Why would a company spend time and $$ to R&D an inferior product?

[her209]

Say company A makes product Z and and its balls to the walls an awesome product and sells for H dollars.

Why would A then turn around and invest R&D on an inferior product that isn't as awesome as Z but sells for less than H? Why not just slight lower H and spend the R&D producing more of Z?

Isn't this what makes logical sense from an economist's POV?

 

[highland145]

Quantity over quality. Kind of like P&N.

 

[drinkmorejava]

Because Z doesn't hit the price point that consumers want and may be too expensive to manufacture to lower the price.

Or maybe it's not too expensive to manufacture to lower the price, but A can maximize profit by selling a high and and low end product, and they must differentiate the products (invest more R&D) in order to keep everyone from by the new cheaper one

 

[soulcougher73]

Costs good money for planned obsolescense

 

[Anubis]

different product streams/different markets and so on

we have premium products and mid tier products and even low tier. depends on who its targeting, the market and price point

sometimes R&D targets a market or pricepoint where an existing product wont work for any number of reasons

 

[SamQuint]

Your scenario kind of describes the iPhone 5C. It was by all means inferior to the newer iPhone but sold for less.

 

[Sonikku]

I remember when video cards would have their pipelines cut and then sold for less.

 

[SlitheryDee]

Hmm. What I would think is that they want to sell awesome product Z for a very high margin, so they need product X in the lineup to justify product Z's premium price.

Let's say product Z costs $100 to make and that $200 is a decent "midrange" price for such a product. They could sell Z for $200 and double their money, but if Z works as well as you say it does, why not build midrange product X for $75, sell it for $200, and sell Z at the premium price of $300? That's better profit margins all around, and Z's inflated price is justified somewhat by the placement of X because everyone will expect X to perform at a lower level than Z.

 

[SSSnail]

I don't think they spend much money on R&Ding, the inferior product, rather a product plan. So they when they spent money on a product, they planned on selling the top tier with all the bells and whistles, then reduce bells and whistles and they drop in the price. There might be some cosmetic changes and minor reduced functionalities, but overall the product is still the same underneath. The R&D cost difference isn't as great as you think, not like designing a product from ground up.

 

[Rakehellion]

Say company A makes product Z and and its balls to the walls an awesome product and sells for H dollars.

Why would A then turn around and invest R&D on an inferior product that isn't as awesome as Z but sells for less than H? Why not just slight lower H and spend the R&D producing more of Z?

Isn't this what makes logical sense from an economist's POV?

Because it sells for less. Not everyone needs the more expensive alternative. Also, their competitors are still improving their inexpensive alternatives.

 

[Rakehellion]

I remember when video cards would have their pipelines cut and then sold for less.

They still do.

 

[OverVolt]

Its like when HP was making tablets.

I have no idea. It sounds good on paper. "We need a line of tablets to increase our declining revenues!" without really addressing any real problems.

So there is that.

http://www.businessinsider.com/hp-layoffs-to-exceed-55000-people-2015-8

http://www.theverge.com/2012/6/5/3062611/palm-webos-hp-inside-story-pre-postmortem

 

[Imp]

To get enough suckers to buy your product to make a few extra bucks?

And to make the "market" (shareholders) believe you actually have a chance -- pump and dump?

 

[1sikbITCH]

Because Z doesn't hit the price point that consumers want and may be too expensive to manufacture to lower the price.

Or maybe it's not too expensive to manufacture to lower the price, but A can maximize profit by selling a high and and low end product, and they must differentiate the products (invest more R&D) in order to keep everyone from by the new cheaper one

If you want to maintain your elite status, you can't cater to the masses. If they lowered the price so that everyone can afford it, the elites don't want it anymore.
Case in point: Monster Cables

No need to mention quality in this conversation. It's about perception.

 

[SSSnail]

If you want to maintain your elite status, you can't cater to the masses. If they lowered the price so that everyone can afford it, the elites don't want it anymore.
Case in point: Monster Cables

No need to mention quality in this conversation. It's about perception.

Then I present you with BMW, a very successful car company that covers the entire spectrum of car buyers with different product lines at different price points.

 

[CPA]

Then I present you with BMW, a very successful car company that covers the entire spectrum of car buyers with different product lines at different price points.

They do? Is there a US BMW truck I'm unaware of or a decently priced SUV? Or were you being literal with your word "car"?

 

[Imp]

Then I present you with BMW, a very successful car company that covers the entire spectrum of car buyers with different product lines at different price points.

BMWs are "poser" cars now... I knew a bunch of people who leased them over the past few years. They weren't poor, but they weren't doing that well -- probably sub-$100k club.

 

[Rakehellion]

Then I present you with BMW, a very successful car company that covers the entire spectrum of car buyers with different product lines at different price points.

"Different price points" all of which more expensive than the average car.

 

[feralkid]

BMWs are "poser" cars now... I knew a bunch of people who leased them over the past few years. They weren't poor, but they weren't doing that well -- probably sub-$100k club.

Which proves their former slogan "You don't have to be a rich asshole to drive a BMW".

 

[NoTine42]

I tend to think marketing departments have too much say over R&D directives.

Like the American Auto industry that spent too much effort satisfying whatever marketing thought brought people into showrooms and into a car, while ignoring the factors (like ergonomics, reliability, fuel economy and interior material design that keep consumers satisfied as they are getting out of their car years after the sale.