Dr. 16610

[B. Doggy]

It was a sunny day with the morning dew glistening under the glow of earths iridescent light bulb. Early winter air was fresh and the low-lying sun provided shadows from young trees that seemed to wrap their fingers around the rich soil. This reminded me of how grand life really is, so I strapped on my Rolex. Not just any Rolex; the timeless classic that all others are compared to- Dr. 16610.

Now Dr. 16610, being an academic of sorts and inspired by such a glorious day, thought to himself and began to ponder pricing. With his thick collegiate beard, spectacles, and armed with a pen & paper, he researched other forum posts relating to the pricing of his kind.

With a sip of his creamy cappuccino, steam bellowing from the cup, Dr. 16610 acknowledged that Rolex issues price increases approximately every 12-18 months. He considered the current economic headwinds, the two recent price increases within a year, as well as the Rolex brand's market orientation/position. Legs crossed, a pencil was placed under his chin as he gazed upon a playful bird gawking in a nearby tree.

A stroke of the pencil reveals several known facts to consider when addressing price: 1) The Rolex product is of the utmost quality. 2) Depending on the timepiece, mark-ups (including the AD's cut) can exceed ~75% over production costs. 3) Perceived quality.

The stale halls of business school taught Dr. 16610 that much of a products quality is perceived, particularly through price. Furthermore, inflationary pressures will be inadvertently placed on a product such as Rolex each year. So while a dragonfly came to rest on the good doctor's cherry table, he took a puff off his smoking pipe as asked, "how does this relate to continued price increases?"

Aha! He figured it out- Given that average annual inflation since 1914 has been about 3.50%, and that Rolex needs to maintain their market position, the Company has to increases prices accordingly. However, since they are a luxury brand, these increases won't directly mimic actual inflationary trends. Price pushes will instead be slightly above the average in order to maintain exclusivity and perceived quality.

Satisfied, Dr. 16610 retired to his study to rest on his well worn leather sofa and read a book.

[rob]

true, sounds like a good day doc!

[SSD]

Pleasant reflection on a dignified topic. Refreshing!

[GBJIV]

Well written - I see a reality show coming!!!