This term demonstrates a lack of understanding of market dynamics.
As a company you aim for a certain profit when developing and later manufacturing and selling a product. The market has multiple segments and ideally you re-use design and manufacturing processes for multiple segments. Simply speaking, you can basically sell a single tier for $250 or differentiate by different means into a $150 tier and a $350 premium tier. In the end, people with higher quality demands will pay a significant, dis-proportionate premium. So, you can tap into that, which means the premium tier essentially cross-subsidizes the cheap tier. Everybody angry at this practice needs to understand that they couldn't just sell the premium tier for $150. They'd need to sell it for $250, or whatever the weighted mean is. Worse, they'd likely sell fewer items in total, so $280 or some such is more likely to reach the same total profit.
Really, it's not about being evil, it's about economy.
>In the end, people with higher quality demands will pay a significant, dis-proportionate premium. So, you can tap into that, which means the premium tier essentially cross-subsidizes the cheap tier. Everybody angry at this practice needs to understand that they couldn't just sell the premium tier for $150. They'd need to sell it for $250, or whatever the weighted mean is. Worse, they'd likely sell fewer items in total, so $280 or some such is more likely to reach the same total profit.
Another example is selling books for cheaper in countries with lower incomes. Yet another example is countries charging more for access to national parks to people from richer countries than poorer countries. And another example is using coupons to get discounts, or student discounts, etc.
It is not a perfect mechanism, and sometimes the subsidies are not from and to the populations that would make it "fair", but on a population wide level, it works pretty well.
The consumer is paying for slight sound improvement and the prestige of owning the nicer pair. You may not think it is worth the extra money but apparently it is for some.
This is no different then offering coupons to more ‘cost sensitive’ buyers
A Audi/VW mechanic I know put it best "They all mostly use the same parts so maintenance and repairs cost the same...might as well buy the one that sells for more used"
It depends on what you want. If you are planning to resell the car after a certain length of time the best bet is the Audi. If you are buying used and want "close" to the same performance buy VW (Audi has higher power, often different suspension, better sound deadening and way more options).
In my case...I bought a used VW. So I didn't take the advice...but I don't ever plan on reselling. I repair cars myself and run them far longer than a typical person does. By the time I am done with my car it will probably be sold for scrap due to miles...even though everything will likely be replaced at least once.
> “might as well buy the one that sells for more used
Not sure I follow this logic. Seems unlikely the higher resale value is going to fully cover the higher price you buy it for (whether you buy new or used)?
I guess "hold their value longer" is a better wording...but that is the point.
Easier to sell used? More desirable/rare? He bought/fixed and resold mostly Audi/VW but specialized in European cars.
I have owned 2 VW and 1 Audi. They all had very similar intervals on things breaking. I will say though I much preferred to drive the Audi...but unfortunately a 2001 allroad only lasts so long :)
If you follow that logic, then the Dacia Sandero is the only car you can buy. Every other car just comes with pointless overpriced extras that nobody needs.
In reality, the brand of a car is extremely important to most people who buy cars.
(But speaking of VW transmissions, I don't know why anyone would buy a VW. Their manuals always seem to be having issues with the clutch, and DSG is the worst driving experience I've ever had. Maybe their EVs work better)
I knew a guy who had been working on a VW/Audi manufacturing line in Belgium. I think they were assembling golf and A3. Both models were assembled on the same line, I wouldn't vouch that all posts were exactly assembling same parts, that wouldn't be true, especially as fit and finish and some specs are different, but for his particular post in the line, he was installing same part and was only told to put glove before working on the Audi ones, basically to avoid leaving fingerprints somewhere most customers would never ever look anyway.
To be honest, I just once drove a Sharan with DSG for a day, and I hated the way it handled when parking and driving slowly. It felt like the worst parts of driving an automatic combined with the worst parts of driving a manual.
$350 is hardly the high end market for headphones. That’s the general consumer market top end, barely getting into real Hifi money spenders (who drop hundreds of dollars on extremely dubious products like “balanced” cables etc)
To counter, not caring about anything you've just written and looking purely at the end result is also part of the economy.
Consumers generally don't want to sympathize with companies and I don't think it's healthy if too many people did either. It's a tug of war to find a balance.
The core of this issue to me is about feeling lied to through vague implications. The product number is higher, the physical appearance of the headphones look better, it cost more, so therefore they must have put more effort into it to justify the price so the sound quality must also be better.
I agree. I don’t mind something being more expensive, but I feel like companies should have to ‘show their work’ to some degree. That way customers can gauge if the additional effort was worth the price difference.
I’m sure most customers in this case would not feel like this was worth the price difference.
But they are selling the premium tier for $150. It's the same set of headphones.
