How do they do it

[concorde 1954]

I bought a Panosonic G9 before Christmas for £1200 with a the Leica 12 to 24 f2.8_4 lens.

The body alone is £1000 and the lens is £800 = £1800, so how can the price be reduced by 33% for a kit.

I just cannot understand how the pricing works in the photographic world. Could someone please ex-plane.

Cheers David

 

[Smaug01]

They might be selling them at close to cost to clear out the pipeline for The Next Big Thing.

 

[concorde 1954]

The kit is £1500 in the UK now so I dont think its a clear out.Wilkinson cameras Warrington UK

 

[Klaus dk]

The price of an item is not proportional to the cost of production, but to what the market is willing to pay. The kit is a different product than the lens or the body.

The more items to spread the initial cost of R&D, tooling, production planning etc. the smaller the production cost of each item. The higher profit rate you take, the less items you'll sell.

If a cheap entry price to a system will lead to more people buying more lenses, losing money on a kit may be more than compensated by the extra margin on the additional lens purchases.

In the end, a manufacturer's survival depends on their ability to optimize those parameters.

 

[threw the lens]

Kit lenses are always overpriced to buy them separately boxed. If you can buy them "white box" the prices are more realistic. It's usually because dealers split the kits up to sell the body for slightly less than usual. Companies inflate the lens price so the kit looks a bettr deal than it really is. They wouldn't do it if nobody ever fell for it.

The only time a camera with a kit lens catches my eye is in the used equipment listings, because people who buy and sell a camera kit usually aren't high mileage users. The ones who tend to rack up 100k+ are the hacks with the standard f2.8s

 

[Rambow]

I bought a Panosonic G9 before Christmas for £1200 with a the Leica 12 to 24 f2.8_4 lens.

The body alone is £1000 and the lens is £800 = £1800, so how can the price be reduced by 33% for a kit.

I just cannot understand how the pricing works in the photographic world. Could someone please ex-plane.

Cheers David

Easy. If the cost of manufacture for the body is ~$150 and the lens costs another ~$100 to make, everything above that is profit for the manufacturer.

They do the same thing with high end loudspeakers and most other things. That's what automation and Asia manufacturing were all about, after all. Make them for pennies, sell them for fortunes.

 

[Bobthearch]

It's always cheaper to buy kits than body and lens(es) separately.

But it's only a good deal if you actually want that body with that lens.

 

[Melissara]

Pricing is different. it's per unit of goods. Each item requires packaging and logistics.

 

[Gerry Winterbourne]

I bought a Panosonic G9 before Christmas for £1200 with a the Leica 12 to 24 f2.8_4 lens.

The body alone is £1000 and the lens is £800 = £1800, so how can the price be reduced by 33% for a kit.

I just cannot understand how the pricing works in the photographic world. Could someone please ex-plane explain.

The first thing to understand is that it costs something to stock and sell even an empty box. It needs a warehouse, stock control system, someone to wrap it and despatch it, a finance department, taxes on all those things …

Those things all add up to a significant proportion of any sale of consumer goods. And the proportion is almost independent of the size or cost of what might be in the box.

Just for the sake of illustration let's guess that for a camera store all the things I've mentioned add up to £300 per item. That would make the basic selling price of the body £700 and the lens £500, £1200 together. Now sell that as a single item - with the £300 on-cost - and you get £1,500 rather than the £1,800 sold separately.

That is, obviously, not a full explanation but it accounts for a lot of the difference. Another factor is that apparent savings (to the buyer) attract quicker and/or more sales. This is how supermarkets can give so many two-for-one offers - things move off the shelves more quickly.

Then there's the seasonal effect: you bought your kit before Christmas, when every store is competing for the holiday/presents trade, so they are prepared to take a lower profit than failing to sell and earning no profit at all.

There is a long chain from manufacturer to customer that adds complications at every stage; there must certainly be more factors than the few I've mentioned.

[Edit] Another consideration is how the seller thinks about the time value of things. This can fall into two parts (and they can operate simultaneously):

1 Interest. If a commercial interest rate is 10% then it's worth reducing the price by 5% if it allows the sale to go ahead now instead of in 6 months time.

