It's only smart if it's also reliable and sufficiently functional. The same goes for basses - if you can get a bass that is sufficiently functional and reliable for $500 and a $1000 wouldn't inspire you in any way to play better or doesn't have better functionality or reliability then $500 is the right price.
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How much are bass guitars truly worth?
- Thread starter el_Bajo_Verde
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It's only smart if it's also reliable and sufficiently functional. The same goes for basses - if you can get a bass that is sufficiently functional and reliable for $500 and a $1000 wouldn't inspire you in any way to play better or doesn't have better functionality or reliability then $500 is the right price.
According to classical economic theory that's what a company should do provided (profit per unit) x (units sold) is maximised.
E.g. the iPhone has a relatively high margin, and it doesn't sufficiently affect sales to reduce Apple's overall profit too much it would seem. Other phone manufacturers at the lower end have slimmer margins as they cannot command a premium.
Obviously selling all products at a loss isn't a good idea, although companies sometimes do sell some things at a loss when trying to establish market share, the classic example being game apps on phone, where the free version has a cost to initially produce but the hope is that this loss leader creates sufficient network effects that people then step up to a higher margin version or use in-app purchasing. Also if you have a large capital investment in plant then selling some or all items at a loss for a period of time may make sense as ceasing to produce means that all revenue is lost, loans on buildings, or whatever, cannot be made and the capital investment is lost as a result. So for a bass manufacturer if the current cost if $101 then selling 500 at $99 is a $1000 loss, but producing none might mean $2000 of interest repayments cannot be made, so the rational short-term decision is to sell at $99 and hope conditions improve. Given the thin margins on some items this can happen as a small currency fluctuation can wipe out profits for a period in a particular foreign market (or equally might increase it) or input costs.
Even if the profit margin is healthy then reducing the input cost, if it doesn't lower quality unduly and impact reputation and sales, will increase it if the price commanded for the finished item can be maintained.
All value is based on belief. A bass is worth what someone is willing to pay for it. Just like the wood, the time of the employee to cut the wood, the paint, the electronics, etc. are worth exactly what the buyer and seller believe to be a fair price for those things.
Exactly- I can afford to play whatever bass I want- from Dingwall on down, I choose to play a $500 or so bass. Because to me the marginal utility jump doesn't justify paying 10 times the price. (at this point)
That's not the point, and I'm sure you know it. The point is you pay whatever you want to pay, and amortize it by using it.
If you can't afford the super-expensive one, well that's what dreams are made of.
He just applied it to car manufacture, and AFAIK Oldsmobile did it before Ford. He adopted it from a meat packing plant that started in around 1850, and that was certainly not the first instance of the assembly line. The oldest example of something looking like an assembly line was 12th century Italy for building warships, and there were quite a few early 19th century examples.
I really wasn't sure what point Ted Turner's father was trying to make as it presupposed having the purchase price of the item. The point maybe holds if you have the purchase price, but I think the man made an invalid point as it wasn't sufficiently qualified. The point about net present value another poster made also holds, and also risk, liquidity, etc.
If you pay $4000 for a bass when you are not able (due to skill, gigging profile) able to extract more value from it than a $1000 bass then you've locked up $3000 of capital which cannot be invested, be used for a rainy day, etc. or used for an amplifier that might have been a good deal, etc., so they are probably factors to be weighed up. If those other factors are not in your favour then a $4000 bass might even have a negative value.
It only makes sense that you cannot purchase something you cannot pay for.
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Thats a lot of economics thrown into a single breath.
Apple and the iPhone are in a market of rapid innovation and equally rapid obsolescence. There is a lot more R&D expense that must be factored in to the cost. As sales increase the R&D expense decreases per unit. This is not a good model or market to compare to bass guitars.
The "freemium" game software model is an entirely different business model based on driving consumption. IMO it is a different conversation.
Finally, bass building companies in distress might do all sorts of tactical things to dig out of the hole, but again I don't find that relevant to how market price is set.
There are probably more corner cases as well, but generally speaking in a slow growth or zero growth commodity market prices are determined by cogs and margin, and then sales data influences future product strategy. That is why you can look at the price book up and down the Fender product line (as an example) for the past few decades and see predictable and rational trends.
In my view the price pressures on the major manufacturers is likely more due to decreasing interest in electric guitars and basses as the younger generation embraces other avenues in music performance, and less due to any fundamentals dealing with cogs, margin, automation, assembly lines, etc.
Ok, points well made. I should have said "is creditd with" and made an emphasis on "modern".
My point is simply that what makes a contemporary assembly line excellent for cars has little in common with asembly-line style production of inexpensive basses.
Paul Herman and the folks responsible for Wal basses believe firmly in the value of letting the neck especially settle in for a substantial amount of time. I'd sign up to be a fly on the wall if you were ever to have that debate.
Value is subjective. The store price is of course somewhat indicative of the value of an instrument, but a better approximation would be its used price, especially when sold in the "like new" condition, and the time it took to sell it factored in as a discount. Then you can aggregate by make, model, configuration etc.
It was more that I was disagreeing that cost-plus is the general mechanism by which prices are set, not arguing that bass guitars are in any way similar to phones, just using that and software as examples showing that cost-plus is often not the method used, or at least for part of the time.
I'd disagree on that. If a company has a competitor selling basses in a tight market at $100 and due to various factors it's costs are $101 then selling at $101 might result in zero sales, so what the market will bear is an important factor. Obviously it might also seek to lower it's input costs to enable it to sell at $99 again rather than sell at a loss, but if it's not possible to do that in the short term (e.g. it would require retooling and the capital for this isn't available) then selling at a loss for a period might be required. It certainly happens on occasions in many industries.
Although I've given the example above as a low cost production, at higher prices skilled staff are probably more of a factor in the cost of each instrument, and retention of skilled staff can also be a factor for many industries in being prepared to sell at a loss for a period, as laying off and rehiring staff is disruptive, with no certainty of being able to rehire the same quality of staff or get them up to being fully productive if new to your company.
That could be true. I don't really know what 'young people' listen to these days. I probably wouldn't consider it music and just ask them to get off my lawn
Ford certainly made it much more widespread by its example (I think Ford actually hired someone in to implement it rather than doing it himself, but he made that change happen, hence using the impersonal pronoun for the company not the man).
A luthier friend of mine is of the same opinion, in the sense of preferring to use very well seasoned wood, as long as possible, which does increase his raw material cost a fair bit I suspect. I suppose the genius of Fender was using engineering principles of standard, removable components that could be replaced if defective which means that it is possible to swap necks on mass produced items if they become defective, meaning raw material quality tolerances can be widened provided the likelihood of replacement is not too great as to damage reputation. Wal's operating in a premium market, so the likelihood of replacement needs to be much closer to zero.
