Nissan 370Z Forum - View Single Post

semtex · 08-06-2009, 10:38 AM

You know guys, there is an upside to 'high' prices, however one chooses to define that. High prices provide an incentive to produce quality parts. Think about it. Imagine that you're in the exhaust manufacturing business, and market research indicates that 370Z owners are cheapskates who are, on average, only willing to pay, say, $50 for an exhaust. What incentive do you have to actually put the resources into producing a quality exhaust? In fact, you probably wouldn't even be bothered to produce any exhaust for this car. It's just not a market worth tapping into. Now imagine that 370Z owners are, on average, willing to dish out $1500 to upgrade their exhausts, and you happen to know that each exhaust will only cost you about $600 to produce (incl. development costs, material, labor, marketing, etc.). In other words, there's a real profit opportunity here. Suddenly, there's an incentive to make an exhaust. And not just any exhaust -- there's an incentive to make a high-quality exhaust, because you know that with margins like that, there are bound to be others who want to get in on the action for a slice of the pie. i.e., there will be competition, and competition tends to drive quality.

I guess the point I'm trying to make here is that profit, 'excessive' as some may find it to be, is what drives production and the availability of goods and services. Indeed, the whole problem with socialism (IMO) is that it fails to recognize that without profit-opportunity, there is little motivation to be productive.

Another upside is that high prices have a natural poseur-prohibitive effect. But I'll leave that one for another day.

08-06-2009, 10:38 AM	#34 (permalink)
semtex A True Z Fanatic Join Date: Jan 2009 Location: Behind enemy lines Age: 54 Posts: 5,995 Drives: People to drink Rep Power: 32	You know guys, there is an upside to 'high' prices, however one chooses to define that. High prices provide an incentive to produce quality parts. Think about it. Imagine that you're in the exhaust manufacturing business, and market research indicates that 370Z owners are cheapskates who are, on average, only willing to pay, say, $50 for an exhaust. What incentive do you have to actually put the resources into producing a quality exhaust? In fact, you probably wouldn't even be bothered to produce any exhaust for this car. It's just not a market worth tapping into. Now imagine that 370Z owners are, on average, willing to dish out $1500 to upgrade their exhausts, and you happen to know that each exhaust will only cost you about $600 to produce (incl. development costs, material, labor, marketing, etc.). In other words, there's a real profit opportunity here. Suddenly, there's an incentive to make an exhaust. And not just any exhaust -- there's an incentive to make a high-quality exhaust, because you know that with margins like that, there are bound to be others who want to get in on the action for a slice of the pie. i.e., there will be competition, and competition tends to drive quality. I guess the point I'm trying to make here is that profit, 'excessive' as some may find it to be, is what drives production and the availability of goods and services. Indeed, the whole problem with socialism (IMO) is that it fails to recognize that without profit-opportunity, there is little motivation to be productive. Another upside is that high prices have a natural poseur-prohibitive effect. But I'll leave that one for another day. __________________ "There are no small accidents on this circuit." -- Ayrton Senna 316.8whp & 248 ft/lbs (Dyno Dynamics) \| 319whp & 256 ft/lbs (DynoJet) (04/23/10) Stillen G3 CAI, CBE, Pulley / F.I. LTH / GTSpec Ladder Brace / Setrab Oil Cooler / UpRev-tuned by Forged Perf.