UK prices and US prices

[Alan Solomon]

I just read Bob's June editorial, I guess I was one of many who, when he first exploded, told him to consider the possibility of cock-up rather than conspiracy.

But I can throw some light on the pricing issue, because I've been there.

When we launched Dr Solomon's Antivirus
Toolkit in the US, one of the things we had to do, was decide what price it should sell for.

Pricing software is an art, not a science.
Hardware isn't really any different. Because
the cost of making it, is a few dollars per
copy, plus the fixed costs of design, programming, etc, plus the costs of marketing. You do not price this stuff
according to costs, it just isn't possible.

The fixed costs were already being paid
out of UK revenue, and weren't likely to
be increased much by a US version (yes, there were some minor differences, especially in the packaging). The marketing costs - who knows how much? Marketing costs per unit, depends on how many units your marketing sells, and you don't know that in advance.

What I'm saying here, is that costs aren't
actually very relevant.

So, the first thought was, let's just multiply the £ price by about 1.6 to get a dollar price.

Then we compared the price that gave, with the prices of competing products in the US, and found that we would be a *lot* more expensive.

So we set the price by looking at competing products, and so we wound up with a US
price that was somewhat lower than the UK price.

When the internet started to get big, we
started to worry about this price differential, thinking that people in the
UK would buy the cheaper product from the US.

It didn't happen.

I think I know why. It's a *lot* more hassle to buy abroad. Some US vendors won't accept "foreign" credit cards, not realising that they're the ones who are foreign, not us.
Shipping costs a lot more (which is perfectly understandable) and you might expect it to take longer (actually it doesn't). But then
the goods come through Customs, and you get hit by a bill for VAT, a bill for duty, and the carrier (UPS or whoever) adds a charge
for paying these for you.

Here's a tip. If you're in the US, and you
buy something, and it cost $100 or so, you
can import it duty-free (check with Customs
for the current limits on duty-free import).
I bought a NTSC VCR that way. I was going to declare it, but then I read the limits notice, and found I didn't need to.

Technical support - suppose you have to send the unit back for something to be replaced?
And any phone calls for support, will be to the US, because if you phone the UK distributor, he'll probably say "If you didn't buy from us, we won't support you".

Good example - I just bought a Polaroid scanner. I could have gotten it 20% cheaper
by buying in the US. Maybe. But shipping, VAT etc would soon swallow that. I'm having some problem with it. The guy from Polaroid is going to visit me here to see the problem (it's a problem with scanning, describing it is difficult, seeing it is easy).

If I'd bought from the US, would the US company have sent someone across the pond?

So - I'm not saying "don't buy from the US", because I do, quite often, and it works. I'm saying that you have to consider all the costs and benefits.



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I got the Queens Award for Technology for my software

[Robert Young]

>So we set the price by looking at competing products, and so we wound up with a US
price that was somewhat lower than the UK price.<

But (video editing) products are "competing" in the UK too - since there are many of them available, yet this is not driving prices down, as it clearly does with general computer products which are more universally used. The fact is that consumers in the UK are firstly much less aware of both the choice and availability of video products, and more importantly are simply too polite or too small in number to challenge the manufacturer's huge premiums on their UK-marketed wares.

It is also clear that Video Editing makers are literally forcing UK suppliers to sell at inflated prices under threat of cutting their supplies altogether. They could not possibly get away with this in the US. The price differential has resulted from a quite ruthless exploitation of the 1.6x factor of simple currency exchange. Example: ALL Pinnacle products are being offered in the UK at roughly the same numerical figure as those in the US, but with £ signs in front of the figure instead of dollar signs. This is utterly outrageous.

A rather one-dimensional and cliched argument for this is that a product is worth what the market is willing to pay. But the UK market for video products is, at present, a niche one, and much weaker than its US dynamic equivalent in this sector of the computer industry (same goes for digital camcorders and hi-tech music equipment), and a tacet price fixing agreement amongst producers is therefore more possible.

The solution, I believe, is to greatly increase awareness of the large price differential and to encourage potential purchasers to protest both to their local suppliers and directly to the producers. I am not at all against hardware/software producers making a healthy profit, for it is in all our interests that they do so. But it shows a cynical disregard for UK customers when, for instance, even an entry-level package like Studio400 manages to be $199 in the US and £199 in the UK against a proper exchange rate price of approximately £121. This is a ludicrous difference in a market which is "meant" to be global. I urge all UK consumers to stand up and be counted!

Regards,

Robert Young

[This message has been edited by Robert Young (edited 15 June 1999).]

[This message has been edited by Robert Young (edited 15 June 1999).]

[Alan Solomon]

Studio 400 in the US - $189 to $212
(http://www.pricewatch.com)

Studio 400 in the UK - $155
(http://www.dabs.com) = $248

So - about 25% more expensive in the UK.
Possibly other vendors are cheaper than Dabs, I haven't checked.

OK, this isn't wonderful, but it isn't the 60% premium that you referred to.

The way to exert consumer power, is to *shop
around* and buy the same product from whoever is selling it cheapest.




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I got the Queens Award for Technology for my software