It would be as if Apple sold you one computer for $1,000, but the exact same computer in a different case for $2,000, with the only difference being they put a bunch of malware on the first one so it runs slower.
That's not "re-use design and manufacturing processes for multiple segments", it's intentionally breaking half the product line to sell at a lower price.
> That's not "re-use design and manufacturing processes for multiple segments", it's intentionally breaking half the product line to sell at a lower price.
Sure, you can call it like that if you will. You are free not to buy any products from a company doing this if you don't like it.
As I explained above, they could stop doing that, but then the product would cost more. That may be nice for somebody who wants the premium product version for $280 instead of $350. But I'm sure there are people around who are fine with the simpler ("broken") one if that means they only need to pay $150. And since there are, there is obviously a demand, so it's obviously not all bad what the company is doing.
Again, if you don't like it, don't buy it. (Oh, and in this particular case, you can just buy the cheap one and do the mod. Be happy that you saved $200 instead of ranting that this is wrong in the first place. The more you rant, the harder they will make it for next time.)
Obviously? I'm not searching for a personal shopping solution in this thread; I would hope it's obvious that I'm not going to buy this pair of headphones.
>The more you rant, the harder they will make it for next time.
I think, and this one might just be a wild and crazy idea, next time they can not deliberately break their product line to sell at a lower cost.
My hope when I buy a product is that the company is selling me the best product they can at a particular price point. I don't mind the company making a profit. In fact, I want them to! I just don't appreciate the expectation that I need to break apart every product to determine if they are intentionally sabatouging their product line.
The Centris -> Quadra transition was a similar computer, but not the same. For example, the Centris 610 was a 20 MHz 68LC040 and the Quadra 610 released shortly thereafter was a 25MHz 68040 (some shipped with a 25MHz 68LC040, though).
So right. I think I was thinking of the Performa sub-brand.
The Macintosh Performa is a family of personal computers designed, manufactured and sold by Apple Computer, Inc. from 1992 to 1997. The Performa brand re-used models from Apple's Quadra, Centris, LC, Classic, and Power Macintosh families with model numbers that denoted included software packages or hard drive sizes. Whereas non-Performa Macintosh computers were sold by Apple Authorized Resellers, the Performa was sold through big-box stores and mass-market retailers such as Good Guys, Circuit City, and Sears.
“Jip” is phonetically identical to a slur that refers to ripping someone off, so I was curious about what you meant and found this forum post that goes into detail. Kind of fascinating to think of the incentives and how they play out.
This person seems to leave out some info. A previous coworker spent some time as GC employee. He would tell stories of each month's jip awards to the employees that brought in the most jip. There's the price on the sticker, and then there's the absolute lowest price GC will sell for. As the comment in that thread suggests, buying from GC is something to not be done without researching first. Similar to buying a car
Remarkably few people whine about the use of VW branded parts that are used in VWs, that also show up in Audis, Porsches, Lamborghinis, and Ducatis. (Mostly because it lets them buy replacement parts at a fraction of the price than if they'd only ever made a few hundred of those parts just for the Porsche GT3.
> Everybody angry at this practice needs to understand that they couldn't just sell the premium tier for $150. They'd need to sell it for $250, or whatever the weighted mean is.
it should be stressed that this is only true if we add the assumption that they must make the same amount of money, which isn't part of the thought exercise
thus, "need to" should be "want to, because they want more money"
Unless Sennheiser can prove that the 555s are being sold at a loss, there is no "cross-subsidizing" happening here. You talk as if "the markets" and "the economy" are some naturally occuring phenomena that are matter of fact and non-negotiable.
> Unless Sennheiser can prove that the 555s are being sold at a loss, there is no "cross-subsidizing" happening here.
Nope. That's part of the misconception here. It suffices that they are being sold for less profit than the target profit margins of the company. And that's very likely the case, given the situation with the premium-tier offering. Every reasonable company cancels projects not bringing in enough profits, since shareholders want to see a return on investment. Non-zero profit is not enough.
> You talk as if "the markets" and "the economy" are some naturally occuring phenomena that are matter of fact and non-negotiable.
I'd indeed claim that market mechanisms can be treated like natural laws, just like gravity or natural selection. You can steer them with taxes or other incentives, just like you can steer how gravity or natural selection impact you. But the mechanisms themselves work no matter if you like them or not, or if you find them "evil" or not.
And I say this as a lefty who is in favor of radical inheritance tax and such. It's important to understand the thing you try to regulate.
> Every reasonable company cancels projects not bringing in enough profits, since shareholders want to see a return on investment. Non-zero profit is not enough.
