I find the salty reaction to my previous post quite fascinating. Basically every response reads like, "If you have an issue with the quoted feature set at the quoted price point then you are the problem."
I fondly remember a time where companies had to prove their products are worth the money. Now - according to some people - reluctant buyers have to justify their reluctance.
Very fascinating.
Anyway, I won't bother responding to the trolling.
Display MoreIn economics this is called "price discrimination."
Basically imagine you have 100 potential customers for this product.
One group of 50 (we'll call them Group A) will only pay $700 for it; and if it is only $700, they are ok with a more limited set of features.
Another group of 25 people (Group B) will buy it for $700 with more limited features, but *would* pay $1000 for it with expanded features.
Another group of 25 people (Group C) will only buy it with expanded features, and they would pay $1000 for that.
If you sell it with limited features for $700, Group A will buy and group B will buy, and you will make $52,500 (75*700)
If you sell it with expanded features for $700, all 100 will buy, and you will make $70,000 (100*700)
If you sell it with expanded features for $1000, only Group B and C will buy, and you will make $50,000 (50*1000)
But what if there was a way to sell it with limited features for $700 and expanded features for $1000?
Now all 100 will buy and you make $85,000 (Group A: 50*700, Group B & C: 50*1000).
DLC allowed for price discrimination which maximizes your revenue in many cases. Companies love price discrimination but in many cases it is either impossible or illegal (i.e. a company could maximize their revenue if they charged a rich person $50 for a box of cereal but a poor person $5, but you can't do that both logistically or legally). But in situations where they can do it, they often will do it.
The point where this rationalization falls apart is when the manufacturer contradicts it by saying, "This unit is at price point X because we have put so much hardware in there and all of this costs amount Y so while we'd be glad to offer the unit at price point Z we just can't and X is really the best we can do."
Of course both can be true: that what you wrote is true, and that the manufacturer is explaining the price exactly how I paraphrased.
Which leaves only one conclusion: they are lying. Doesn't matter in which way exactly, as all options leave a bad taste in the mouth.
Let me prove this with a comparison to the market where price discrimination has been abused the most. Ironically it's the automative sector, which links the comparison nicely to Kemper being out of Germany.
VW and BWM started a subscription scheme a few years back, with BMW going as far as offering seat heating as a sub. But the seat heating hardware was installed in every car from the factory. VW is charging a sub fee for voice recognition. The hardware is in every car. Tesla is offering full autopilot capabilities, the hardware is already in there.
Now the contradiction: all car manufacturers, in particular out of Germany, have claimed for many years that the price increases from 2020 onwards were purely driven by a component shortage, and basically they blamed the consumers for imaginary demands for more smart features, They increased prices and said they're simply passing on increased manufacturing costs and there's really nothing they can do about, with some going as far as claiming they wish they could offer a lower price point but they simply can't.
Not only is this contradicted by many years of car manufacturers being caught installing hardware that isn't unlocked through a sub or through a "facelift" (where it turns out the lower-priced pre-facelift car already had the electronics for the "new" feature), it's also contradicted by the recent situation in Germany where out of nowhere the federal government ended an EV subsidy. Suddenly all the manufacturers that proclaimed for many years they could offer no lower price point chipped in and said, no problem, we'll give you an instant rebate of 4500 Euros.
Price discrimination is really just a rationalization of consumer fraud.
