Jim Taylor
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Warning: this post is off-topic.
Let's say there are three companies.
Company "A" produces a quality product. This product costs more than an inferior product. Company "A" also wants to innovate. Innovation takes Research and Development, and that costs money. Company "A" also has a better-than-average guarantee, and provide tech aid to dealers and repair entities.
Company "B" produce a product that can be described as "average". It costs less to produce than the product company "A" offers, so they can sell it at a lower price. They advertise by price, and not innovation, thereby avoiding the financial burden of R&D. Their guarantee is modest, and their tech aid is only to servicing dealers ... no one else.
Company "C" produces a product that is very cheap to produce and has a high failure rate. They offer a guarantee, but create roadblocks to easy implementation for the customer. However, they offer an exemplary trade-in policy, and dealers use that to quell customer dissent. Techs are low-paid, instructed to replace rather than repair. Although the company has a poor reputation, new models are introduced yearly, with sales spiels that this year's model is "new and improved", and the problems that a customer had experienced are now gone.
Company "A" makes the lowest net profit, because they feel the pressure on prices from company "B", and eventually they are bought out by company "B". The high-quality brand name of company "A" is put on the products of company "B", and used to sell the lower-cost product at a slightly higher price than the native products of company "B".
However, the exceedingly high net profits accumulated by company "C" allow company "C" to eventually buy out company "B". Companies "A", "B" and "C" are now under one all-inclusive corporate umbrella, dominating the market. The new giant operates according to the manner that company "C" has always operated. Customers are irate. That comes to nothing, because the new conglomerate is so big that it doesn't need to cater to the worries about quality or service, as long as it is careful to stay barely inside the letter of the law.. It tells everyone, "It's a new world out there. The old ways of doing business are gone. "
You ask, "Why do things work this way? I hear people say that they'll pay more for good quality and good service."
Yes, you do hear that, but people are two-faced liars. They'll rationalize any way they can to chase a lower price, living in denial that by doing so, they are cutting their own throat.
Aren't people wonderful?
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