Let take a product to explain this topic, clothes. A tee shirt can be ranged from as cheap as $9.90 to few hundreds dollars. This leads to one problem, why does the price differ so much? Lets look closely to their differences. For a $19.90 shirt, it has a normal clothing material with a normal design of the shirt, which means cheaper cost price of making the shirt. While a hundreds over dollars shirt has more expensive cost price as the process of making the shirt is more complicated and expensive.
Scenario: A well established branded shirt company that sells it products over hundreds dollars. Demand from the market is still high despite high selling price. Below are some points why it has a high cost price in making the products.
- Material - The quality of the clothes has to be different and special to persuade people to fork out the extra money to buy. Clothes technologies such as the well-known sports attire "Dry-Fit", which prevent the attire from being sock of sweats and cause discomfort to the wearer. Research and Development (R&D) is required to find out these technologies, the cost of research is expensive.
- Designs - Great design of the shirt means the company have employed groups of well known designers to design. these designer salary does not come cheap, thus revenue increase for the company. This is also one of the factor that increase the cost price of the product
- Complexity - Not every product are manufactured from one place from the start to scratch. Most of these products have to "fly" over places after places. Let say that the company have many factory in many different countries that specialize working on different jobs. Japan's factory helps to develop shirts that has "Dry Fit" features in it, then the shirt will "fly" to Italy for the factory to design and imprint on it, after that it will "fly" to China for packaging of the shirt. The list goes on and on.... The longer the list, the more the cost price of the product. Thus, selling price would be larger.
- Commercialize - A branded company has to be successful in this area. Commercialize, such as media commercials, campaign and having well known spokesperson to represent their company. These revenue is expensive and it helps to boost the company's popularity and thus, branding.
Brands are important for a company to succeed. Referring to the Article that I found recently, the writer has stated that if Apple, a company that is well known for the iPod, has not been branding exceptionally well, this company would not be even exist 10 years ago.
1 comment:
Interesting. But on a personal note, I'd go for a branded product for its quality. But it all depends. A branded electronic gadget that costs alot makes more sense than a tshirt. Which means, not all products are good because of its brand.
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