Yep, 'strue. Because, on an economic level, the label itself does have value to these people. And again, to a certain extent it’s the uniqueness of the product, just like with expensive perfume. Designer clothes and, to a bigger extent, accessories do usually look different from what’s you’ll find at Sears, even if they’re not made any better. And some designer clothes really do look nice - because they’re designed by talented people. But there’s no guarantee of that, of course, and the correllation between price and quality does seem to grow weak once you get towards the top of the scale.
Rickjay: I think it’s price discrimination. What people are willing to pay for a given product is not uniform - some people want things more than others, and have a higher demand. Some have more disposable income, so the marginal value of their money is lower and they’d be willing to pay more.
The solution to the pricing problem is to find the price at which the the intersection of profit per unit and volume is at a maximum. This means you’re getting less from the guys who really want it than they would be willing to pay, and you aren’t selling to some people who would buy it at a lower price, even if it were profitable to do so.
This is a very inefficient way to price things, but it’s the best you can do when you have a single product that must sell to the same marketplace. But this explains why the same product sells for more or less in different countries - the barrier of borders separates the markets, so the manufacturer is free to find a separate optimum for each country.
But as manufacturing and retail has evolved, manufacturers have found a way to split the market into little chunks so they can charge an optimum price to each. So the same factory that provides bulk cereal to Costco can sell name brand cereal in Safeway. Same product, two prices. This also explains why the same cable manufacturing plant will manufacture bulk cable for the construction trade, package the cable in cheap bags for sale at Wal-Mart, take the same cable, sheath it in something a little thicker, put slightly better plugs on it, package it in nice blister packs, and sell it in stereo stores. Then do the same for the ‘audiophile’ market, except put beautiful looking gold and silver connectors on the end. Same product, three different prices. It allows them to extract all the market will bear.
This is not a bad thing. Being able to charge more to the rich than the poor is progressive pricing, and helps keep the cost down for the poor. Efficient pricing means efficient markets, which means optimal manufacturing and efficiency.
The reason pricing goes exponential is probably a function of the the marketplace fitting on a bell curve. 5% of the people will pay much more than the next 32.5% of the people, etc. Flip a bell curve upside-down, and you’ve probably got a decent approximation of the price/performance curve. That’s just a guess on my part, though.
The trick is to use that knowledge to your advantage. Place yourself on the right part of the curve to match what you’re really looking for. People go astray when they buy into the marketing aimed at the rich and the fanatics, and over-stretch themselves to join the party. Find that point where you get 80% of the value for 20% of the price.
What we’re seeing here though is not full-bore price discrimination. True price discrimination is when you can charge different prices for the exact same product. If you are willing to pay 75 cents for an Oh Henry bar and I’m willing to pay $1.50, it would be perfect price discrimination if the candy company could somehow sell you the bar for .75 and sell it to me for a buck fifty. Obviously, for most retail goods that’s nigh on impossible, and an ideal fixed price needs to be set.
My employer engages in straight up price discrimination. We sell auditing services. ISO 9001, TS-16949, stuff like that. Our daily rate is to a large extent determined by what Client Services thinks the customer will pay and nothing else. I have a number of customers to whom I provide exactly the same service who all pay different rates, dependent entirely upon what the CS rep thought they could squeeze out of them. It’s easy to price discriminate for an expensive, custom-planned and technically elaborate service for which you can’t even guess at a standard retail price. As you point out this isn’t a bad thing; what happens, overall, is that large and insanely wealthy companies are paying extra money while small family businesses are getting cut rates.
What we’re discussing, however, is slightly different (in most cases.) To pick on the Lexus-Toyota example, they ARE different cars. They’re not very different, but it’s not the exact same product. A person buying a Lexus is in fact buying a different product.
Your general point’s valid though, and now that I think of it, I believe we’ve discussed price discrimination before when talking about stereo equipment.
That does make sense though, because at the extreme ends of the curve, the marginal value of money is skewed as compared to most consumers. To you and I, a couple hundred bucks is a reasonably significant sum of money. Therefore, a television priced at $799 will have to have singificant marginal value to be a better buy than a TV prices at $599, and it’s unlikely a TV priced at $10,000 could possibly have enough marginal value to be worth the margin al cost. As we go up the curve, though, you run into people from whom $200 isn’t really anything.