I see very little reason in cancelling profitable projects. Also, framing my comment as a "misconception" is kinda indisgenious. This is a philosophical disagreement, hard to frame my point of view as objectively wrong.
> I see very little reason in cancelling profitable projects.
Happens all the time everywhere. Money wants to maximize profits. If company A brings you 2% return and company B 5%, then the money will gravitate towards company B. It's not that company A doesn't have profitable projects, perhaps all of their projects are profitable. But just less so than company B, on weighted average. And that's not bad. A reasonable society prefers to use its resources optimally. That's where market mechanisms and society objectives align, and that's why we are embracing a market-based economy. (There are other factors than profits of course, and that's where government regulation comes in. But all else equal, the above example of companies A and B holds and illustrates my point.)
I encourage you to try a management role in a for-profit business and after a few years we can chat again.
> Also, framing my comment as a "misconception" is kinda indisgenious.
Sorry, I didn't mean to offend. I just see this line of arguments now and then and it seems to me that there is some fundamental knowledge of the involved mechanisms lacking.
The cross-subsidy means that while they have gross margin on the 555, it would not be enough to cover R&D & make net profit without the additional sales of the higher margin 595. In other words, they could not afford to develop & bring the 555 to retail by itself, even if the sale price is higher than the simple cost of manufacturing.
That wouldn't be cross subsidy, that would be selling at a loss, right? I don't think any item has ever been sold for the sum of its bill of materials. The price is always bill of materials + labor + some profit, and here "labor" includes R&D.
Sounds like a "bullshit job". Note that I did not say: it should be illegal, or that it’s not maximizing profits for ownership, so please go away if that’s what you want to say to me.
Instead of justifying the status quo, I think we would all benefit if we retired the concept of an economy that incentivizes companies to act evil in order to succeed in it.
Edit: 'evil' is a loaded word. I'm generally referring to profit being the only measure of success. I for one would like to see other KPIs enforced by government institutions, such as 'environmental impact' or 'human benefit'.
I don't get what's evil about it. If you want the expensive headphones and can afford them, get them. If you think they are too expensive, get other ones.
Edit: want I wanted to say is, that prices are arbitrary. They are a number on a label. As a customer you pick what suits you best. If you think Sennheiser or Apple is overpriced, buy something else. It is their decision to set a price, as it is your decision what to buy. You are also not an "evil" customer, if you don't buy their headphones.
I said companies are acting 'evil', not that customers are evil for not spending money.
You don't get what's evil because you're reacting to the environment you know, but you don't have to. Imagine a better environment where your options are not limited to "expensive headphones" or "less expensive headphones".
The alternative to the "'expensive headphones' vs 'less expensive headphones'" choice is not "less expensive headphones". Best case scenario, it's "slightly less expensive headphones but still more expensive than the originally less expensive ones". Or perhaps "they stop manufacturing headphones".
We're not living in a dream world. The conditions you set have consequences in how people behave. Not just individuals, but also companies.
Everybody arguing like this in the thread seems to be missing that the company is offering cross-subsidized headphones for $150. If you actually make them stop the two-tier system, then they would stop offering those for $150 and would need to sell the single-tier product for over $200. There will be some people who can't afford that. So your activism would prevent them from getting nice headphones for $150. Who's evil now?
Very correct, but you’re missing their point. What’s “evil” is that the folks who’ve spent their life designing, optimizing, investing in, and producing these products aren't doing it purely out of the goodness of their hearts, but selfishly in the pursuit of a better life.
What is “evil” to these posters is always “profit above the value of goods provided”. It doesn’t matter whatsoever that the (subjective) material and emotional situation of every happy sennheiser buyer, employee, and investor is better than before.
> What’s “evil” is that the folks who’ve spent their life designing, optimizing, investing in, and producing these products aren't doing it purely out of the goodness of their hearts, but selfishly in the pursuit of a better life.
Sure. That's true though to different degrees for everybody participating in a market-based economy. You can call all of us "evil", but then the term loses most of its meaning.
This term demonstrates a lack of understanding of market dynamics.
As a company you aim for a certain profit when developing and later manufacturing and selling a product. The market has multiple segments and ideally you re-use design and manufacturing processes for multiple segments. Simply speaking, you can basically sell a single tier for $250 or differentiate by different means into a $150 tier and a $350 premium tier. In the end, people with higher quality demands will pay a significant, dis-proportionate premium. So, you can tap into that, which means the premium tier essentially cross-subsidizes the cheap tier. Everybody angry at this practice needs to understand that they couldn't just sell the premium tier for $150. They'd need to sell it for $250, or whatever the weighted mean is. Worse, they'd likely sell fewer items in total, so $280 or some such is more likely to reach the same total profit.
Really, it's not about being evil, it's about economy.