Price CE Products Correctly The First Time

Implications: You can't un-ring the bell! Customers who buy any new consumer electronics product know that the price will erode over some reasonable period of time. This extraordinarily fast price drop hurts all manufacturers of comsumer electronics products. Now Apple is in a quandary, they can't ever do this again or consumers will assume that it's a pattern and they will quickly take a "wait and see" attitude for any new products. Many CE manufacturers always want to reap high margins for what they think are hot new products, knowing that they will be compelled to drop prices later to maintain demand and fend of competitors. But this strategy can have the opposite effect of causing the consumer to hesitate, wait, and perhaps buy later or worse case not buy at all. What's the answer? Price the product correctly right out of the gate and avoid the necessity to "apologize" to the public and explain the quickly deterioting price.

Analysis: The whole issue of pricing CE products and how you handle products that are already sold to consumers or are still on retailers shelves is a touchy subject. Most retailers demand that the manufacturers offer them "price protection" on any goods that are either in inventory, in transit or on order.  This means that should the manufacturer drop price at any time, the retailer can immediately drop his cost on all goods that they have committed to. Furthermore, when manufacturers sell to third party distributors, the distributor (who sells to the retailer) will often ask for "pass through price protection", meaning that they will pass on any price reductions to their customers (the retailers), even for products that the retailer bought up to 30 days prior to the price drop. By the same token, retailers need to offer a standard policy that says if a manufacturer drops price on a product, the consumer should always have the option of getting a credit for the difference between what they paid and the new lower price if they return to the same store within a reasonable period of time and ask for the credit. This will go a long way to easing consumers fear of buying new technology and will help all CE manufacturers.