Do people actually think that retail price is a function of production/R&D cost? It's not, never has been. Dropbox charges 20$ for something that consumes marginally more ressources and incurs identical R&D costs when compared to the 10$ product. Chip manufacturers do this all the time. Discounts for electronics and groceries are fully artificial.
A much more realistic model is price as whatever the market can bear. I sincerely doubt that there is a moral obligation to set price points in any other way.
[This may be relevant: http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...]
Sennheiser in this case is being fraudulent by claiming that there is an actual difference between the two models while in reality they are exactly identical apart from a tiny piece of foam clearly put there only to defraud customers that want better sound and are prepared to pay for it.
To quote the amazon page for the 595's:
"The HD 595 is the top-of-the-line headphone of the audiophile 500 series range, boasting a new level of comfort and sound quality. Features include our E.A.R. technology and a highly constant,compressed cellulose fleece to reduce total harmonic distortion. Velour ear pads and high-quality leatherette headband both provide outstanding comfort."
compared to the 555's:
"A comfortable, high-quality headphone system"
Don't you see how this is fraud at work? Nowhere in the description of the difference between these models is the piece of foam mentioned or hinted at. To the contrary, the description of the 595's indicates that they include ADDED technology to improve sound quality and comfort. Which is full-on lie.
No, pricing is not connected to incurred cost. That's not the issue.
Nowhere in the 595 description do I see wording to the effect "exclusive to this model". Nor do I see anything in the 555 description that says it is missing features of other headphones in the line up. So where is this full on lie?
If there's something you're not telling someone, which would really piss off that someone, you may be guilty of a lie of omission.
Would you feel better if they were both identical, except for labelling, but carried different prices?
I agree it's not fraud, though, at least unless their advertising materials made false claims about the products' differences. For example, if they claimed that the higher-end headphone removed certain artifacts, but didn't disclose that they had created those artifacts in the first place, that would be misleading at best...
In a well-functioning market, the price should be driven by
competition towards a level a bit above the production/R&D costs
How do you decide the strategy for recovering a fixed cost of millions of dollars from the price of the individual product? Price all DropBox accounts at $10 and you may not have enough margin dollars per account to cover your R&D. Price all DropBox accounts at $20 and you may not have enough volume to... cover your R&D.
Assuming the incremental storage for 50 GB costs $2, it's ok to recover $8 and $16 respectively for fixed costs. Just because they are fixed doesn't mean that the user shouldn't have to pay for them, or that it should pay in the same amount. You could argue even that the R&D should be paid in a 2:1 ratio as well by those benefiting from 100 GB versus those benefiting from 50 GB. It's the risk of the entrepreneur to decide where to set the bar so that, at the end of the day, the margin multiplied by the volume recovers the fixed costs.
Competition driving the price towards a level a bit above the R&D (fixed) costs doesn't work at all for products where the marginal cost is trivial but the R&D expenditures are huge. Why Ask, with 1-5% market share, cannot compete with Google Search, which has more than 60% in the US market? Crawling the web, building the index and removing spam costs more or less the same in terms of R&D if you aim for an approximative identical standard of search quality in the search engine. But having a market 10 times greater or 2 times greater (in Google versus Bing) means that one allows himself 10 times or 2 times the total fixed costs at equal levels on a per user basis. No wonder Bing losses millions while Google uses the ad revenue to subsidize its other operational branches.
In a "well functioning market" buyers would be aware of what sort of product could be built with what sort of development time, and would pay for the work. (I think this is what's happening with Minecraft - the people who bought the Alpha see themselves as funding its development).
My take on it, anyways.
Were it something important that I needed for my job, or were the cost less negligible, there's no way I'd throw a bunch of money at something and hope the inventor/developer/designer finished it adequately. If someone walked up to you and said "I'm going to build an electric car to compete with Tesla Motors, give me $80,000 and you can have the first one" what would you tell them?
EDIT: Kickstarter too. I've invested small amounts of money in things that I think are worth supporting, with the hope that they get finished well. But I'm not counting on it. It's a risk vs reward analysis that I'm willing to try, but only on small scales.
