Product Longevity

Frequent readers of this blog may recall my posting on the 8th March about the (potential) demise of certain products. If not, you can read the posting here.

How refreshing it was to contrast the extinction of the products mentioned therein, with a story on the longevity of the Morgan 4/4 which appeared in the ‘Life & Leisure’ supplement in the Australian Financial Review of 31st March 2006.

Here are a couple of quotes from that article:

“The Morgan Motor Company has been building its 4/4 sports car for 70 years…the longest running continuous production of a car in motoring history…apart from mandatory safety and emission inclusions (airbags, indicators and front, rather than rear, hinged doors” the design is basically unchanged from the 1936 model".

Believe it or not, the vehicle’s frame is still made of wood, and the roof is constructed manually.

What’s this got to do with pricing? Well, in 1936 the Morgan 4/4 was touted as the cheapest sports car in the world, able to “round corners at speed without sliding”. Back then it cost 748 pounds and 7 shillings. Today, the price of the 2006 limited edition vehicle is $109,000.

How refreshing! 

Beware of Price Perceptions

Most mornings (depending on where I'm working), I grab a coffee from Gloria Jeans. GJ's is an Australian-owned, franchised chain of coffee shops, and a recent winner of Australian Franchise of the Year.

Anyway, on Wednesday my regular brew rose in price by 20c, from $3.50 to $3.70. Being a franchise, every Gloria Jean's probably put up its prices by the same amount across all its stores (after all, when was the last time you saw two or more McDonalds engaged on a price war?).

This price increase probably hasn't caused too much grief amoung GJ's customers around the country. But in Melbourne's cafe society, it may have been perceived differently. Wednesday was the day the XVIII Commonwealth Games started in the city, a time when the city is bursting at the seams with tourists, who have little or no knowledge of GJ's prices.

But for locals, it wouldn't surprising if the price rise has been accompanied by what appears to be a shot of price gauging and opportunism. GJ's could probably have picked a better day to change prices.

Happy St Patricks Day!

Value Propositions

Another posting I just couldn't resist. Like most jokes, cartoons and the like, they often have a serious side to them as well.

How do you sum up the value proposition of the product or service you are trying to sell? 

A Special Event

I just couldn't resist posting this Ron Tandberg cartoon up on my blog (from The Age, 16th March 2006).

The Commonwealth Games began here in Melbourne last night (15th March), with around 80,000 people inside the Melbourne Cricket Ground for the opening ceremony...including these three guys. 

Examples of the Economics of Pricing

Here’s a couple of articles that have recently caught my attention, all of which illustrate some of the economic issues surrounding pricing.

Readers of this blog may recall my entry on cinema pricing last month. If not, you can read it here. The prolific piracy of DVD’s in China is discussed in the early sections of this article, which looks at the costs of producing a pirated DVD vis-a-viz the cost of going to see a movie at the cinema in China. Towards the end of the article, you will find a discussion on the economics of a Wal-Mart proposal to supply DVD’s-to-order, in-store (another example of the transferability of pricing, perhaps?).

On a less cheerful note, but one everyone has to confront sooner or later, the cost of chapel crypts at Woodlawn Cemetery in Detroit have increased between 42% - 100% in the last couple of months. Why? Because Civil Rights campaigner, Rosa Parks was interned there last October. Perhaps an illustration of cross-price elasticity (?), you can read the story here. You can also ”buy it now” two side-by-side plots at the cemetery on eBay for $100,000

Finally, in what may come as a surprise to hotel managers and no one else, it seems the economics of the minibar just don’t stack up. The costs of servicing hotel room minibars far exceeds the revenue they are generating. See which hotels minibars are starting to disappear from here. 

In the Footsteps of the Tasmanian Tiger

• Seventy years ago this year, the last Tasmanian Tiger (or thylacine) died at the Hobart Zoo. This year is also shaping up as a year of extinctions. By the end of the year, there will be a few less products and services to be priced:
  
  Nikon has announced that the only type of camera it is making now will be digital ones. In China, there is likely to be a generation that go from ‘no camera’ to ‘digital camera’, not taking the detour to ‘film cameras’ that many of the current generation are familiar with
  
  Bankcard, the iconic credit card introduced in Australia in 1974 will be no more by the end of the year, despite the fact that there are still 1million card holders
  
  As there were only 20,000 of them sent last year, Western Union has announced the closure of its telegram business (there hasn’t been a telegram delivered in Australia since 1993)
  
  Dixon’s, the UK Electrical retailer has announced that by the end of the year, it is unlikely to be selling cathode ray TV’s, and is likely to be selling flat-screen TV’s only. It has already stopped selling manual 35mm camera’s and it expects to also stop selling portable CD players and cassette players (remember them?) in the not-too-distant-future.
  
  And all these announcements have come in the first 6 weeks of 2006. What products or services will join them before the end of the year? Share you predictions….