offerings, but only as of late.

The O.P. is spot on.

I know he's spot-on. I'm just pointing out they need to tread carefully because the competition offer viable alternatives.

And I'm not suggesting competition is good for the manufacturers; I'm suggesting it is good for the consumers (us).

If you are not looking at the competition that's your loss, but it does make you Nikon's ideal customer and that's what helps them charge a premium price.

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slimandy Forum Pro • Posts: 17,133
Re: Nikon's pricing is pretty smart

rudyr wrote:

I don't think it makes sense to compare an end-of-life product's inventory clear-out price vs. the price of a brand new product with newer technology and enhancements. If you really want to compare them, take the original 80-400's debut price and adjust it with inflation to today's dollars. I suspect the price differential isn't nearly as extreme as you make it out to be.

That would just prove they have always charged too much for new procucts. I think it does make sense to compare the price we could have bought the lens for over the past few years (not just the clear-our price) to what we'd have to pay now for the newer version. According to camera price buster the cost of this lens in the UK 2 years ago in march 2011 was £950. I has hovered around £1000 for some time.

I'm sure some people will pay a 150% premium for improved IQ and VR but many more will not.

I won't.

Leonard Shepherd wrote:

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

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Leonard Shepherd
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Eyvind Regular Member • Posts: 214
Re: Nikon's pricing is pretty smart
1

as philosophy and approach, I definitely wouldn't operate in the same way as described in the OP. However, I have no idea whether needs to sell the lens at this price to afford making it. Maybe they do? I'm guessing they can afford to sell it for a lower price, but that's just a guess.

As far as I've understood it, Nikon and Canon are the only camera manufacturers currently making profit, but even they are experience deteriorating profits in the current market.

In order to provide us with better bodies and lenses, they have to make money. By exploiting price elasticity dynamics over the product life cycle everybody actually wins... Early adopters willing to spend the extra bucks gets the toys first, and later adopters who value money over time gets them later (or used).

Those not willing to wait or willing to spend should rightfully find other options, thus voting with their money - not spending obscene amount of time complaining on a forum about those greedy corporations (that actually barely makes money).

Just my humble opinion...

HSway
HSway Veteran Member • Posts: 3,161
Re: Nikon's pricing is pretty smart

Leonard Shepherd wrote:

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

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Leonard Shepherd
Many problems turn out to be a lack of intimate knowledge of complex modern camera equipment.

There are a few factors to be taken into account re pricing.

In 2007 we get for £1 - ¥240 (¥250 in peaks), in 2013 today we get ¥143. That’s some 68% appreciation and 40.5% depreciation.

Add in zero inflation in Japan and inflation in GB throughout.

Size of the market.

GBP for example depreciated well 32% to CZK (which appreciated over 47% to GBP) only just from the start of the credit crunch.

The new lens is a better (high magnification) instrument in several aspects filling the needs of today’s different standards and employing another level of optics capable of higher resolution and image quality compared to the old lens. Such a tool is more expensive to make even today.

The initial price will come down some. Competition is also a good thing.

Btw, the manufactures have to take QA and QC seriously as the instruments do occupy higher price levels and their execution along with the technical challenges they answer with their design need to be matched with an adequate manufacturing process. So the QC becomes more of a factor than before and not less.

Same as failures here that will have a steeper curve of negative impact. Who gets the idea faster will gain advantage – the others will have to follow with losses regardless.

As for the focus breathing if it’s something like 270mm at MFD that’s great. I mean great with this versatile high magnification capable and compact zoom optics. 270mm –  smashing. Let’s the lens excel at what the main design purpose is. That’s where most would like to reduce the compromises to minimum.  And means also less room for excuses I guess.

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thomas2279f
thomas2279f Senior Member • Posts: 2,850
Re: Nikon's pricing is pretty smart

Or go to Canon especially with the Qc issues with the D600 and D800; Canon seems to offer more frequent cash back promotions covering larger selection of lenses and cameras.

£160 off the Canon 5D MK 3 seems like a good offer to me.

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Leonard Shepherd
Leonard Shepherd Forum Pro • Posts: 14,673
Re: Nikon's pricing is pretty smart

HSway wrote:

In 2007 we get for £1 - ¥240 (¥250 in peaks), in 2013 today we get ¥143. That’s some 68% appreciation and 40.5% depreciation.

In the second half of 2012 £1 UK bought about 119 yen. it now buys, as you say, about 143 - an increase of about 20%.

