Conference 7.286::digital

    re. .0
    	I think that you are confusing product/service costs with 
    product/service pricing.  To be competitive a company must be able to
    have a competitive cost of production...this low cost of production
    would then allow the company to price whereever they choose depending
    upon other market conditions and the marketing strategy the company
    decides to implement.  Low cost of production doesn't necessarily mean
    lowest price.  Maybe a premium pricing strategy is employed and the low
    cost simply means greater profits.  And if they decide to be
    competitive strictly on price then the low cost of production would
    allow the company to follow this strategy with the other competitors.
    Ric
    

    Ric, that is exactly what I meant.   The American Business seems to be
    too troubled with having the lowest possible cost of production without
    'seeing' the other factors as I explained.
    
    Now, what I trying to get feedback from is for example:
    
    	Given products X, Y and Z have the following characteristics:
    
    	Product X: Known for Quality, Timeliness, however cost is 5% to 10%
                   higher.
    
    	Product Y: Known for Quality, Timeliness, cost is par.
    
    	Product Z: Best Cost (lower by 5% to 10%) questionable
                   (unpredictable) Quality & Timeliness
    
    	Product/Service is commodity type (ie. TV Set), which you will
        purchase: X, Y or Z ?

    re. -1
    	In your scenerio...what does your term "cost" mean???  If you mean 
    price that the customer pays then please use price.  As a general rule
    customers do not make any buying decision on the cost of production....
    they don't care about that.  In a commodity market where products have
    similar characteristics then price is most often the deciding factor.
    A commodity market assumes similar time to market characteristics and
    similar quality characteristics.  This does not mean that time and 
    quality are equal...only that in the customer's eyes they are not
    sufficiently varied among suppliers to make any difference.
    	In a commodity market producers who are late to market or who have
    lower quality will often try to compete by starting a price war.  In a
    price war the company with the lowest cost of production will win.
    If the companies competing in the market are publicly held then the
    superior earnings of the company with the lowest cost of production
    will attract the most investment and the stock price will rise
    providing a better return.
    Ric

    .2
    
    the US consumer will take Z.

    they buy at Building 19, K-Mart, etc.  They care more about price than
    anything.  Heck, they'll even buy a PC from Korea.

    They get sold a story about quality but by in large don't know how to
    recognize quality or service.  They grow up in a Mall.  They buy Hondas
    because they have been told they are quality autos.  They know they are
    because the TV tells them.  And they read it on some computer.

    They go to flea markets to buy junk.  They wouldn't know how to
    recognize quality clothes being so used to junk that doesn't last. 
    They think they are getting a good deal if the supplier offers to
    replace returned items.  They don't know that the supplier is buying
    very low cost items and knows that very few people will actually go
    through the effort to return anything.  

    It's all a numbers game.

    And companies or business that actually provide a honest service and
    would like to get value in return are being downsized every day.

    take a look around at who's left.  low cost producers don't produce
    long term value.  But it doesn't matter, because by in large the 
    customer doesn't care nor want it enough to pay for the value.  

>    It's all a numbers game.

It's frequently called "capitalism"...

>    take a look around at who's left.  low cost producers don't produce
>    long term value.  But it doesn't matter, because by in large the 
>    customer doesn't care nor want it enough to pay for the value.  

Not necessarily.  There are lot of companies that get "fat and happy"
and don't change with the times.

Low cost can be shoddy OR it can just be lean & mean.  The US electronics
industry died partly because of attitudes JUST like this.  (Those cheap
transitor radios are pieces of junk.)  Now we have both "cheap" (in terms
of quality) electronic devices, but also very high quality solid state
consumer electronics - and a lot of US consumer electronics vendors that
are no longer in business or shadows of their former selves because they
refused to change with the times.

    the difference between the cheap and high quality is not so much in the
    guts but in the features (add a .50 feature charge another $20.) and
    the case (finer finish on the plastic??).  Consumers don't know how to
    judge the quality of electronics products, they only know
    price/feature.  If a $5. radio breaks they go buy another.  Their $2.
    ear doesn't know the difference between a .25 speaker and a $1.
    speaker.  They don't know the difference between hand sewn beading and
    glued beads.  All they know is it looks about the same and one is
    several hundred dollars less.  The fact that the glue disolves when the
    gown is cleaned doesn't hit them until after the purchase.  

    >>>>>" The fact that the glue disolves when the gown is cleaned 
           doesn't hit them (us) until after the purchase. "
    
    	   This is exactly the trend I'm pretending to get.  That is why I
           don't want to talk/discuss about price.   Because price is a 
           one shot item (short term), and the total cost of any item is
           the price plus: service, maintenance, warranty, repairs,
           refurbishments, etc.
    
    	   We as customers, don't see this potential long term impact and
           only tend to see the short term (one shot deal) price tag.
    	   Only when we receive the traditional, 'but that is not
           included' is when we wish we've made another choice.
    
    	   Thanks to all for your candid answers.
    
           

    well, you are on the right track.  It's interesting that in my
    observance of customers (consumers) the more experience they get (by
    making mistakes) the more attention they pay to the total costs.  If
    they start out buying cheap coats at K-Mart they eventually figure out
    (well, some of them do) that buying one every year costs more than
    buying one good one every five years.  Not to mention that cheap fabric
    looks cheap and there's nothing one can do to change that.

    I've now run into a few customer's here that tell me they don't want to
    buy direct from 3rd parties because the cost they incur when the 3rd
    party files chapter 11 is greater than our value added pricing, they
    want us to assume that risk and deliver the product to them.  But they
    are few in number and fewer yet that are willing to pay for the added
    value.

    	If you want to read some very interesting comments on the cost
    versus quality issue, the book by Akio Morita - CEO of Sony -
    'Made in Japan' is very candid.   Morita argues that Sony (his company)
    does the reverse, the markup cost concept.......They want to have the
    most expensive price because the company is committed to Timeliness and 
    Quality and State-of-the-Art instead of cost.   He says that Sony likes
    to be ahead in technology and quality but not in cost.
    
    	Well if we rate them in the numbers (P&L and financial ratios)
    they are one of the top notch manufacturers from Japan.   So although
    I do not 100% agree with him, it seems he's got a point or at least
    the performance of Sony is reflecting that.
    
    

    
    
    I'm looking for competitive analysis information regarding services
    offered by our competitors like IBM.  
    
    Can someone point me to a DTN or node where such info exits?