Is it possible for a high end manufacturer to overprice their goods?

Apparently not.

Hard to answer this one; my first response was, "Is it possible NOT to overprice high-end gear?"

A former business associate used to RAISE the prices of stuff that did not sell, and heavens to mercy, he was successful in many items.  Some people judge items by their price, so he played on that situation and it worked.  Nutty.

After spaking with Bill Johnson in the 1970's when we sold his products, I learned what it took to do what he wanted to do.  It was one thing to build an amp for a few friends (See McIntosh beginnings) and another to build a product to sell worldwide.  What I learned is that aiming for perfection is expensive.  One example he gave me:  He spec'd the top 10% of an item from a manufacturer.  When 100 came in, he had to measure each one (a PERSON on the payroll does this).  He told me that even though he spec'd top 10%, he RETURNED 20+% of each order since they did not meet his high standards.

SO, if you are building a car by hand or an audio piece spec'd a certain way, it costs more than it would if you were building mass-produced stuff.

As for the silly prices I see today on some things, I always wonder how they could possibly be any better than, for example, in speakers, Magnepan.  I realize their best stuff ain't cheap, but I have no idea what could be more accurate no matter how much money you spend.

Finally, since YOUR ROOM is the most important part of ANY system, it seems odd that speakers, for example, could cost that much (regardless of the cost of making them) since even Maggies are not good for EVERY room.

As almost everyone on here preaches, you have to take the gear HOME to see if it is good for YOUR ROOM, regardless of the price.

Cheers!

As an example, Samsung, like most manufacturers, does not price televisions based on their internal parts, manufacturing, marketing, and shipping costs.  Many items, and particularly luxury items, are priced (at least in part) based on what the market will bear.  This should not come as a shock to this group given that audiophiles are being sold fuses for hundreds to thousands of dollars, and stuff like this ground-breaking game-changer for many thousands of dollars.

BTW, it appears Tweak Geek has taken down their QSA products.

Overpricing can occurs at every price point.

There are multiple ways to price products and when pricing 'premium' products in a portfolio with a "good/better/best" stratification some manufacturers look to recoup R&D costs as soon as possible.

The true value of something is better measured by actual sales.  Products where there's no sales indicate the market doesn't believe its worth it. I also believe most of the folks in this forum have limited discretionary income and some folks concentrate that on 1 or 2 hobbies and others may have spread the funds over more activites. 

No.  It's completely impossible.  Never happens.

I’ve read of two examples from completely separate sources that were so similar they must be indicative.

A speaker manufacturer and an amplifier manufacturer both told virtually an identical story:

‘The ‘bean counters’ looked over the business and said, ‘You’re selling this for $3000.00 dollars? Price it at 10 (thousand dollars.)’

And then there was a story I read from a salesman about customers who are their own worst enemy, who think high price means best quality:

‘People would ask, ‘What’s the best pair of speakers you have? And I’d show them the $3000 pair, the best I had. Then, they’d see the $8000 pair and lose interest in the ones I was showing them. What are these?, they’d ask; tell me about these (the $8K pair.)

and btw I wonder if the Lamborghini comparison is appropriate for most audio products. Lamborghini - whoever owns it - does not claim that their car is x times better than other cars. It's VW plastic in large part. But you can drive it to the mall to impress people, which is where the price is justified. Audio does not have that feature. 

I would comment but it would get removed - as before

making fun of the wealthy and their justification of why they *need* and *deserve* to buy x and y.

Reading this forum is an amazing social experiment about how delusional rich people are.

If they charge enough and sell just 1 that might be all they need for easy money and a big profit. Some might call it a scam. But It’s attempted here all the time (sell something for absolute top dollar that can be finagled). It’s something agon is designed to do ie facilitate sales of one-off hyped up items only here on the “high end” site….the Ultimate hifi boutique shop. Complete with free forum for marketing efforts. See the occasional ad for a 10k power cord from a total unknown, for example. High end means more expensive and elaborate. Things few others are likely to own or want. Duh! Get a clue hombre! All else is subjective. So nope, no price is too high. The sky is the limit. All you may need is a buyer. So just factor in expense of hiring a few good shills perhaps. You know, the usual story just with expensive hifi things. Have at it!

