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From: denbeste@cc5.bbn.com.UUCP
Newsgroups: comp.sys.amiga
Subject: A2000 price rise: A defense
Message-ID: <1310@cc5.bbn.com.BBN.COM>
Date: Mon, 25-May-87 10:57:51 EDT
Article-I.D.: cc5.1310
Posted: Mon May 25 10:57:51 1987
Date-Received: Sat, 30-May-87 05:47:07 EDT
Organization: Bolt Beranek and Newman, Cambridge, MA
Lines: 88


First off, let me say that I agree that in many regards Commodore has botched
up the marketing of the A1000. Now, leaving that aside, why all the
anger about the A2000 "price rise"?

In any product like this, there are really two prices: The "suggested
retail list price" and the "wholesale price". The former is the one which
you and I will supposedly pay. It is important to note that, though the
retailer can charge LESS than this, the retailer cannot charge MORE than
this. "Suggested Retail Prices" therefore, should be deliberately set
a little high.

The "wholesale price" is what Commodore charges the retailer. The difference
between these two is the retailer's gross profit (out of which comes his
overhead, sales commissions, local advertising, taxes, you know the list).
I have gotten the impression from reading here that the A1000's price
cut last year consisted of dropping the retail price, without dropping
the wholesale price as much, thus squeezing the retailers, many of whom
dropped the product - and USENET flamed at Commodore.

The A2000's approx $1600 price was not, so far as I know, an official
announcement (nor, for that matter, have we seen an official announcement
of a $2000 price). If, in fact, they are raising the retail price of the
A2000, maybe they are doing it to increase the retailer's profit margin,
thus re-enticing the retailers to carry the Amiga line. (And since, by
testimony of someone here, they aren't adding many features, maybe
any increases in the wholesale price are going to a (whisper it)
advertising budget.)

I think I hear someone saying: Why don't they increase the retailer's
profit margin by dropping the wholesale price? Easier said than done.

The volume of A2000's they will sell is already such that they would have
to quintuple their expected volume to get another price break on components.
(As a guess, I would expect that they are negotiating in 100,000's and taking
delivery in 10,000's - and there really aren't any price breaks above that
point to speak of - you are already getting about the best price the
semiconductor manufacturer's can offer.)

To get a drop in price from manufacturing would require building a
custom plant like Apple did for the Macintosh, and that takes a lot of
TIME and MONEY, neither of which are in great supply at Commodore right now.

They could cut their advertising budget - but USENET has already expressed
its opinion on THAT. They certainly cannot get the Teamster's union
to cut transportation costs, and they aren't likely to get Congress to cut
their tax burden.

There are other things they could do: They could cut Commodore's profit
margin - and the company would likely die. They can cut overhead by getting
rid of people (like out in CA - and USENET flamed again!). If they haven't
already done so, they could ship the manufacturing overseas to Thailand
or some such place. How does everyone feel about that? (Of course, we're
all part of the educated techno-aristocracy, so it wouldn't be OUR jobs that
are lost this way, so that makes it alright.)

Is $2000 really that outrageous for the A2000? From reading the specs and
the other things I have seen about it, it is nearly as good as the new
color Mac (better in some ways) which costs almost twice as much. I just
mentally compared it to other computers past and present, and it comes
out a bargain at $2000 against every one I compare it to (except the
1040ST, and there you are trading money for features: each has about the
same value per buck, but the A2000 has more value and costs more bucks).

If by raising the retail price by $400 Commodore can increase the retailer's
profit margin (and thus get more of them to carry it) and advertise the A2000
(hopefully increasing its sales) then I consider that a sufficient and
satisfactory reason for doing so - and I don't think Commodore has to add
features to the A2000 itself to justify the rise. (It also puts them in
the position of doing EXACTLY what USENET has been saying collectively
that they should do.)

Remember that the $1600 price wasn't formally announced in the first place,
and that in any case the retailer isn't bound by the suggested retail price
(now that the "Fair trade" laws are gone).

On the other hand, if Commodore is raising the price just to improve its
own profit margin without either helping the retailers or doing
advertising, then everything the four-letter-worders have said on this
subject is justified.

-- 

     Steven Den Beste
     Bolt Beranek & Newman, Cambridge MA
     denbeste@bbn.com  (ARPA or CSNET)

"The voice within the candle whispers of a timeless peace beyond." - Paul Winter