Thursday, April 22, 2004

Why computers, printers, and cell phones seem relatively cheap

I often say to people that the reason why seemingly large-ticket items are so cheap these days is because they will really make their money back on the accessories and services - printers are a prime example.

The HP printer mentioned above sells on HP's site for $150. Ink cartridges run $20 for black to $35 for color. This means that if you go through 3 sets of ink in a year, you've already exceeded the purchase price for the printer. I am sure that the profit margins on the printer are most definitely a lot smaller than those on the ink - why - because price isn't based on cost, it's based on value.

This is why printers don't come with USB cables, and buying one in the store can cost you significantly more (say $20-30) than finding it on ebay (say $5-10). Because we perceive that price as being reasonable for the value we're getting.

I was once privvy to an invoice sheet at a major electronics chain and learned that the margin on the $300 printer I was buying was about $30 bucks - 10% while the $20 printer cable the margin was $18 - 1000%!!!!!!

The moral of your story - save those printer cables!

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