Then you have the reputable vendors who have to be concerned about maintaining a good reputation. Different story !

@russ69 +2

Mike

@8th-note  "There are 5.3 million millionaires and 770 billionaires living in the US. The market for ultra luxury goods is bigger than you think."

I thought 5.3 million seemed like a low number so I did some checking. You're correct, depending on the source. Other sources doing a Google search listed that number around 22 million. 

Regardless, your statement that the market for ultra luxury goods is bigger than you think is certainly correct!

Part of my OP came from a recent discussion that I had with a very very well heeled friend who can easily afford anything in high end audio. To this gent, a multi million dollar system is no strain on the pocketbook. What interested me was his comment that he will not spend any money on a product that he sees as having a minimum value to cost ratio. We discussed several speakers ( not Rockport’s, and certainly not the Orion), but others that we all know and would respect, but few here can acquire. My friend commented that one of the reasons he is able to actually afford all of these products is also because he has the discriminatory ability to not get ’taken’, as he put it. Just to add another perspective to the narrative here.

Don’t get me wrong, this gent has a system that most would envy, but it has been put together with some considerable thought, and he always bought used or at a considerable discount, as far as I know.

In discussions with a retailer I respect, and talking about Focal speakers, he told be the mark-up was 100% at every step.  Focal Sopra 2 cost $6500 to build.  His cost from Focal was $13,000.  His list price (CDN) was $26,000.  Expected discount off list was 20% leaving him with a 30% margin on the sale.  I have no reason to believe this formula does not prevail regardless of the cost.  Bottom line, the higher you climb up the MSRP, the bigger the profits are built in at every step.  It's just a fact of life and no one is forcing any of us to buy anything we don't want.  

I have always wondered what some of the really high end manufacturers expectations are w/ the really pricey stuff in terms of actual number of units sold. 

I suspect some of these products are intended to create or maintain a manufacturer's reputation so they can sell their more reasonably priced offerings & not really intended to sell well themselves. The hope for many of us is that the technology & concepts they develop in creating these outstanding products is that some it can trickle down to more reasonably priced things & more people can benefit from them. 

As for the actual price of things, it's all a matter of point of view. I suspect the general public would think that spending even $5K on a pair of loudspeakers is crazy & would not ever consider it but to many here on this forum, that's basically the bare bones starting point for anything decent. The same goes for cars, bicycles, cameras whatever. For some, part of the fun is trying to get close to the sound quality of a top system for a lot less $ using our experience w/ tweeking, set up, room acoustics & used gear as well. 

If you work hard for your money, you deserve to spend it anyway you enjoy. If that means donating to charities or buying a $100K sound system, to each their own. 

mofojo

@mihorn The only Hi-end audio company is the Wavetouch audio. Everything else are Hi-Fi. They all are simply unlistenable to me. I watched few 2023 Axpona videos and my ears are in serious pain. My ears are much better after I listen WTPC video for few minutes. Alex/Wavetouch”

ohh my that made me laugh after a rough night !! 😃😃😃😃😃

WT audio sounds the most natural and closest to the original music than any other audio system. There is a big gap between WT audio sound and 2nd best audio sound. WT is just a different league from every other sound systems. Until somebody makes the better sound, only Hi-end audio in the world is WT audio. Alex/Wavetouch audio

@russ69 Thanks for pushing me!

@8th-note 

If you have $50 million in Microsoft stock spending 7 figures for a stereo is reasonable in your world. What else are you going to do with your money? Give it to the homeless?

Well-placed irony. That said, one thing which is true about the wealthy, and non-wealthy to a large degree, is that happiness is largely measure in relative social position, not material riches. People buy eye candy and expensive things in large part to position themselves with others in their stratum. Part of the audio market is serving that need, while also throwing in a lot of nice audio parts and research in the process.

Thorstein Veblen coined the concepts of 'conspicuous consumption'.

Look him up. His theories read like a copy of Absolute Sound.

Like beauty, art, and a good movie, isn’t overpricing in the eye if the beholder? 

