Every time a camera is launched, our comment section is flooded with comments saying ‘it’s too expensive,’ irrespective of what the price is set at. Are all the camera makers utterly out-of-touch with reality, or is there something else going on?
I’m going to explain the three main misunderstandings that I see prompting these comments. I’m not advocating for higher prices, nor trying to suggest that manufacturers never get it wrong, but just trying to highlight why cameras are priced the way they are.
A new model is always going to cost more than the outgoing one
Prices decline with time. No matter what your pricing strategy, an older product (particularly in a fairly fast-moving marking like electronics) cannot demand as high a price at the end of their lifecycle as they can at the beginning.
This may sound obvious, but the consequence is that a new model will always look expensive compared with the model it replaces.
|The D780 was launched at the same price as the D750, so is cheaper in real terms. But heavy discounting of the D750 makes the new camera look very pricey.|
This is the error we most often see: ‘How can they charge $2200, when I can buy the old model for $1400?’
To which the response is: ‘How can they not?’ If you offer your new model at the price of the outgoing one, then what does its price look like, at end-of-life? Do you then have to match that price with the next generation model? That approach would end up with you giving cameras away within a couple of product generations, which isn’t exactly a winning strategy in an already contracting industry.
|Prices decline with time, so new cameras tend to be released at around the same cost that the old one was launched at.||The alternative (launching to match the current market prices) is a pell-mell race to the bottom.|
So cameras tend to be released at around the same prices that the preceding model was launched at. After all, camera makers are companies: they exist to make as much profit as they can. Their job is to maximize the amount of money they generate from each product.
The main exception to matching the previous model’s launch price is if the new model has been stripped-down to hit a lower price point or re-positioned to attract a different audience.
Case study: The stripped-down mass-market special
Sony’s a6000 was launched for $799 with a kit zoom: around $200 lower than the existing NEX-6 model. It gained a couple of additional features and updates but also saw a drop in viewfinder resolution and had less substantial feeling construction: distinct hints that it wasn’t a like-for-like replacement model.
Sony’s insistence on assigning similar names to all its models doesn’t help, but the pricing alone makes it easier to recognize the a6300 as more of an NEX-6 replacement than an a6000 update. Sure enough, both the a6000 and a6300 continued alongside one another for the next few years: one targeting the ‘price conscious’ consumer, the other offering better build, an NEX-6 level viewfinder and 4K video, for people who were comfortable to spend a bit more.
Manufacturers will occasional try to re-position a particular model, making it cheaper or more expensive, perhaps trying to make room for a new model.
Case study: two models in the place of one
Panasonic’s GX8 had a significantly higher spec and was launched for $200 more than the preceding GX7. This created the space for a less expensive GX85 to sit underneath. Looking at the launch prices suggests that Panasonic thought there were two different types of customer buying the GX7: some that wanted a small, mid-priced model and some who wanted something more ambitious, and were willing to pay for it.
However, the next model refresh saw the GX9 launched back at the same price as the GX7 (and called the GX7 III in some markets). ‘This isn’t a GX8 replacement at all’ complained some would-be buyers. The pricing indicated that they were probably partly right.
The lesson in all of this is that you can better interpret a manufacturer’s intentions by comparing the price of a new model to the launch price of the outgoing model, not its depressed end-of-life price.
Case study: getting the price wrong
Manufacturers don’t always get their pricing right, of course. Nikon entered the prime-lens APS-C compact market in 2013 with the Coolpix A, an attractive camera with a 28mm equivalent F2.8 lens. Perhaps emboldened by Fujifilm’s success selling its X100 models for $1299, Nikon priced its camera at $1099.
Around a month later, Ricoh launched an APS-C version of its much-loved GR, also with a 28mm equiv F2.8 lens, for $799. The Coolpix A was a pretty good camera (though we preferred the GR), but without the retro appeal, hybrid viewfinder and burgeoning reputation of the Fujifilm, or the establish fan-base of the GR, that $1099 price tag looked awkward.
Without access to sales data, we can’t know for certain how many units were sold at full price but by the second half of 2014, the price had collapsed to just $580. A lot of people got a bargain at that discounted price, but it’s noticeable that Nikon hasn’t shown any further interest in that niche.
