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03-24-2012, 05:25 PM   #46
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QuoteOriginally posted by isaacc7 Quote
There's a reason that Leica has gone bankrupt several times and why Hasselblad has been bought out, they didn't make enough money despite charging more than other companies.
They went bankrupt because they charged (drastically) more than other companies. If they hadn't continued to behave as if their products were made of gold, they might have been as competitive as Canon and Nikon, or at least a lot more competitive than they were (are). "Quality," once the initial R&D is paid for, and the assembly-line machines have been set up to mass produce the product, doesn't necessarily have to cost a fortune just because it is "quality."

Am I being too simplistic again? Possibly, but it doesn't seem like it to me.

P.S. Yes, pricing "quality" out of reach of the average person does prevent the "riffraff" from taking business away from the professionals, but that's another matter.

03-25-2012, 10:44 AM   #47
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QuoteOriginally posted by Welfl Quote
Maybe this is a business philosophy that is no longer practiced, but I remember in the "old days" (late 20th century) that most businesses seemed to use a relatively standard percentage ratio when pricing their products. I probably have the exact number wrong, but it seems that 30% (give or take) over cost was the standard markup that companies used.
These generalizations are really tough. Bedding (mattresses and box springs) can be as high as 100% because many people keep them 15 or 20 years. Garment manufacturers range from 75% to 10%. Margin is dependent on turnover and barriers to entry in the industry. High capital costs is a barrier to entry, as is product ssegment fragmentation (what Nikon and Canon are doing to the dSLR business).
QuoteOriginally posted by Welfl Quote
Did you use the Inflation Calculator to come up with those findings?
Yes, I used a CPI inflation calculator.
QuoteOriginally posted by Welfl Quote
One thing that we might tend to forget when calculating inflation is that most people's incomes (i.e. "income inflation") has not kept up pace with price inflation. It's not even close in some cases.
There is some truth to the idea that incomes lagged inflation from about 1995 to 2005, but during the period non-cash "incomes" such as medical expenses and other pre-tax benefits not counted as income rose dramatically faster than inflation. Recent studies suggest across the entire economy employee costs has outpaced CPI inflation since 1990 by on average 1.25% per year. That is why so many US manufacturing jobs have been lost to automated assembly (robots) - more jobs than have been lost to "outsourcing" to other countries. In 1964 my father owned a small business. He made about $25,000 and he was well-to-do. $190 for just a camera body was equivalent to three months of the grocery bill for a family of four at the corner grocery store, where incidentally my parents had an "account" and paid their bill monthly. A K-5 List Price when new cost more than a Sp[otmatic, inflated. Food might be a bit more.
QuoteOriginally posted by Welfl Quote
At $5 per download, times several thousand downloads (theoretically), that would be a nice little profit for Pentax (with zero overhead costs that I can think of). Or, at the very least, Pentax wouldn't lose any money.
Think in terms of a "Full Time Employee" (FTE). 1 FTE = the total cost of keeping one employee on the payroll for one year to complete a task. 12 people for one month is the same as 1 person for 12 months, so 12 people working on a Firmware upgrade for a month = 1 FTE. In cost accounting that is referred to as "A Year". 4 people for three months = 1 FTE = A Year, 1 person for a month = 1/12 FTE (called "A Month"), etc. What we'd need to know is how many FTE's it would take to produce the necessary Firmware upgrade. A month? 3 months? A year?

If Pentax (Ricoh) wanted to offer FW upgrades as a customer retention service they would price the subscription at cost, not make a profit.
03-25-2012, 11:22 AM   #48
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QuoteOriginally posted by isaacc7 Quote
But your computer is a general use device, you would own it regardless. Pricing your labor at your hobby the same as your job isn't really all that realistic. But even still, would you spend more or less time in a darkroom? Unless you re actually giving up income in order to do your hobby, I still think you're coming out ahead with digital
Actually my photo processing computer is single-purpose. All the other software takes up too much RAM headroom for process stubs.