Obviously, it is possible. Even the most expensive items are made of components that cost relatively little (thank goodness there is little place for precious metals and gemstones in hi-fi!) Does the manufacturer add enough design know-how, or design beauty to justify the exorbitant price? Looked at objectively, not often. Evidently it makes a difference as to whether the price is a big deal to you, or a trivial throwaway. But it makes no difference to the sound, does it?

I guess I'm saying we should only praise or recommend components on their sound, not on their appearance or their price. An unobjectionable principle. What a shame it so rarely seems to apply.

@hilde45  Thanks for the well reasoned response.

A few points on the OP;

There are 5.3 million millionaires and 770 billionaires living in the US. The market for ultra luxury goods is bigger than you think.

We are in the situation now that extremely high prices for products are a feature not a bug. In other words, exclusivity is a selling point. If you have $50 million in Microsoft stock spending 7 figures for a stereo is reasonable in your world. What else are you going to do with your money? Give it to the homeless?

To reinforce a point made above, volume and mass production is critical in the pricing of any complex product. I don't think anyone would argue that a Toyota Venza is magnitudes more costly to design and manufacture than a Rockport Orion yet the Venza sells for less than half the price. If Rockport could sell hundreds of thousands of Orions they would be a lot cheaper.

A $100k speaker or amp is not just an appliance, it is a work of art with a story behind it. It has the advantage of reproducing musical works of art as its purpose. People pay over $100k for paintings all the time. Why not buy a nice stereo?

I've been to a few audio shows and it's thrilling to hear some of these ultra expensive systems even though I will never own one. The sound they achieve gives me a target to shoot for and has allowed me to enjoy this hobby even more. I've been able to put together an affordable system that was state of the art 25 years ago and it holds up to the modern ultra expensive systems surprisingly well. I'm glad the ultra expensive stuff is out there and I hope that it brings joy to its owners.

It's also possible for a manufacturer to under price a product.  If someone were to manufacture a power amplifier and sell it for a profit at $1,500 no audiophile putting together an upscale system would buy it, regardless of how it sounds.  Too much cognitive dissonance to match that with a $20k plus loudspeaker.  If you doubt me, consider how most audiophiles view powered loudspeakers.

There are no laws for pricing products. Manufacturers must establish what they think they need to run the business, and then what kind of profit the product might drive. Do these products have some type of exclusive patented technology? Maybe sometimes? Hype? Bet your life on it. There is always a market for products marketed toward super high-end customers who have so much money that the price is irrelevant and those same customers are the least likely to be customers who do a lot of technical research or get too deep into learning the nuances of a hobby such as audio. It might be a hard pill to swallow but in many cases all that matters to this demographic is that they have something extremely rare and expensive, no matter what the thing in question might be, and that they can show it off simply for the fact that it costs an obscene amount of money. Price is not always a great measure of performance or quality, especially when you leave the reasonable bounds of high-end-high-quality to the level of ridiculous-price-no-added-performance.

@hilde45  +1! 

IMHO,  once you have established what the law of diminishing returns is on a piece of audio equipment,  any money spent above that price becomes questionable.

Of course,  I am basing this on common sense.  For instance,  does a $200,000 audio system sound ten times better than a $20,000 system?  For that matter, does a $20,000 system sound 10 times better than a $2000 system? 

It's all relative to how much money you have to spend and how good your hearing is.  

@daveyf 

Do a search one million dollar speakers, there’s a bunch of them! Over priced?  Well they are for me, but…

Someone is buying a $133k speaker while someone else is living in a cardboard box.

And some are eating fillet mignon and others are eating a hot dog. So what does that have to do with the topic?

@russ49 -- It has to do with one construal of the OP’s question, as to whether the speakers are overpriced. Clearly, one reaction to the price is moral revulsion; we

read this all the time on Audiogon -- "How dare they ask that much for X?" We all understand that there are no *laws* against pricing things as they wish, so there are a couple other ways to explain why this question gets asked.

(a) Is the price justified by the economic inputs (parts, labor, research, etc.)? Here the answer is hard to gauge, because every company adds in their "margin" and it’s hard to question what kind of margin is "correct."