Pricing based on cost is irrelevant because that has nothing to do with the value created or what people are willing to pay. E.g., why did Sony and MS sell the PS3 and 360 below cost for so long? Well, no one would have paid the $1000 plus margin that Sony would have needed.
On the other end, do you really think that bottle of Coke you buy is priced anywhere based on the cost of manufacturing? The ingredients in that cost about $0.02, but they charge $1 at the store. The 20oz bottle has maybe an extra couple cents of cost, but they charge twice as much.
To your point, Ask could have 5% share of volume, but if their ad platform was better to the point that they could charge 10x what Google could, they would be doing pretty well.
I remember one day going into the convienience store near my office and finding that all the coke prices were identical, 1.69 iirc. The small bottle, the widemouth litreish one, the two litre, all the same price.
2) you still get the point. it's then even more clear that it has nothing to do with the underlying cost.
Luxury goods have never been "well-functioning" markets by the definition you appear to be using.
It is somewhat unfortunate as a consumer that the market has turned out that way, rather than as a more competitive market. It makes shopping for audio equipment a lot more time consuming, because prices don't have much to do with either production cost or quality.
This seems to me why people complain about IP laws. They encourage one type of good behaviour - innovation - but also discourage another type of good behaviour - sharing.
And they make sure to keep their selling arguments to "musicality", "passion" and "emotions" because that is something you can easily sell, it gives you a very unique selling position and is virtually impossible for the customer to measure and compare.
The real question that they should be asking is should they have just sold them all for $150 and not risked the bad PR? They may have sold enough at the lower price for it to come out a wash, and not be embarrassed by something like this.
The risk was minimal. Everybody does it. The odds of them getting targeted weren't significant, given the pool of possible targets. You could spend every hour of every day cataloging all the places this occurs. And this still is yet to be a big deal, even.
(Please note that when I say everybody does it, I mean simply that everybody does it, no more, no less. I'm not passing judgment about the virtues or lack thereof. It's just the truth. Oh, and everybody doesn't literally mean every single person, but this is a well-established meaning of the term.)
Air needs to move for sound to exist, even in the direction away from your ear. If stuff's in the way, the sound's going to be muffled.
Does it looks like? They're doing it!
I know in a limited range it's good to have a better and a worse to sell the median, but that doesn't apply here. They have many models above and below these two.
The trick is to effectively capture that surplus without pissing off your customers or making them feel they're being ripped off.
There is no need when they have headphones much cheaper, and MUCH more expensive than these two.
I do agree with your reasoning if the above wasn't so.
and who claimed that? there is however a moral obligation to not lie to your customers.
if anything, the crippled version is actually more costly to produce, since some R&D went into making it crippled.
I do, however, find it ironic that the $199 555 model physically contains more "parts" and more manufacturing costs than the $349 595 model.
Curious if anyone has thought about the correlation between shareware/trialware software and these headphones, being that HN readers are generally more software than hardware people. I mean, the only difference between my 30 day trial of Something.app and the unlimited version is a 32 character string, and depending on my current morality level, I could find any number of those strings floating around the internet.
That's true, but imagine what they could do differently. They could have a whole separate assembly line to make the cheaper headphones out of different material, for example. But ironically, this might actually drive up the cost of both headphones, since they'd lose the economies of scale that they have now.
I agree that it seems wrong to intentionally make your headphones worse, but it might be the most cost-effective way of producing a cheaper set, given that you're already making the expensive model.
When I buy headphones I expect more than a license to use technology.
Why do you believe that? A company has no moral obligations to its customers in any way.
However everything we humans do has moral implications, and company that lies is clearly behaving in immoral way. Then it's up to a customer to decide based on her morals what is the right approach to dealing with such company.
It really doesn't matter how broken the security is, doesn't it.
Rather than getting angry at the company for segmenting its market, why not enjoy the fact that you can buy their top-of-the-line product for a fraction of the price? Rather than raise a stink and force them to do something about it, why not stay relatively quiet about it and let those of us in the know profit from it?
I'm still upset that Baush and Lomb got raked over the coals so publicly for packaging the exact same lenses as monthly, weekly, and daily wear at different prices. I would have been perfectly happy to wear my "daily" lenses for a month each, thus saving several hundred dollars a year. Instead, a witch hunt was raised and they were forced to actually develop a flimsy contact lens to sell cheaply.