2 Prices almost always drop over time. If the seller thinks the price might drop by 30% in the next year it's worth reducing the price by 15% if it allows the sale to go ahead now instead of in 6 months time.

 

[forest dream]

The price of an item is not proportional to the cost of production, but to what the market is willing to pay. The kit is a different product than the lens or the body.

The more items to spread the initial cost of R&D, tooling, production planning etc. the smaller the production cost of each item. The higher profit rate you take, the less items you'll sell.

If a cheap entry price to a system will lead to more people buying more lenses, losing money on a kit may be more than compensated by the extra margin on the additional lens purchases.

In the end, a manufacturer's survival depends on their ability to optimize those parameters.

Similar to Apple product, low cost high price, lot of profit margin.

 

[JustUs7]

Read up on contribution margin and sunk costs. Once you’ve recovered all your sunk costs (r&d), and your fixed costs have been covered (rent, salaries, etc), a company might make a business decision to sell a product at a price high enough to cover their variable costs (direct labor, direct material, factory overhead) with an acceptable contribution margin baked in.

 

[D Cox]

I bought a Panosonic G9 before Christmas for £1200 with a the Leica 12 to 24 f2.8_4 lens.

The body alone is £1000 and the lens is £800 = £1800, so how can the price be reduced by 33% for a kit.

I just cannot understand how the pricing works in the photographic world. Could someone please ex-plane.

Cheers David

Easy. If the cost of manufacture for the body is ~$150 and the lens costs another ~$100 to make, everything above that is profit for the manufacturer.

You are forgetting warehousing costs, shipping costs, import duty and VAT, wholesaler and retailer share, advertising and publicity (stands at photo shows, etc), and money set aside for development of future models. Also cost of running offices and repair sections in several countries.

They do the same thing with high end loudspeakers and most other things. That's what automation and Asia manufacturing were all about, after all. Make them for pennies, sell them for fortunes.

 

[BrownieVet]

Apparently, what they lose per item, they make it up in volume. . . :-D
Please don't take this post seriously.

But if you feel guilty, send Panasonic the difference between your purchase price and what you feel it should be. :-D

I bought a Panosonic G9 before Christmas for £1200 with a the Leica 12 to 24 f2.8_4 lens.

The body alone is £1000 and the lens is £800 = £1800, so how can the price be reduced by 33% for a kit.

I just cannot understand how the pricing works in the photographic world. Could someone please ex-plane.

Cheers David

 

[forest dream]

Read up on contribution margin and sunk costs. Once you’ve recovered all your sunk costs (r&d), and your fixed costs have been covered (rent, salaries, etc), a company might make a business decision to sell a product at a price high enough to cover their variable costs (direct labor, direct material, factory overhead) with an acceptable contribution margin baked in.

In forum, sometimes found someone recommend smartphone to other. If many people go to buy smartphone instead of entry-level camera, then market shrink, R&D cost high. If entry-level can't earn money, why lot smartphone started focus sell entry-level smartphone (especially INDIA market)?

I always hear below (IMO them just blame user, never request camera maker improve)

1. "Don't process RAW file" - go to smartphone (IMO camera maker need improve OOC jpeg）
2. "Want small body"- go to smartphone (IMO if smartphone/iPhone can do it, why camera fail?)
3. "Want selfie" - go to smartphone (IMO just need FAS for compact camera)
4. "Want cheap cheap camera" - go to smartphone (IMO less profit margin, high volume still earn money)
5. "Water resistant' - go to smartphone / high-end camera (IMO just few gasket, why so high cost to implement)

 

[RedFox88]

They might be selling them at close to cost to clear out the pipeline for The Next Big Thing.

No. Volume sales, incentives by manufacturers

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[RedFox88]

The price of an item is not proportional to the cost of production, but to what the market is willing to pay. The kit is a different product than the lens or the body.

The more items to spread the initial cost of R&D, tooling, production planning etc. the smaller the production cost of each item. The higher profit rate you take, the less items you'll sell.

You gave an answer to the wrong question. The OP just had a end of year sale

If a cheap entry price to a system will lead to more people buying more lenses, losing money on a kit may be more than compensated by the extra margin on the additional lens purchases.

In the end, a manufacturer's survival depends on their ability to optimize those parameters.