(b) Is the price justified by the wider social conditions? Here the answer is often "no," either because of what people themselves can afford or what they see around them (hence the cardboard box comment). Many people get angry at this question because it brings up issues of injustice and how dare we talk about that. This is supposed to be a happy occasion!

(c) Is the price creating a distortion in the audio market? Here, people divide up. Some see the pricing as part of a trend which is distorting the hobby into an ultra rich guy thing. That makes regular hobbyists feel priced out. Others look to the opportunity to buy this ultra-gear at used prices or hope that there is trickle-down from the technology (the way the Apollo program lead to all kinds of innovation.)

In short, the OP’s question is a kind of Rorschach test, and this leads to a fun but chaotic, cross-purposes thread.

No absolutely not……..😀

It's like asking is there any greed in man. Answer yes!

I have the 22K Aurender W22SE, I can imagine the markup is less than jewelry on high end audio, but I expect Aurender took 10K profit from the 22k. Worth it? Absolutely yes! Greedy? a little. But also good business, it's a fine line between greed and good business, few walk it.

One definition of 'overpricing' is that in the revenue (quantity x price) drops. 

This is the case in an 'efficient' market with full 'price elasticity' (the cheaper you make it the more you sell) with full working supply and demand balance. 

None of these 'laws' apply to the nutty 'high end audio' market. It may actually be the opposite. In this case: they may sell MORE at $133k than at $20k (the full manufacturing cost (including overhead, development, material, labor, etc may be $5k for such a speaker) since 'nutty price' is actually a sales attribute that buyers crave and desire in the realm where a negative cost/benefit ratio starts. 

@steakster +1!

Get what you can afford...or can stretch for. Visit  a handful of dealers or at least get into communication with a few.  Explain your situation and how many bucks you can part with. Tell 'em what you listen to, i.e., what you like. Only play Led Zep? Only hip-hop? Only Miles Davis? Only Maria Callas mono recordings? Tell 'em how much space you got for your high-fi set-up, and how many dB's you like to bathe in. To be sure, you don't need to ignore magazine rave reviews.  But a good dealer is a wonderful thing.

There is such a thing as a 1" fine extra large brushed brass faceplate in front of a mediocre piece of electronics.

It might be a good idea to rate lines by a minimum age. Like Movies.

Highest priced lines are Rated XXX Over 30 to view

Moderate Lines rated R for buyers 25+

Affordable Lines PG for "Pretty Good" All ages 

I think it's about exclusivity and avoiding comparison.  If you price something high enough hardly anyone will ever hear it or be able to compare it to other products.  Bose is famous for requiring their products to be displayed in separate areas where they can't be compared to anything.  If you price a product high enough no dealer will have a demo so it doesn't need to perform because it can't be compared.  It needs to look pretty and have a sound that some will prefer.

@mihorn ,

”
The only Hi-end audio company is the Wavetouch audio. Everything else are Hi-Fi. They all are simply unlistenable to me. I watched few 2023 Axpona videos and my ears are in serious pain. My ears are much better after I listen WTPC video for few minutes. Alex/Wavetouch”

ohh my that made me laugh after a rough night !! 😃😃😃😃😃

@steakster While you are correct in alerting folks to the many costs incurred by manufacturers, i also question where the process is when it comes to a speaker ( maybe any speaker/ high end product at this price point) that comes in at a consumer price that equates to a very impressive new car ( or insert any number of other far more sophisticated and complex products here). While the argument that economies of scale come into place, this argument can surely only go so far?

OTOH, all of this is relative to one’s disposable income, and given that, I do question why this speaker ( or others of its ilk) are priced at just north of $130K...and not multiples of this price? Do these manufacturer’s ( or their dealer network) actually know that this price is in fact attainable--while multiples of this price is not?? If so, how??

Not only is it possible, it happens.

daveyf OP

@labguy while I think your math is not quite correct for this particular speaker, as it leaves out a number of factors, including the R&D costs, shipping, advertising, dealer mark up etc.

