The Economics of Leica Camera Pricing

Have you ever wondered how Leica chooses its pricing for its high-end cameras? J Shin has written up a great post over at Leica Rumors that offers a geeky and lengthy explanation of the economics behind the company’s pricing decisions:

Every time there is any kind of a product-related announcement here and elsewhere, there are a number of invariable comments complaining about and/or defending Leica’s price strategy. In making these comments, people make references to various economic and noneconomic reasons why Leicas are priced the way they are. This essay is an attempt to show that, basically, almost everybody is right, at least when it comes to Leica’s profit motives. Rather than nefarious greed, devious psychological warfare, and, as some often mention, Dr. Kaufmann’s ignorance of Leica fandom, Leica prices are basically a function of mathematical inevitability.

The Mystery of Leica Pricing Explained [Leica Rumors]

  • jfrzn

    would rather have seen a cost breakdown of the camera instead

  • Osmosisstudios

    Presenting information that only an accountant can make sense of is useless.

  • Dave

     No it’s not. And it’s fairly simple. Works just the same for every company.

  • wickerprints

    Actually, I’m not sure it’s something that accountants as a whole would grasp.  Accounting has more to do with tracking cash flows and adhering to regulations for reporting them.  Economists, however, would–in fact, they might take issue with the simplicity of the model as it is being applied in this case.

    What the original post doesn’t really address is the question of why some consumers see value in a $16000 Leica system but not in a $8000 Canon or Nikon system; or vice versa.  Yes, we get a nice breakdown of the economic principles underlying prestige pricing and its consequences on profit margin; but the analysis doesn’t get to the heart of the matter, which is this:  why do Leica consumers rationalize the utility of their system so differently than conventional DSLR users?  That, ultimately, is the reason why the revenue curve shifts the way it does in the article, and the fact that Leica is able to exploit it is not the reason why the curve does what it does.  Effect does not precede cause.

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