Of course, sometimes manufacturers will keep old models on the market at a newly lowered price (the Sony a7 II and a7R II, for instance). This makes life a little more complex but should really just focus your attention on what really matters: ‘does the new model offer enough compelling improvements to overlook the older model?’
Your country probably isn’t being ripped-off, even if the US launch price seems cheaper
|The RX100 VI was launched for $1298 in the US and the equivalent of $1450 in Europe. But that’s not the whole story.|
The other complaint we regularly see is that the launch price in country ‘X’ is higher than a direct conversion of the US dollar price. There are two main reasons for this.
The first is that US prices tend to be quoted without sales tax, whereas most other countries tend to include sales tax/VAT/GST in consumer-facing communications. As a results, US prices tend to look less expensive simply because the price quoted isn’t the price most people are legally expected to pay. Your local tax level may be more expensive, but that’s more likely to do with your country’s history, style of government and degree of healthcare provision and social support: none of which can be blamed on camera makers.
The second factor is that price competition varies greatly between countries. US prices tend to stay at or near the Manufacturer’s Recommended Sales Price until the manufacturer chooses to adjust it. Countries with more competition between retailers tend to see prices quickly fall away from the initial asking price: early adopters end up paying full price, but anyone buying a few months (or sometimes weeks) later, will get a much better deal.
Case study: why are cameras more expensive in Europe?
Sony’s RX100 VI had an initial MSRP of $1298 in the US and €1299 in Europe. This looks bad: €1299 was worth $1450 in July 2019. Outrageous, right?
But, if I went to buy one today, I’d end up paying $1429 after tax in the US ($1298 plus my 10.1% local sales tax rate). If I lived in Germany and bought the same model from a large internet retailer, I’d have to pay €1180, including VAT, which is equivalent to $1315.
So, although the launch price in your country may look outrageous, compared with the US price, that doesn’t mean you’ll get ripped-off. The last two times I’ve looked at buying cameras in the US and UK, I found the year-old model I was shopping for to be less expensive in the UK, even with higher local taxes. I’ll concede that this was before the pound plummeted following the Brexit vote: but again, that’s not really the fault of camera makers.
Some things are supposed to look expensive
Marketers have all manner of theories about how to price their goods, and different strategies for maximizing the amount of profit they can make from a specific product. Very few of these have much to do with the costs involved in developing, manufacturing, distributing and supporting that product. Most strategies set the price high enough to make this money back, but there are exceptions even to that.
So there’s little point looking at a product and saying ‘they’ve removed ‘x,’ so it should be cheaper,’ or expecting the price to relate in any way to your estimation of the costs involved.
For instance, a premium pricing strategy holds that it’s sometimes beneficial to price your goods so highly that you end up selling fewer than you could, but at greater profit: the high price and resulting scarcity in itself contributes to the perceived value of the product.
A premium pricing strategy holds that the high price in itself contributes to the perceived value of the product
‘That’s silly,’ you might think: ‘that wouldn’t work on me.’ But it does. Like it or not, you respond to pricing. Read through the comment section of the launch of any Leica product: you’ll see an audience dramatically polarized between ‘it’s not worth that’ and ‘if you could afford it, you’d understand.’ The same goes for luxury items, whether they be Range Rovers or Rolex watches: if they weren’t expensive, they wouldn’t have the same cachet.
This discussion is almost entirely divorced from whether the products themselves are any good (to the degree that any assessment can be entirely rational and dispassionate), it’s primarily a reflection of differing personal responses to the price.
Perceived value is entirely personal and both responses are equally right and wrong: a premium product isn’t worth its exaggerated price to the person who doesn’t care about prestige, scarcity, brand history and reputation or the degree to which something is hand-built, but it is worth it for someone to whom those factors contribute to the item feeling special, or more meaningful.
Is it worth it?
Which ultimately brings us to the question that’s really at stake: not ‘is it too expensive?’ but ‘does it appear to represent good value to me?‘
Again, manufacturers are for-profit companies. They aren’t aiming to offer the product you want at a price you want to pay: they’re trying to price it at the maximum amount you’re willing to pay.
In other words: it’s always going to be a bit more expensive than you’d like.