At what cost? Why IT pricing differentials can make sense

There is a lot written about the difference in the price of software, hardware and online services between here and the US. IT companies, Apple and Microsoft included, come in for a pretty hard time from many IT journalists, rightly or wrongly.

Compared to the price differentials of Harley Davidson and Mercedes-Benz between here and the USA, however, these technology price differences truly are minute! (I am off to the US next week, and will blog further on the impact of these price differentials on the core brand values of international brands in shoppers minds when I return.)

But back to IT. Pricing of Apple, Adobe or Microsoft core services aside, what each of these company’s investment in technology and infrastructure has delivered to the shopper is the global facilitation of product innovation through a low-cost, seamless distribution system. A bit long winded, and pure marketing speak? In other words, what it’s done is let clever people build and sell shoppers their clever services very, very cheaply, anywhere. Cheaply you say?

Let me explain. I paddle outrigger canoes and ocean skis. It’s my sporting passion out of work. I am passionate about paddling, though not necessarily competitively successful. But I try. Trying in competition requires staying fit as a minimum, so I have a personal trainer off the water.

When I travel I take with me an app called iM Ball. It was created by a producer I worked with several years ago. He has taken digitally rendered interactive graphics and now delivers them via an app. This allows you to focus on key muscle groups, and see in 3D the exercises and the muscles and skeleton working in unison.

The 3D computer-generated imagery is visually amazing, but not new. However, when it was first built less than 10 years ago, this particular piece of software cost several million dollars in development alone. The box set of DVDs needed to store and present this 3D imagery cost around $500, and required a factory to replicate it, trucks to ship it, retail store to stock it, and a PC to run it.

iM Ball costs $2 and can be downloaded to your phone via free eponymous WiFi in Maccas in three minutes. I can’t do the maths on the percentage of productivity improvement, lowering of carbon footprint, or improvement in price for this item, but I do know that it would not be possible without the huge initial, and ongoing, investment by the mainstream technology leaders. For that I am happy to spend a few dollars more for their core services.

Now, an extra $16,000 for an identical motorcycle sold in LA and Melbourne. Or an Australian-built car selling for $10,000 less in San Diego than Hobart? That’s something I struggle with.

CROSSMARK CEO Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. His international career in sales and marketing has seen him responsible for businesses in over 40 countries.

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