It's a good thing, and now you know about it. Try not to ruin it for the rest of us.
I toured professionally as a drummer with a tech metal band and played with a click track every night. I used Ultimate Ears (high-quality earbuds) with ProTools through a rack amp. I had guitar tracks going behind the click track (metronome) for reference and let's put it this way... the reference guitar tracks had to be louder than the actual live amplifiers/PA and the click track had to be even louder than that. On a scale of 1 to 10, relative to the loudness of the vast majority of electronic music players (computers/mp3 players/phones/etc.)... I'd say my click track was at least 17. It hurts my ears just thinking about it now... constant TICK TICK TICK TICK TICK for 30 (sometimes 45) minutes every night for weeks at a time! I don't wish that upon my worst enemy.
If it was another style of music there's no doubt I could have had it turned down to a fraction of what it was... but it was tech metal so it was always loud and heavy and all over the place. Most of the time I'm playing upwards of 300 bpm and the tempo and time signatures were always changing so the click track was necessary. I remember I tried turning it down a few times and it didn't work out so well haha... Bye bye hearing! I miss you.
I feel sorry for the patrons of the venues you played in. I do care about my own hearing, and I hate it when I forget to bring non-distorting attenuators of some sort to a place which makes a goal of preventing conversation even in shouts.
Now that I think about it iirc, it was actually mostly my drums (mostly cymbals) that I had to drown out... the guitar cabs/PA levels varied depending on the venue setup.
Do you think you could learn to play with a tactile click track? I always thought it would be interesting to build a thing you strap to your body that taps/shocks instead of blasting your ears with clicks. It doesn't help with backing tracks, but it might keep someone a bit more sane.
Think it would work?
People are talking about market behavior and what not, but I don't feel like Sennheiser is behaving in good faith here. They are intentionally relying on opaque information (this is obviously news to almost everyone), and making price the only way consumers have to reliably differentiate between the products (you can't even test drive the products to tell). Also, with respect to the "luxury" part of the discussion, they are competing against themselves, the branding and "Sennheiser" name you get with the 595 or 555 is the same.
I've been considering getting 800's, I'm a huge Sennheiser fan. I think this has put me off though (even knowing that everyone else probably does the same thing).
Even if they can't tell that the product is better (say, because they can't hear the difference), I think the difference is night and day.
Sure you can, the same way you'd test drive a car: walk into a brick & mortar store.
The baseline in this discussion is $200 headphones.
Do you really want to talk huge markup?
Sure you can. Under EU Distance Selling Directive (97/7/EC), you can return any product you buy online within 7 days, even if you've just changed your mind.
HD 555 MSRP in the States is $170, and you can buy it for $85 on amazon.com. Right across the border, the MSRP is 200 CAD (202.5 USD) and you could get it for 180 CAD on amazon.ca. In other words, the discounted price in Canada is higher than the nominal price in the States, which in turn is almost twice what consumers actually pay for these headphones.
- Take a look at this wonderful mug with Mickey Mouse. It's worth 20$
- I'd love to buy that but I only have 5$
- Would you pay 50$ for it if the mug didn't have handle?
- Yes I need a mug, but handle is so convenient...
- I can take 5$ (as he breaks of the mug handle)
It's not about market it's about psychology of human exchange. Someone destroys value with no purpose other than better conning his peers. How could that not infuriate specimen of social species?
Still it's lasted this long, one pair 6+ years, another going on 3 now, so I'm pretty satisfied with them.
Buy a $20 pair of Koss KTXPRO1 http://amazon.com/dp/B00007056H
Read the reviews. They sound almost as good as $200 headphones.
I own a couple of Sennheiser, and I prefer the Koss unless I need closed cans for some reason.
I had no idea this was a phenomenon -- I just got lucky with a random Rat Shack purchase. As a 90th percentile audiophile (with industry experience) I can vouch for these 'phones. They are the real deal. I am ordering my replacement now.
If they are broken, get a replacement, I think you only have to pay shipping. I read about people taking advantage of this all the time on their older headphones.
I've used the same pair of Sony MDR-7506's on a professional, near daily basis for about seven years. They're very accurate, and more importantly, super solid. I mean, they're tools. And they work. About $100, and a really good value for money.