My last photo processing computer is now my computer for everything else - taxes, bill pay, investing, MSOffice, PF access. The one before that is my server, where I store all these RAW files. Of course, now I need WinServer and a Tb of native storage and a router and Cat-4 cable, and a switch and 3Tb of taped, striped and mirrored RAID drives and a DAT tape B/U for the OS partition and Anti-Virus multi-PC licenses and distributed backup software - and my own IT guy, etc.

That doesn't count the Apple laptops and iPhones for my wife and children, so I need a b/g/n WAP - it never ends.

I price my free time higher than my job - then again I'm 56 and literally half blind, so my free time IS more valuable than my work time - I think GB Shaw declared, "Youth is wasted on the young."

I wouldn't spend time in a darkroom - that's the whole point. Digital forces me to invest money in software and computers and monitors and calibrators that I could invest in bodies and lenses, and forces me to spend time in my digital "darkroom" that I could spend photographing or typing on PF or even sleeping.
03-25-2012, 03:18 PM   #49
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First, thank you, monochrome, for continuing to correspond with me. I realized last night that my political comment yesterday might have been viewed as being aimed at you, when that wasn't the case at all. I just meant I am very reluctant to post my political comments in the PentaxForums Political & Religious section because I might be inundated by others who have to chime in, and it would never end, and no one would ever change their minds, and I would burn out worse than I already am. And I also don't want to make (too many) enemies in a potentially fun place like this. So I apologize if I led you to believe I was referring to you. Normally, I think ahead to how my words will be interpreted, but my mind was too focused elsewhere at that time, so I wasn't paying attention as closely I should have been.

QuoteOriginally posted by monochrome Quote
These generalizations are really tough. Bedding (mattresses and box springs) can be as high as 100% because many people keep them 15 or 20 years. Garment manufacturers range from 75% to 10%. Margin is dependent on turnover and barriers to entry in the industry. High capital costs is a barrier to entry, as is product ssegment fragmentation (what Nikon and Canon are doing to the dSLR business).
You make some very good points, and I don't dispute them at all. In fact, I completely agree with you. Over the course of my life I've often wondered how companies that make things that last a long time keep making a profit. I didn't remember that yesterday. I was mostly using 30% as an example, not as a completely fixed rule, even though I didn't word it very well (or maybe I'm now rationalizing). My point, which I made later in the thread, is that wholesale prices in the past seemed to be gauged in fixed percentages over manufacturing costs (and retail prices seemed to be gauged in fixed percentages over wholesale costs). They weren't (always) free floating, at the whims of corporate CEOs and board members -- based solely on how much of a top price the market is willing to bear. From an outsider's perspective, it sometimes seems that prices on some products are now set on a whim (the maximum amount the enthusiast market will bear) in certain industries. I may be in over my head in this topic, but I do know that corporate whim does factor in at times. For example: Unless the K-5 Silver LTD is made of real silver, then its significantly additional cost is pure fancy and whim. Some here were recently discussing a "limited-edition" all-black K-01 (I prefer that option), which implies that it would cost more than the two-toned models. Why should all-black plastic, rubber and metal cost more than two-toned black plastic, rubber and metal? especially when all black is considered "standard" among other models?

I completely agree with you that the percentage of profit should vary according to the lifespan of the product and the market size for that product (but market size can definitely be limited by really high prices and a lack of a cheaper "side" product line to fill the gaps when their premier items don't sell fast enough to allow a company to survive). However, with cameras (like certain other products), it seems very clear (just by reading PF ) that there are at least two types of camera consumers: 1.) Enthusiasts who don't hesitate to buy the next great camera, even though their last camera(s) was (were) purchased less than a year ago, and even though it (they) still produce(s) masterpieces of photographic artistry. These are the "crazy" customers for whom the people at Pentax should -- yes, should, in my old-fashioned opinion -- be eternally grateful and to whom they should be willing to give an occasional tiny-upgrade-via-firmware -- just as I frequently gave away free drinks to my best customers when I was a bartender, much to the approval of my various bosses, who understood good customer relations. 2.) The remaining "90 percent" of the always expanding world population, of whom at least a certain percentage will always be in the market for something better than a P&S (even though Pentax, etc., profits off of P&S sales too). During one year 10% of the latter (that's an example number only!!!) may buy a dSLR. The next year another 10% will buy one, and so on. Eventually, enough time will have passed that the first 10% will be ready to buy new ones, and then there will always be the new crop of consumers who have finally become old enough to buy cameras. In Pentax-Ricoh's case, those percentages will theoretically increase if 1.) the Pentax-Ricoh marketing division is even half as good as the pathetic Pentax-Hoya marketing division was, and 2.) if Pentax-Ricoh realizes that lower prices (if even minimally lower) will increase their market share (but this must be combined with much better marketing!). Then, after the consumers in that slightly increased market share have fallen in love with Pentax cameras (and rightfully so), they will keep on buying Pentax cameras, and they will recommend them to their friends and children, too.