However, there’s still a huge impact here in bad information. To return again to my buddy Scott, he makes more money than I do, but not really a lot more, and he’s not rich. Frankly, he buys crap he can’t afford and then wonders why he has no money. In my discussions with him it’s become obvious that he really, honestly does not understand what everyone in this thread does; that price and quality do not follow a positive, linear relationship. His honest expectation was that his BMW really would be 3-4 times better than my Hyundai, and he expresses amazement and frustration that it is not. What psychological pathology causes him to do this I can’t imagine.
Part of this, I think, is that the amount of information is truly dizzying. It’s easy to do what Scott always does and just buy the first car he likes. I shopped around, but I’ll tell you, it was a LOT of effort, and that’s just for one car. People tend to be short of time and just do not have the time or inclination to be careful purchasers. It might explain why credit cards are out of control.
Subscribe to Consumer Reports, that’s what I say.
I have to agree, my complaints about their tech support nonwithstanding. I have worked on many Dells and in general they are well built and a very good value for the money you spend.
Ver similar to the example of Coors beer is White Castle hamburgers. Man, those sliders are horrendous, but aren’t you lucky you can get them where you live? Because Easterners transplanted out West can’t and they’re hankerin’ for that “great taste”. :rolleyes:
Kona coffee. The price is inflated because there isn’t very much of it. It’s nothing particularly spectacular as far as coffee goes, and most medium roasts are comparable in flavor et al., but hey! it’s rare!
I wonder about this myself. I really enjoy good coffee, and truly beleve that Diedrichs (my local high-end, regional chain) is better than Starbucks, and Starbucks, in turn, is better than the standard grocery store brands. So I will spend $8 - $12 bucks for a small bag of Diedrichs without batting an eyelash. Hey, it’s still cheap when I consider how many cups I get out of it. But the last time I went to Diedrichs, I inadvertently bought a bag of some extra-special super duper premium estate coffee that cost around $20. I wouldn’t have chosen it, but the clerk had already rung it up and put my card through. So I thought, at least now I could try something that might be equivalent to Kona, or Jamaican Blue Mountain, to see if it might actually be worth it.
To put it simply it wasn’t. It was certainly good, but not, as far as I could tell, any better than the other Diedrich varieties. I think a lot of consumer products are like that. Up to a point, higher quality can justify the higher expense of a more exclusive brand, but beyond that point, we enter a vague and arbitrary world where any sense of logic and concrete correlation between price and quality is abandoned.
Unfragranced skin products may indeed be better. I am not claiming that choosing a perfumed product is the most rational decision - perfuming one’s body is an aesthetic, not rational choice. However, no other entire line of products meets my needs, so that is the line that I will pay higher than the generic price for. It really isn’t a matter of brand - I was as I think I might have said, quite skeptical that this brand would meet my needs. It does, so I buy it. I have consistently not met with allergy problems, therefore I trust this brand now. You might not find my product requirements (in this case, non-allergenic to me scented over unscented) a reasonable reason for choosing a product, but I obviously do. For me, this is a cosmetic choice - I could also choose always only to wear the most utilitarian clothing, but I don’t, even though it would cost less.
Eh, I had a long response but I decided I didn’t need to be defensive. Let’s just say, I can measure a difference, consistently, in the time it takes to manage my hair*, and it’s cut by over half by adding one type of product - leave-in conditioner - that hasn’t been available in store-brands where I’ve shopped. I’ve absolutely no doubt it’s just another dose of the same chemical gunk, however, I can’t get the same effect tossing in another batch of conditioner, so I’ll shell. If I found leave-in conditioner in store-brand, I’d have no objection to using it.
I don’t think being able to demonstrate a consistent difference in time I waste getting my hair untangled counts as deluding myself that it works. And yes, I’d pay anything to keep my hair consistently easy to manage, but that doesn’t mean I will automatically pick the expensive choice over the cheap choice. I just can’t find a cheap choice.