While international companies smooth out some currency fluctuations, many Nikon bodies and lenses have recently been reduced in price in the UK to reflect the recent currency improvement.

This makes the current UK street price of the older model between £1000 and £1050 and the launch price of the new model at about £2450 likely to test manyUK  photographers credulity. A price much closer to the Nikon suggested price for the old model of £1534 would not have raised as many eyebrows.

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Leonard Shepherd
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HSway
HSway Veteran Member • Posts: 3,161
Re: Nikon's pricing is pretty smart

Leonard Shepherd wrote:

HSway wrote:

In 2007 we get for £1 - ¥240 (¥250 in peaks), in 2013 today we get ¥143. That’s some 68% appreciation and 40.5% depreciation.

In the second half of 2012 £1 UK bought about 119 yen. it now buys, as you say, about 143 - an increase of about 20%.

If not for this recovery the figures would be 103% yen appreciation and 50% depreciation hit for the pound at 2012 lows. Otherwise yes, the yen had a terrible year (2012), although its troubles are different. Still the pound was, out of 32 currencies, the worse performing currency of the year.

While international companies smooth out some currency fluctuations, many Nikon bodies and lenses have recently been reduced in price in the UK to reflect the recent currency improvement.

Yes, thankfully they do. the price stability has its own effects on business. The key word here, however, is the fluctuation. It would be nice but I don’t think that this is the case. The change in aud, cad, czk and others and also in jpy rate is not a fluctuation. However harder spotting it with the yen it might be.

Yes, Nikon pricing in the UK seems a bit more violent recently but is in no way influenced by the pound strengthening vs yen (I see that a fluctuation; and a short retracement or a long term level at best). Quite the opposite, you can count on a gradual factoring of some changes into the pricing schema of this type of products.

This makes the current UK street price of the older model between £1000 and £1050 and the launch price of the new model at about £2450 likely to test manyUK photographers credulity. A price much closer to the Nikon suggested price for the old model of £1534 would not have raised as many eyebrows.

The price does seem high. I’d imagine it somewhere around £1600-1800 if the lens is very good.

Otherwise you know well that speed, build, compactness and telephotos are expensive, if they also come with a quality. In this case it’s mainly the telephoto designation and in part the compactness. Alternatively, the old 80-400 or the 70-300 VR can be seen as actually very inexpensive rather than a reliable or general measure of pricing. Beside that what we can see from the specifications a lot depends on the performance which will have its own effect on how the price is perceived. I guess the obvious question for many will be whether buying it for this year or wait for say holiday’s discounts and enjoy experience of others and reviews in the meantime pleased with the fact the lens was finally released.

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Leonard Shepherd
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KnightPhoto2
KnightPhoto2 Senior Member • Posts: 1,980
Re: Nikon's pricing is pretty smart

Leonard Shepherd wrote:

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

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Leonard Shepherd
Many problems turn out to be a lack of intimate knowledge of complex modern camera equipment.

I realize the British situation is different, and I feel for you guys.  But we all know better than to compare an end of life product price to a beginning of life product price.

If we did that one might say the D7100 is $400 more expensive than the D7000, which is balderdash of course since both cameras were introduced at the EXACT same price

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thomo
thomo Senior Member • Posts: 1,301
Re: Nikon's pricing is pretty smart

Leonard Shepherd wrote:

There is a difference between initially pricing high and increasing the suggested prize by 62% for a lens upgrade, as has happened in the UK.

The lowest official import UK street price for the current 80-400 is £1,000. The initial price for the new 80-400 is almost 150% higher at £2,450.

I do not think you can blame UK customers if they feel this size price hike is anything but smart.

The UK street price is still pretty good compared to those in Australia. The 'grey' imports are $1400 - $1600 (which is about the same as UK price) but the so called 'clearance' prices of genuine Nikon (Aust) imports are still around $2000 for the 80-400VR.

That's pretty amazing when I think back to 2006 when I bought my 80-400VR (in Hong Kong) - I only paid $1450AUD which, at the exchange rate back in those days, was only around $1,000US (and that was after declaring it to customs and paying 10%GST)

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Leonard Shepherd
Leonard Shepherd Forum Pro • Posts: 14,673
Re: Nikon's pricing is pretty smart

rudyr wrote:

I don't think it makes sense to compare an end-of-life product's inventory clear-out price vs. the price of a brand new product with newer technology and enhancements.

I did not do what you imply.

Nikon's guide price and the UK Street price has been similar for the last 12 months.

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Leonard Shepherd
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