QuoteOriginally posted by monochrome Quote
There is some truth to the idea that incomes lagged inflation from about 1995 to 2005, but during the period non-cash "incomes" such as medical expenses and other pre-tax benefits not counted as income rose dramatically faster than inflation.
Maybe I'm misunderstanding what you are saying, but most (maybe not all) people only see their medical-expense "incomes" during the brief moment in which it is transferred from their employers or their insurance companies to the hospitals. If they never go to the hospital, they never see it. At least that has been my experience. Yours may be totally different. And then there are all those businesses that provide no health insurance of any sort. I've worked for plenty of them. Furthermore, medical costs since 1970 have increased far faster and higher than the regular rate of inflation (see chart here), thanks to easy government medical welfare (easy for the hospitals, I mean) and thanks to the existence of wealthy insurance companies that hospitals know will pay huge costs. In the "old days" people didn't need such huge "additions" to their incomes in order to pay for medical expenses.

QuoteOriginally posted by monochrome Quote
Recent studies suggest across the entire economy employee costs has outpaced CPI inflation since 1990 by on average 1.25% per year. That is why so many US manufacturing jobs have been lost to automated assembly (robots) - more jobs than have been lost to "outsourcing" to other countries.
Which means you cannot count those as U.S. incomes anymore (and, remember, the U.S. isn't the only place in which companies like Pentax sell their products). The U.S. is now predominantly a service-sector economy. Most service-sector jobs don't pay nearly as much as the manufacturing jobs and skilled jobs did that are no longer in this country.

QuoteOriginally posted by monochrome Quote
What we'd need to know is how many FTE's it would take to produce the necessary Firmware upgrade. A month? 3 months? A year?
Yours may be a completely valid way of looking at things, and I'm definitely just an amateur, but I don't think people who are already employed by a company and receive a set salary, are costing the company any more money just because they are working on something that is not part of the regular (future-and-present-profits-oriented) workflow. I've never yet seen a company in which employees are busy ninety-eight percent of the time, and especially not only on their primary tasks. Most of them always have time to do "something else" without costing the company a single extra cent. That said, I am really only talking about one little firmware update that has already been implemented for one camera and is being implemented for a number of future cameras. It's not as if making this already existing firmware compatible with just one more camera would be like taking employees away from more important tasks. Their "firmware engineers" have already had focus peaking added to their regular permanent schedules.

QuoteOriginally posted by monochrome Quote
I think GB Shaw declared, "Youth is wasted on the young."
You may also remember it from the movie, "It's a Wonderful Life." It's one of the most profoundly true statements of all time. I'm living proof of it.


Last edited by Welfl; 03-25-2012 at 03:27 PM.
03-25-2012, 03:58 PM   #50
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QuoteOriginally posted by Welfl Quote
First, thank you, monochrome, for continuing to correspond with me. I realized last night that my political comment yesterday might have been viewed as being aimed at you, when that wasn't the case at all.
I thought nothing of the kind.

AFA the economy of doing more free FW upgrades, there is a business principle called marginal resource allocation, which principle states that all resources should allocated according to the most important uses, right down to the last resource. An employee is a resource who must be assigned to the most important project available. There are no employees who are doing nothing - if there are the company is in trouble and they are let go.