*My own fault it takes so long; my hair should probably be kept short, it’s waist length, slightly coarse, thick, wavy, and has always had a strong tendency to be dry and tangly.
I completely agree with everything you and Rick are saying here; I just want to add a slight aside.
For anyone thinking of spending more than $5k on a stereo/home theatre system, I’d highly recommend spending the extra on room acoustics, since they’ll have vastly greater impact on how your system sounds than the sound system itself at prices beyond this level.
And I think Rick’s right about the information thing. A lot of people assume that the price conveys all the information needed to make a purchasing decision - that is, that price and value correlate to some very high degree, and all the consumer needs to do is decide is pick out the preferred point on the price scale. But this is of course completely false. In many cases, higher priced items are no better, or even worse, than lower priced items of the same type. If everyone had perfect information, then prices would correlate to value, but in the real world information is often hard to come by. Hence, $500 speaker cables that aren’t an iota superior to 14/2 lamp cord, or crappy $80k luxury cars that are outperformed by el cheapo imports from Korea.
Geez, it’s nice to see a thread where we can all discuss this stuff without the rampant flaming in the politics threads…
Gorsnak said:
I’d expand this to say that anyone who wants to improve the performance of their stereo should look to room treatment first. It’s not expensive, and it makes a whopping difference. Just something as simple as putting some absorptive material on the walls at the ‘first reflection point’ of the speakers can make a huge difference. A $1K stereo in a room that has been treated with $500 worth of fiberglass panels will sound better than a $10,000 stereo in a room left untreated (given a typical small room that most stereos are in).
Here’s a good article on room acoustic treatment: Room Acoustics Primer
The part of the equation we’re missing in this discussion is the utility curve. And it’s different for everyone. It’s a fallacy to think that the same price contains the same value for everyone. For a millionaire, the added value of an $80,000 car may be worth it, because the marginal utility of the extra $40,000 over a Lexus isn’t much when you have millions. But for someone living paycheck to paycheck, having an extra $800/mo in car payments so you can drive a BMW instead of a Toyota is just nuts.
I think that’s where people really go wrong - their ‘utility curve’ gets skewed by impulse, marketing, peer pressure, lack of knowledge. So they make bad choices. But it’s important to remember that since the slope of marginal utility of money decreases as you attain more of it, it makes sense that wealthy people are willing to spend more for smaller gains in quality. It can be a perfectly rational decision to buy that BMW.
The audio cable thing is a different beast - in this case, it’s outright fraud. These are people making false claims about their products. They simply don’t do what the manufacturers claim. If audio cables were a regulated industry, none of the high end stuff would be on the market.
This is not to say I support regulation of audio gear. Caveat Emptor. But I have noticed that the internet is having a pretty big effect on these companies - the real audiophile fanatics are all on the net, and some of us are spending the time to debunk their claims in public forums like this one.
By the way, if you think the flamefests here are bad, you haven’t lived until you’ve stepped into a forum full of committed audiophile ‘tweakers’ and debunked their cherished cables, tice clocks, $1000 POWER CORDS, magical metal blocks chilled in liquid nitrogen, multi-thousand dollar vibration dampers, and all the rest of the snake oil. What makes it even more exciting is that a portion of the posters are actually shills for the cable and device companies, and they get absolutely apoplectic. I think they’re starting to run scared a bit.
Here’s another one: diamonds. What’s with the horrendously expensive price of diamonds, when the normal person can’t tell the difference between it and zirconia?
(Personally, I like jewels with a slight hint of color in them, especially in the pink to purple range, but to each their own, I guess.)
I guess I wasn’t clear. What I meant was that by offering very similar products at wildly different price points, the manufacters gain the advantages of price differentiation (more efficient pricing) that they can’t get in a homogenous market with one product.
The Lexus is a good example. Why did Toyota even bother making the Lexus? Because they can sell the same car to upscale buyers for much more money. Now, in this case they do have to offer some added value, and a typical Lexus is a nicer car than the Toyota it is based on. But the whole purpose of the car is to extract more money from people willing to pay it.
