What’s wrong (or right) with this pricing model?


samsung-printer.jpg

I bought a small personal laser printer last year. It was on sale at the local electronics chain and cost me all of $79. It is small, less than 1 cubic foot in size, weighs less than 10 lbs, has a 1200×600 dpi print resolution, and is rated at about 22 ppm print speed. This is less than 5% of the price I paid for a far less functional laser printer 15 years ago. Then, I paid over $2000 for a 6ppm, 300×300 dpi printer, that must have weighed 30 pounds.

My little printer came with a toner cartridge that has only now begun to run out, over a year later. I went online to purchase a new toner cartridge. I was surprised (should I have been?) to find that a new toner cartridge cost $99. Now this cartridge will print for about twice as long as the original, but it’s hard for me to get over the fact that the toner cartridge costs more than the printer. How can I purchase a printer and toner for $79, but a replacement toner cartridge costs $99. BTW this is about the same price I paid for toner for my original $2000 laser printer 15 years ago.

Now, I’m used to this scheme with ink-jet cartridges — it’s the old razor blade model. The idea is that you’re not buying a shaver, but in fact, a subscription of sorts, to blades. It’s a recurring revenue model and seems to work for razors. In the context of shaving, it is the blade that has the value — consider the 5 bladed, Fusion razor as an example. If I want a close shave, I focus on the blade. The handle has little value except to enable the blade to do it’s job, but if I like the blade, I will buy and use more.

But in the printer world, it doesn’t apply that easily. At least it did apply 15 years ago, but doesn’t apply today. Why not? If we look at the printer as the handle, and the ink/toner as the blade (recurring revenue stream), it is the handle (printer) that has the real value. The toner/ink only enables the printer to do it’s job.
Also, the “handles” get better and better every year. My little laser printer from last year has been replaced by a better model that is faster and has a couple of additional features as compared to mine and costs about… you guessed it…$79.

But even more important, there are many other printers on the market that I can choose from. Aside from basic laser printers such as the one I purchased, there are colour printers, printer/scanner/copier combos, networkable printers, etc. etc.

The cost of these printers is, in my opinion, incredibly cheap, far below what I believe it costs to make them. I saw an Epson color ink-jet printer/scanner/copier on sale for $29 recently. Think about that. What other technology can I get for $29? Not much. A router. 2GB of RAM. Some flash memory. A video game. A full single colour ink jet cartridge!

So what did I do given this dynamic? Instead of buying a new toner cartridge for $99, I decided to spend $10 dollars more and bought this baby. It prints at 2400×600 dpi, scans, copies, OCRs text and much more. And yes, it comes with a toner cartridge.

So, here’s the question. How viable is this pricing model? Granted, I’m a light user of printers at home. And if I run through 1 or even 2 printer cartridges a year, I’m going to benefit every year from better printers at cheaper prices. I fully expect that a year or two from now, I will be able to get fully networkable, colour laser printer for about what I paid for my monochrome printer this year. How is this sustainable? Or am I in the minority of users who don’t print very much and thus can benefit from such low prices?

Thoughts?

Saeed

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7 responses to “What’s wrong (or right) with this pricing model?

  1. Pingback: Eco Drive Blog » Blog Archive » What’s wrong (or right) with this pricing model?

  2. At this price, it is just easier to buy a new printer every time and save the $20. In fact, I did this for a couple of years when I just needed a basic ink-jet printer. I went through 6 printers in two years. It was just easier (and cheaper) to junk the old one every time.

  3. Junking the old printer is a concern to me. I still have my basic laser printer, and in a couple of weeks, the toner will run out of it. At that point, what do I do with it? I’ve considered donating it to my kids’ school. Pass the buck so to speak. Beyond that I’m not sure. Any suggestions?

  4. Susan Bridges McKay

    The idea of junking the old printer and getting a new one is *logical* given this pricing model, but it is shockingly wasteful. It puts me in mind of an article I read yesterday about how everyone is junking perfectly good CRT TVs in favour of flatscreen LCD or plasma models. Many people are, of course, making an effort to find homes for their old TVs… and printers… but it’s quite rightly disturbing to waste something that isn’t broken.

    My solution to this kind of problem is to wait patiently for a flatscreen TV until my CRT finally gives up the ghost… and to fork over the extra $20 for a new cartridge for the cheap printer. After all, I spend more than $20 at dinner some nights. Given that a new cartridge can last a year or more, what’s $20? Consider it the price you pay to avoid the uneasy feelings you’d otherwise have about throwing perfectly good stuff away.

    Or let’s hope, at least, that most of us would have those feelings. My $0.02.

  5. Susan,

    Thanks for the advice. I don’t simply want to throw away the older printer. I would likely give it away, though, as mentioned, I’m passing the buck to someone else. i.e. they now have the dilemma of spending the money on the toner cartridge or buying a cheaper equivalent printer new.

    It goes back to the pricing model. When the consumables cost more than the base product + consumable, the pricing curve is out of whack. If the companies weren’t trying to gouge me on the consumable, I’d happily pay for it and not waste the original printer, but from a price/value perspective, it doesn’t make sense. And I’m assuming their profit is in the consumable, so how are they making money? The $29 Epson ink jet printer is another similar example. It’s clearly an incredible loss leader but without getting any commitment from the purchaser to buy more Epson ink, it seems like a money losing — or at least really inefficient — business model.

    Do you know of any other examples of similar kinds of strange pricing scenarios?

    Saeed

  6. Don’t forget that often the “new” printer comes w/ a very small amount of ink or toner. It appears to be a standard cartridge – but it’s half full. The manufacturers have learned – why provide a full supply when the customer is going to need to purchase a new refill in the near future.

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