Now here’s a thing. The price you pay for something is not simply a percentage uplift on what it costs you to make that thing.

There are a lot of factors to take into account, not least amortising the costs of development.

But there are also other, intangible, factors such as the fact that a premium price often conveys prestige. The exact same product, made in the same factory, will cost more when it has a brand attached than when it is sold under an own label.

One that often gets missed though is when price is used to manage supply. My A-Level Economics tells me that as price goes up demand goes down. If you have a product that you know is going to be in severe constraint, for instance because there is not enough global capacity to make sufficient OLED screens of a suitable size and quality, what do you do?

A: Set your price low and then have customers complain about having to wait months.

or

B: Set your price high, position it as a premium product, and suppress demand to a manageable level while global capacity ramps up.

Oh, while you are doing B you might as well introduce product that you do have capacity to build to divert that suppressed demand to, thereby keeping customers with a ready supply of things to buy.

See Mr Handa, I was listening all those years ago 🙂