The same happens with stereo gear. Integra receivers are just Onkyo receivers with different faceplates, slightly longer warranties and some minor improvements. Things like gold-plated connectors, detachable power cords, or in some cases significant improvements like RS-232 ports or inputs/outputs for whole-house infra-red control. But none of these improvements really justify the price increases - it’s just a way for Onkyo to legitimately add an upscale product line. There’s nothing wrong with it, but consumers should be aware of these things.
Maybe a better example is Microsoft Windows XP Home vs Microsoft Windows XP Professional. Virtually identical products which Microsoft has tweaked in minor ways so they can sell to two different markets with vastly different prices. Sometimes software manufacturers can engage in true price discrimination by selling identical products to different markets with ‘home’ and ‘business’ licensing plans. Your example of the ISO consulting services is a good one.
Sure. It’s slightly different than the traditional definition of price discrimination, but with the same goal - to make pricing more efficient.
It’s funny you should mention this, because my father just went through this process. He retired last year and decided to treat himself to a gigantic wide-screen TV and a erwally nice sound system.
Following my extremely strongly worded advice, he started shopping around. After selecting the television (a 65" Toshiba, and it rocks) he started shopping for stereo outfits. Place after place suggested systems of $10,000, $15,000, all kinds of wild prices. Finally he went in to one place that told him “Well, you can spend a lot of money, but for $5000 plus $200 for a few items to dampen any echo problems, you can get a system so good you won’t be able to tell that a more expensive system is better.” That’s the place he bought from. (It’s a terrific system.)
Sam: A $1000 POWER CORD? Excuse me?
I kid you not. Because, you see, electrical power can travel through hundreds of miles of transmission line, into your audio panel, and through hundreds of feet of .20/ft Romex installed by your builder. But hey, if you put a $1000 power cord on the last five feet, your system will sound “More airy, with a more well-defined sound stage and more of a 3-D sound”.
That’s typical of the marketing blather these companies use. Notice that the descriptions are things that are not measurable. There are no instruments that can measure ‘airiness’ or ‘3-D sound’.
By the way, I’m in the middle of building a home theater. Just drywalling now. The room is 12 x 20, constructed with double drywall inside and Roxul “Safe N’ Sound” insulation between the walls. I have a front projector beaming an image onto an 8’ wide screen. The room is treated with corner traps for bass absorption, and 1" fiberglass panels covering the entire back wall, spaced 1" off the wall. In front of that is a fake wall for the screen, with acoustically transparent cloth covering it and hiding the speakers. There’s a raised platform in the back for a second row of seats, and a stage in front to give it a theater look. In addition, 2’ x 4’ fiberglass panels will be located strategically in the room at the reflection points for the speakers.
I’m using an NEC projector, Paradigm Studio series speakers in a 7.1 configuration. The back wall has a 19" equipment rack built into it for all the hardware. I did all of the electrical, framing, and detail work myself, and hired contractors for drywall. The entire room, including the projector and screen and audio gear and construction cost, will be around $10,000. You can do amazing things for reasonable amounts of money if you’re willing to be smart about it and get your hands a little dirty and learn the design stuff on your own.
Diamonds are more or less controlled worldwide by the DeBeers family concerns. There are no end to stories that you can more or less find them lying in the dirt where they come from, but the companies’ control of the market keeps them artificially rare and high-priced.
What about the floor and the ceiling? These are often neglected and you didn’t mention them. You don’t want first surface reflections off a hard floor in front of the room. And are you building a “room within the room,” with walls, floor, and ceiling decoupled from the rest of the house? Stick with me and we can reach the point of diminishing returns mighty fast! 
One of my customers is building a theater about that size at his vacation house. He’s not an audiophile but is caught up in playing the “keeping up with the Gateses” game (as if anybody can win it) so he’ll probably want to drop a mill just on speakers. Of course, as I’m of two minds about everything I both thank my lucky stars for people with more money than sense and want to scream that he wouldn’t be able to tell the difference between some really good speakers and the CATs he wants, except he might find the cheaper ones BETTER, especially in this dinky room. But I explained to my boss, who agrees with both those points, that it’s our duty as Americans to help our customers cycle back into the economy as much of their money as possible, as long as the customers are happy and some of it filters through our pockets. It’s the American Way. 
dropzone said:
The floor is standard underpad and carpet, on top of a concrete slab. That will help with the high frequency reflections. The low frequency stuff, not so much.