When you are down to your last employee to assign, who can do only one project, if there are TWO projects, you assign the employee to the more important project of the two. At the margin, you cannot do the last project unless you hire another employee. The last project is the marginal project - it has been resourced out. You have to CHOOSE between doing only one of the the two projects or hiring another person to do the last project.

The cost of free FW upgrades, then, is the difference between whatever the company makes on the FW upgrades (nothing) and whatever they DIDN'T make on whatever they DIDN'T do with those engineers - which is not NOTHING. That is called opportunity cost - it is the cost of passing on an opportunity to do one thing and doing something else instead (whether profitable or not). In a marginal economy everything has an opportunity cost. You hope for every resource allocation decision your opportunity cost is less than your opportunity!!!

At the margin the last decision is truly a lost opportunity. So free FW upgrades aren't free of cost.

Assuming Pentax makes rational business decisions, to engineer free FW upgrades Pentax would need to CHOOSE not to do some other project - that is, they would need to decide free FW upgrades are more important than whatever else doesn't get done.

And then we would have to discuss corporate Philosophy.

Most large companies don't actually shift their medical insurance expenses to insurance companies - they self-insure and hire insurance companies to administer their plans.

Medical expense costs are randomly distributed across all the employees of a company - in any one year we don't know which employee will have an accident or a baby or a heart attack or need glaucoma surgery. So we add up all the costs of medical expenses and spread them across all employees equally (or roughly so) and call them an "income expense." Since they reduce profit they must be allocated somewhere. If you want to have medical expense allowance added to your income and buy your own insurance you will need to pay income tax on that "income" benefit - not something you really want to do.

I could go on. My point - and my attempt to provide some facts about how companies operate - is that Pentax makes rational business decisions using their best business judgement, balancing current expenses against future sales. From the outside we don't see the absis for these decisions - they're corporate secrets - so it is sometimes hard to understand why things are the way they are.

To go beyond this we'll need to move this to the other Forum - we're hijacking this thread.

Last edited by monochrome; 03-25-2012 at 04:05 PM.
03-25-2012, 07:59 PM   #51
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QuoteOriginally posted by monochrome Quote
To go beyond this we'll need to move this to the other Forum - we're hijacking this thread.
Well, thank gosh I'm the one who started this thread, then.

We could move it somewhere else, but I think we've beaten it to death already. I just hope no one else decides to join the discussion, because I want to let it die from being beaten to death.

I never said there are a certain number of employees in every business who are standing around doing nothing. I said that every employee's work schedule does not always consist of a solid stream of work from the moment he/she punches in to the moment he/she punches out, except for people on assembly lines (I assume) and the like. There are intense rushes of business, and there are lulls in business. Even the best, most profitable companies in the world have people who aren't busy every single second of the day. In many cases, this may be because they got their work done sooner than expected. That describes me. I have always been an overachiever. I'm one of those people who actually always started feeling guilty shortly after I finished my work sooner than was expected. When I finished, I didn't want to look as if I was being lazy, so I would ask my bosses if they had anything else for me to do -- while I was waiting for my real duties to crop up again. Nine times out of ten, they gave me tasks that took no more than five minutes, so there I was, standing around again. After a while I learned not to ask them for work. Instead, I would "look busy" (I really hated doing that; it was a miserable experience). Eventually, I decided to do jobs no one asked me to do, that were not in my job description. In one job (when I was in my early 20s), over the course of several months, I rearranged all the inventory, one aisle at a time, so that everything finally fit, instead of not fitting, as had obviously been the case for many years before I started working there. It was a pretty large inventory, and it really, really needed to be done, and I was glad to be keeping busy while waiting for things to do in my regular job.

As for Pentax, I believe what you are saying, and in almost every other case under the sun, as far as a corporation like that goes, I am sure you are right. But firmware is such an incredibly tiny thing, and most of the initial work on focus peaking has already been done, and work is still being done, and will continue to be done for the foreseeable future, since future cameras will certainly have it too. Only a slight technical adjustment may be necessary in order to make it compatible with the K-5.
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