My sennhausiers (585) are a lot more comfortable. A bit clearer sound, a touch less bass, and way less reliable cords.
I've had the Grados since the early 90s, and the Sennhausers since about 2000.
I've been through several different sets of foam, some better than others, but they're still not nearly as comfortable as the Sennheisers.
If you're going to do it, I found that you have to pull hard, as in really, uncomfortably hard on the foam padding to get it off. It does come off though, and everything went back together fine.
I seem to recall something about not being so blatantly bass-ey and being able to hear the mid range more.
Because it makes them feel ripped off.
Enthusiasts were likely having positive feelings about their purchase of Sennheiser products and now they feel like an idiot. Psychology is a big part of the audio business.
Isn't it a good thing that these companies are offering different price points for people to choose from?
That Sennheiser is taking headphones and expending extra cost to muffle them in order to sell them at a lower price indicates that they do not consider themselves to be in an efficient economic market. Likely they are selling the muffled headphones in order to artificially inflate the price of the normal ones.
It also raises the question of in what other ways Sennheiser might be intentionally degrading the quality of its products.
It's a big part of most businesses; you want the customer to have positive emotions regarding your company/product.
They can pull tricks like this because most people don't care that much about whether their chosen product is better according to some objective measurement. Rather, they care about getting a good deal and being made to feel happy about their purchase.
Unfortunately for Sennheiser, high-end audio customers are probably one group who do care about buying something objectively better. News like this risks hurting their target market substantially, I'd say.
I mean, to me this practice is practically fraudulent when it comes to consumer goods. Yes, it makes business sense to offer product at different price points. You could argue that the higher priced model pays for the R&D that went into developing the headphones. That doesn't change the fact that these are the exact same headphones with a $150 price difference.
Comparing to the software case where you pay more to have features put in that may be disabled in the cheaper version, there is a big difference there. When you buy the more expensive version you know what was taken out, and getting that is what you are paying for. Would anyone buy the more expensive headphones if the box said "unnecessary foam not added"?
It doesn't really matter if the practice actually lets more people use a product, it just feels dirty.
In reality, the economics of the utilitarian physical goods business may sometimes resemble more those of the information business, but it's up to manufacturers to justify that to their customers.
That's not "market partioning" -- that's utter hostility toward your customers.
If the feature differentiation is achieved by taking the premium offering and adding a component to remove functionality, then that feels a lot worse than taking the mid-range offering and adding components to result in the premium one.
Would people feel a lot better if instead they just went and changed the circuitry to produce lower quality sound?
Yes, as long as there was a halfway plausible explanation that it cost less to produce.
Hardware does have a per-unit manufacturing cost, and people expect a more expensive product to cost more to make.
(Also, FWIW, the "$350" headphones are currently $145 on Amazon and the "$200" ones are $85.)
Chip manufacturers actually do sell you a different product when you buy the high performance product, and it's related to chip yields.
I think this question is rooted in a flawed "cost-based" perception of product pricing, which is intuitive and seemingly "fair", but not how the world works. In reality businesses should charge based on the value (perceived or actual) their product brings to their customers.
This is really disappointing. My excellent HD-280s are finally cracking after years of heavy use, and now I have to reconsider doing business with them for a replacement.
And why your company cannot afford to not have them.
Extruding things from plastics (and especially ABS which this appears to be made from) is surprisingly inexact process and one would assume that manufacturing headphones selling for hundreds of dollars requires quite tight tolerances. My assumption is that the foam is there to damp rattling of case that is made from not exactly matched parts (and this is consistent with few posts in the forum which describe sound quality getting worse after removing the foam).
And I don't see why speakers/headphones/whatever can't be differentiated on quality, while having same overall design.
Lower quality speakers are not rejects of high quality speakers, they are just cheaper designs.
As to the mold, the holes there require no tolerances, they are there just to avoid air cushion behind the driver and serve no other purpose. Similarly, a foam pad is a rough hack to reduce its effectiveness, driving the speaker's response down. Do you really feel like this foam cut is some precision fix to tolerances problem?
People who are not given all relevant information before they buy are product can legitimately feel upset.