The ceiling is drywalled (2 layers - 1/2" on top of 5/8"), and I’m building a ‘tray’ ceiling. The ceiling is 9’ high, and the tray is about 10" below that. I’m going to put acoustic treatment on the tray bottom to help with ceiling reflections, and the tray itself should help with diffusion a bit, but probably not much.
There seems to be quite a bit of disagreement on how to acoustically treat a home theater. A common practice is to line the bottom half of the walls all around the theater with 1" fiberglass board, covered in acoustically transparent cloth. The idea is that you want the top half of the room and the ceiling reflective to maintain the reverberent field for the surround sound. I’m not going this way for several reasons - 1) cloth covered walls are not child-friendly, 2) I want to use the room for music listening as well, and 3) It’s expensive and a giant pain to cover all your walls in cloth. So my alternative is to put fiberglass board behind the screen wall (no cloth needed, since it’s not visible), corner traps behind the screen wall for bass absorption, 2’ x 4’ panels on the walls at the first reflection points, and then finish the room. Once all the furniture is in, I’ll estimate the RT60 of the room, and if it’s no good I’ll add more panels to get it in shape. I’d like to get a real-time analyzer and do a full-spectrum analysis for peaks and nulls, but I can’t afford to buy one and I don’t know if I can rent them around here. If I can find one, I’ll see if I can smooth the response of the room even more with some diffusive panels and maybe more traps if necessary. But I want all the acoustic treatment to be either invisible or part of the decor.
One neat thing I’m planning to do if I can get an analyzer is to use the raised platform at the back of the room as a Helmholtz resonator by cutting slots between the joists. 1/4" slots apparently can’t be felt after you cover them with underpad and carpet, but bass goes right through that stuff. With luck, I won’t need to go to these lengths. When I designed the room I used a room mode spreadsheet and set the dimensions of the room as close as I could to the theoretical values that should minimize peaks and nulls. But the finished room will have platofrms, trays, and the hole at the back for the rack which the spreadsheet can’t account for, so we’ll see.
I didn’t got for a room within a room, or a staggered joist system for two reasons: cost and space. The 12’ width I have now I would consider to be the absolute minimum, and I didn’t want to lose any more space. The double drywall, solid core door, and insulated walls should give me an STC of around 40 or so, although I imagine there will be some flanking leakage and such that will reduce that a bit. Anyway, I’m not shooting for total sound isolation - just enough that I can listen to a movie at reference levels without waking my daughter two floors above (the theater is in the basement of a 2-story house). I tell you, it’s a lot easier to design a good isolated room on paper than it is in a real-world basement! For instance, I had to leave one joist space uninsulated because it’s used for a cold air return. I had to put ducting in the ceiling for airflow in and out of the hush box for the projector. I had to figure out how to get a cold air return into the theater, when the only available wall adjoins a curved stairwell that spans the entire house. Then there is an electrical panel in the theater room (yuck), and I have to figure out how to isolate the doors for it and still keep them looking nice. The back of the room has a 6’ x 19" equipment rack mounted in it, so that hole is a huge source of sound leakage. I built a closet around the backside of it, but in a room where the ceiling is acoustic tiles instead of drywall.
It’s been lots of fun and lots of work, but in the end I’m not sure how good my sound isolation will be. Once I get the door mounted, I’ll see how it is, and if there’s still too much I’ll put in extra work around the door, electrical cabinet, and equipment rack to tame it a bit more.
I know this is from the previous page, but Armani have expanded their brand so that they are no longer producing just expensive high-quality clothing. Their black label remains top notch, but Armani Exchange and Armani Jeans, for example, offer lower-cost items suitable for regular wear out and about and non-millionaire wallets.