It’s amazing how many people are naive about the costs involved in running a business, let alone designing and building a high quality product. $100K+ speakers aren’t made in a garage over the weekend.

_ _ _ _ _

Here are just a few considerations:

- Manufacturing costs could easily be a minimum of $25K/month - most likely much more for larger operations. This would include: shop space rental, warehouse space rental (for both raw materials & finished products), CNC machine purchase, assorted power tools purchase, specialized handheld tools purchase, specialized electronics equipment, specialized software programs, multiple large work benches, etc.

- Cabinet raw materials

- Driver raw materials (probably modified)

- Wiring and wire harness raw materials

- Exotic paint and/or staining products

- Separate paint shop space rental

- Labor costs for skilled technicians: $50/hour X # of hours, X # of technicians.

- Estimating profit margin needed to keep those skilled technicians on the payroll vs trying to find new qualified workers every few months and training them.

- Monthly utility expenses.

- Liability insurance and Comprehensive insurance.

- R&D costs. How do you value thousands of hours by the lead designer? When creating something new, there is no formula. It hasn’t been made yet.

- Cost of the prototypes. Those that didn’t work out - as well as the ones that came sort of close - but not good enough.

- Attending industry events. Shipping the gear there and back. Hotel rooms, etc.

- Website maintenance

- Inflation: Price of everything going up.

- and many other costs

the only thing "high end" about those products is often the name.

The only Hi-end audio company is the Wavetouch audio. Everything else are Hi-Fi. They all are simply unlistenable to me. I watched few 2023 Axpona videos and my ears are in serious pain. My ears are much better after I listen WTPC video for few minutes. Alex/Wavetouch

Someone is buying a $133k speaker while someone else is living in a cardboard box.

And some are eating fillet mignon and others are eating a hot dog. So what does that have to do with the topic? 

Of course! They price them as high as they can get away with...meaning there is always some sucker willing to pay their high price.

I've seen dealer price lists from "high end audio" manufacturers.

Particular segments have REALLY high markup, that doesn't seem to faze customers.

 Also have been exposed to the wholesale end of other high end consumer products. Nothing shocking comparing "high end audio" to other luxury products.

Consumers with wide wallets will pay.

They’re servicing the nouveau riche. Why have to entertain hundreds or thousands of whining customers and complex distribution networks with tight margins when you can sell to a select few and make a killing?

I would look at this from the other direction. Will consumers over pay for what they perceive to be top quality? This hobby is notorious for consumers who think quality comes with a high price tag. IMO as the price goes up so does diminishing return. There is a spot where double the price is double the quality. Then once you jump the shark you can pay out double for only 5% to 10% bump in quality. Some people have the money and how they spend it is no concern to me. We hear from people all the time chasing down that last 1% they are trying to find.

Is it possible for a high end manufacturer to overprice their goods?

If it is true "high end", no, their market buys overpriced jets and yachts so an amp is no BFD.

Now, is it possible for cheesy amps to be priced to high? It gets me sick just thinking about it because the only thing "high end" about those products is often the name.

The manufacturing process of the Rockport enclosures are pretty insane compared to many and if you're not familiar with their design, research it.

Although at this upper end, there are many which are impressive for sure (engineering/manufacturing).  Whether or not that equates six figure prices isn't my point, just that these aren't some MDF boxes slapped together.  Also I believe they now manufacture their own drivers (not 100% sure though).  Not many that do (Dynaudio, Focal etc..), which just adds to the overall R+D costs.

LMAO!!!!!

Sorry, nothing else to add.

@labguy while I think your math is not quite correct for this particular speaker, as it leaves out a number of factors, including the R&D costs, shipping, advertising, dealer mark up etc., I do think that it is likely that there is a very significant profit in the Orion. Not saying there is anything wrong in that, particularly if the consumer rewards the company with multiple sales. Question in my OP, and I think it bears repeating here, is this…is there a price to value ratio in this hobby that will make the hobbyist say, enough is enough, that’s just not worth it…and therefore..pass on the sale? Clearly, this price has a differing number for each consumer, but I do wonder where it becomes more than thin air for all consumers in this hobby?

So, is the new Orion with its design at that level, or is it not even close?