-the headband is leather
-cans have a Sennheiser logo on them
-cans have a chrome ring around them
-comes with a nifty headphone stand / mount
disclosure: I own some 555's, and will be trying this mod at the office on Monday.
Would love to find a link; it's stumped all my search attempts (including at Google Groups) ever since.
Not to mention, if you have engineers capable of doing systems programming and re-imaging the system, you're not a target customer for an AS400 or the AS400 is used in such a function where it makes no business sense for you to allocate "real" engineering resources (who are working on your core product, not your accounting system) for this.
The AS400 was/is meant to be a turn key solution: IBM profesional services sets it up for you, after which you run SAP (or the like) on it. It also already came with DB2 and is fairly interesting by making the database the file system (decades before WinFS failed, Hans Reiser went to pursue other interests and btrfs is promising but still unstable).
As for Sennheiser's strategy to cripple the product line to handle a different marketing segment; it reminded me of a Steve Blank's post.
For the record, the practice does not offend me. This has been done for ages. R&D costs for creating the HD595's were no doubt great and to recoup some money they created a cheaper, crippled version. With headphones you aren't paying for the parts but for the engineering.
I'm interested in seeing what Sennheiser's justification for this is. It seems odd to piss off buyers of high-end products, because they're the ones that do the research. You can't just go to Target and buy some HD5*5 cans; you have to order them from an audiophile-y place (or Amazon).
(The processor manufacturers make their price structure clear. They make the good ones, part of it is broken, so they turn off the broken part and sell it to you as a lower-end model. And if there is no demand for the fully-working ones, and they don't have enough broken ones to meet the demand for them, they just cripple the good ones. But like unscrewing the headphone and taking out foam, you can just change the multiplier and enjoy the increased performance. So why complain unless you already bought the high-end product?)
Well, the driver itself in those headphones is an integral part of a larger piece which includes some more acoustic parts. That's what you can see there, and it's not symmetrical, so it has left-hand and right-hand versions.
> I'm interested in seeing what Sennheiser's justification for this is. It seems odd to piss off buyers of high-end products, because they're the ones that do the research.
It's worth noting that the 595s have a better standard of finish and come with a few accessories such as a nifty desk-mounting hook. Not that that justifies it.
I interpreted "urban myth" as a slam instead of a firm answer, but he confirmed that's their position:
http://twitter.com/#!/SennheiserUSA/status/37163867276574720 ("Urban Myth=Not True.")
I asked him to comment here, since I'd like to hear more than can fit in a tweet. With 170 comments in 16 hours, it should be in their interest to describe any manufacturing differences in more depth.
Once stuff hits guitar center and best buy, you're probably going to be getting ripped off somewhere. You can buy better quality Mogami mic cable from a pro-audio supplier than you can from Guitar Center for half the cost. The audiophile world (along with the "guitar aficionado") is a very strange place.
In any case, my friends and I have long held the belief that "If you can't open it, you don't really own it". If my toaster breaks, you can be sure I'll open it up and try to fix it before I think of buying a new one.
Though before anyone thinks of flaming, I'm ok with my iPad. I can make an exception for this type of tech!
This is Marketing base knowledge: http://en.wikipedia.org/wiki/Product_differentiation
However, it does turn your headphones into the most annoying things ever for people who are in the same room as you as they too can hear, quite loudly and clearly.
Some people are actually offended when I tell them "you get what you pay for" - particularly for services rather than products. There's this weird consumer fantasy land where you get top quality for fire sale prices.
If that's not sign of pathology of free market than I don't know what is.
If you've only listened to your music with cheap earbuds, you haven't truly heard your music. Rediscovering your existing music collection, particularly if it's high-bitrate compressed or lossless, is a joy. Well worth the money if you enjoy music at all.
Overall I've settled on open-back headphones in the ~$70-150 range as the sweet spot for me personally (I mostly use Grado SR-80s).
Sure glad I bought the cheaper pair now.
If you want a good over-the-ear headphone, the Sony MDR-V6 is quite nice. They sound decent, are built a tank, and have been in continuous production since the mid 80's. They're $90 on Amazon.
If you want in-ear, get Etymotic ER-4's. They're the only headphone I've ever found that can compete with my NHT 2.5i speakers. They should be available around $200.