But when it comes to suits and tuxedos, you will have a hard time finding anything substantially better than what Armani produces. I’ve had this experience time and time again – in fact, about three years ago I was shopping around for a new tuxedo, and tried on several of them from Rome to San Francisco. I tend to go for quality and fit over brand, and I ended up buying a gorgeous tux from Sachs 5th. It cost a pretty penny but the material was incredible, the fit was flawless, the tailoring work impeccable. It was, of course, an Armani – a fact I learned only after I tried it on and thought “whoa, what a suit” (I was ignoring labels in my search).
The tux looks so good that when I have worn it people have actually stopped me to comment on it. Armani’s reputation and high profile brand are certainly not undeserved, although you can definitely criticize some of their lower offerings such as A|X.
But the biggest hyper-inflated joke after diamonds, in my opinion, is women’s handbags. Think about it: you don’t really wear them, you simply carry them around, and they don’t really do anything the way, say, high-heeled shoes or sunglasses do.
Not too far a journey from where I live, you’ll find Shenzen, the mecca of pirated goods. The grade-A products available there are every bit as good as the original, right down to the cute little branded gold lockets, pockets, stitchings, logos, etc. These items are virtually indistinguishable from the real thing, and they’ll generally last longer – that’s how good they are. Yet they cost a mere fraction, usually no more than 40 USD for the highest-quality items rather than several hundreds or even thousands of dollars.
Now THAT’s paying for marketing… just like diamond jewelry. The only remarkable thing about DeBeers and their products is the incredibly competent decades-long PR campaign that has created and cemented in women and men both such a demand and veneration for diamonds.
Uh, yeah!
I’m a traditionalist: Floor to ceiling, front third absorptive and back two thirds reflective.
You forgot reason 4) Cloth walls are so 1978!
Dude, there’s money in this. Imagine being Canada’s premiere home theater designer!
Now it’s back to showing some dumbfuck architect how increasing the size of some stupid antechamber reduces the area I have for my front speakers from not enough to way too little and how they are now crammed into less than six feet wide and that Mr Bigshot is going to be real pissed that his fifty grand (US) worth of left, center, right, and subs is going to sound like shit. I’m glad my boss thinks my rooms sound good because I’m constantly getting fucked by, oh, everybody else involved.
Yep. “Live end, dead end.” For a room that will be used for movies and music listening, I think that’s the way to go, and that’s exactly what I’m doing. The advantage of having a stage and screen wall (and proscenium walls to hide speakers) is that the front 4’ of the room are not visible behind the walls, but the walls are acoustically transparent. So the front 4’ of the room are going to be covered in fiberglass board - walls and ceiling. I’m still debating whether I should go to 2" board or not. 2" board, mounted 2" from the wall, will probably give me a more wideband absorption, and make the room less ‘boomy’, but I also don’t want to make it so dead that it’s an unpleasant room to have conversations in or listen to music. So I think I’ll start with 1" board. The beauty of the screen wall is that if I find I don’t have enough absorption, I can just remove the screen to access behind it and add more.
It’s funny - when I first went out to get quotes for drywalling and carpentry (I did all the design, framing, most of the electrical), the contractor looked at me like I was kind of nuts when I told him what I was building. Then after the room started coming together and he could see what it was going to be like, he asked me if I was interested in working with him to design similar theaters for other customers. I balked at that, though. I’m strictly an amateur at this, relying on good web resources and lots of photos and diagrams of other theaters’ construction to get me by (lots of people put up web sites showing how their theaters are constructed). The acoustic theory is probably what I know best, since I studied physics in college, but I’m far from an expert in it.
There is an excellent theater designer named Dennis Erskine who runs a company that does theater design (Design Cinema) over the internet. For $1500, you take pictures and make drawings of the space your theater is going into, and Dennis sends you complete blueprints, very detailed, down to the last nut and bolt. There are lots of 'Dennis Erskine" theaters on the internet, and they look beautiful and apparently sound beautiful. He’s in the ‘cloth wall and lower half reflective’ camp, which was one reason I didn’t use his services (plus I just wanted to learn it myself).