RustyBug
Offline
• • • • • • •
Upload & Sell: On
|
 p.9 #11 · Why are Leicas so expensive? | |
The premise of a model for determining what once "can" or "should" be able to afford has been in play for a long time. And, the perspectives on this can / have / do / will change / adjust at varying times.
I say that in reference to home ownership, as a model that at times has had different levels of expectation regarding what % of $$$ a person has to work with, should correlate (as a model) to what they might consider. Debt to income ratio tolerance can range from mild to wild, as folks consider their position of what they are willing to spend on a given item ... be that a home, a car, a camera or a meal.
Hearing of Dr. Kaufman's model (never mind the actual dollar), it strikes me that he is recognizing a place that lands with one leg in the need to have $$$ that represents a segment on the curve that is accessible to discretionary income. Not meaning it has to be for the average / mean / median income or below average, etc. ... where discretionary income is often less available. OTOH, it isn't landing the other leg in the outlier territory of something so exclusive it is only a top 1% income availability. Rather somewhere well within a range of say 60% or 65% - 90% of incomes.
Some folks might jump on that and immediately associate that to "luxury" because it is clearly intended to be "above average". Semantics being such as they are ... when I think of "luxury" brands, I think of brands that warrant incomes in the 90-100% range, that only those with extreme amounts of discretionary income are the target market.
And then, I'm suddenly reminded of bass boats ... my goodness, what folks will spend on their bass boats makes a new Leica look like mediocrity. I'd be very curious to have a comparison of what the market spend is for each. Both, I would consider to be distinctly discretionary. Both I would consider to be for the "above average" income levels. But, as I think of other things, the realm of sewing machines comes to mind, specifically the Bernina brand. One could replace "Leica" with "Bernina" and the discussion would mimic or parallel. They are expensive because of the combination of extrinsic and intrinsic values. The requisite intrinsic costs to achieve the extrinsic experience in use combine to form a non-linear relationship.
https://www.bernina.com/en-US/Machines-US/Sewing-Machines
There are a variety of other brands available. And, one can easily place Bernina into similar ilk as Leica, regarding its place in the market. But, until you actually use a Bernina vs. some of the other brands ... it is the experience (not solely the features) of using it that presents differently from other brands. Spending "that kind of money" on a sewing machine seemed absurd to me, at one point. I thought the same of Harley and BMW, too.
Of course, that was before I had experienced using one. I don't sew ... which, even as a luddite in the sewing realm, I could tell the difference in smoothness of operation, ease of use, etc. from other brands. I don't mean to sound like a Bernina shill, there are other brands that make good machines, too. But, the point is that there are always going to be different levels of performance, use, precision, tactile interface, etc. that combine to bring an item to different tiers in the marketplace. And, in the case of the Bernina, the bobbin orientation is one component that makes for a different experience. So simple, yet ... I digress.
Back to Dr. Kaufman's "model". On one hand, is the requisite discretionary income. On the other hand, is the "investment grade" positioning. I realize that in the realm of investment semantics, folks often jump onto the "sell it for more than you paid for it" consideration. There are other forms of investment than buy / sell pricing. The time spent in ownership, and the experience of use during that period of time, is (imo) where the REAL ROI (Return on Investment) occurs with Leica (or Bernina).
The joy and satisfaction of use is an extrinsic value that factors into that model. Of course, if someone doesn't find joy / satisfaction in use ... then, immediately that element of extrinsic value is no longer part of the intrinsic + extrinsic. For those folks who don't get that joy / satisfaction in use, then it IS very REASONABLE that they do NOT value Leica, the same as those who do get that joy / satisfaction in use.
I'm inclined to think that folks who have a "longer view" on things ... i.e. planning to keep a tool for a long time (e.g. keeping a Bernina for years), have a different appreciation for what "investment" means to them, compared to folks who are often lead by the latest specification / feature update comparison(s) are more likely inclined toward valuation of Leica differently. I've been on both sides of that coin.
That said, when Steve walked us through the math (broadly), it was interesting to see the relative position that such model presented. My mind, then went on to wonder (didn't try to "math it out") if / how that model, then factors into the new model release timing that Leica brings to market. This meaning, does that present a model that a person of his model would be in a position to perpetually buy a different model ... say, every 2.5 years or every 4 years (if they were so inclined) in terms of legacy market positioning. Just a "hmmm", not a statement, per se.
Anyway ... I appreciated Steve's walkdown on the math model. I'd be curious to see how closely aligned companies like Apple, Bernina, Leica are in landing their models and pricing around the discretionary income levels of varying sectors. That said, I don't think any of those "expensive" brands are targeting the top 1%, not even the top 10% in their marketing / pricing models. Above 50% ... sure (although Apple has enough product differential to target <50% market, too). But, the semantics of "luxury" ... well, I kinda reserve that terminology for those in the top 10%. Now, if we start talking about Phase One or Ferrari, those are very different models of income that represent the target market. I don't think Leica is anywhere near that level of "luxury". Yet, I do recognize them as a "not average" company, too.
I mean ... they cost less than a bass boat or a sewing machine. 
|
