Back of the Envelope Numbers

(commentary)

I kept finding that my responses to your responses to yesterday’s article about a possible D300s replacement tend towards “Nikon would be leaving a lot of dollars on the table by not making a D300s replacement.” Okay, how many dollars is “a lot?” 

Let’s be conservative. A D400 should have been a 1m+ unit lifecycle camera had it shipped when it should have (2011). Let’s assume it’s now a 500k unit camera over its lifetime and will sell for US$1900 to customers. That puts about US$1500 per unit in Nikon’s pockets (that’s not profit, that’s the total cash Nikon receives). Which means US$750m. 

Let’s further assume that by not making a D300s replacement that Nikon did manage to retain 80% of those customers by pushing them to a Dxxxx or maybe a full frame Nikon. Still, losing 20% means that they left US$150m on the table for competitors to grab.

Either way you look at it, Nikon left money on the table. 

It really doesn’t matter if my numbers are off by a large amount, you’ll still come to the same conclusion. Consider the D300s replacement as a 200k unit camera over its lifetime instead of 500k and that only 10% leak to Canon and others: that’s still US$30m. 

Nikon can’t afford to leave US$30m on the table, let alone US$150m. 

I note many of you are writing that you just gave up on the D300s replacement and that the D7200 seems good enough (and in some cases, the fire sales on the D7100 are triggering your purchase). Again, Nikon is leaving huge amounts of money on the table. Let’s say that 50% of the D300s owner retention go to D7200 sales. We’re talking about a camera that’s US$1200 versus US$1900. Even if a D300s replacement would have only sold 200k units—a number I think is way too low—we’re talking about leaving US$58m on the table by punting on a D300s replacement and just letting the D7200 suffice.

Now things are complicated by the fact that Nikon makes a very full line of products. My contention has been and continues to be that Nikon’s product line management is very sub-optimal and has been for some time now. That’s because there’s no clarity in what they’re doing and why. We have scattergun shots like the Df and Coolpix A; willy nilly random design walks with the V1, V2, and V3; repeated attempts at a consumer FX body (D600, D610, D750); terribly weak iterations of the consumer DX bodies. The D4/D4s mostly bombed. 

Funny thing is, Nikon seems bad at even generation numbers and strong at odd ones. The D1 and D3 generations were strong, the D2 and D4 generations not at all. Will the D5 generation (of which any D300s replacement would now likely be part of) return to form and be another strong odd-numbered generation?

There’s a group within Nikon that is dedicated to the kinds of “what if” scenarios I outline above. They build complex spreadsheets that not only include product line assumptions, but economic assumptions, currency exchange assumptions, and much more. They don’t do back of the envelope calculations like I just did, they do the full enclosure, in deep detail. And they back up that with customer surveys to verify assumptions.

So I’m left with three logical conclusions: (1) Upper management is ignoring (or discounting) these scenario analyses; (2) the scenario managers and others are arguing over the assumptions in the spreadsheets and thus don’t trust them; or (3) something technical stopped Nikon from creating a D300s replacement, most likely the sensor needed. I’d tend to say it has to be #3 with a light seasoning of #1 and #2. That Canon got past #1, #2, and #3 and produced a 7DII isn’t exactly a ringing endorsement for Nikon management, either. 

What I find lacking at Nikon and have for the last five or six years is this: clarity. They haven’t really picked a destination, so it’s difficult for them to drive there ;~). 

So in case any Nikon executives are reading this, here’s some clarity for you: you used to make the best damned affordable camera for serious enthusiasts (N8008s, N90s, F100, D100, D300). That drove a lot of your success and established a wider, positive brand reputation. Why would you turn from that today? Yes, you have a lot of daunting things to fix in your Imaging group, but if you can’t duplicate the N90s/F4, F100/F5, D1/D100, D3/D300 pairings correctly, then your chances of fixing those other things are going to go down. 

And no, the D810 isn’t the lower end of the pair. It’s a new intermediary. To serve as the lower end of the primary product pair would mean that you’ve abandoned “affordable.” 

The core of Nikon’s DSLR products at the end of 2015 should have been:

  • D5 and D5x. Covers all pro needs.
  • D810 and D810x. Same coverage in smaller, less expensive body that splits pro/enthusiast.
  • D500. The affordable (DX) entry point (also requires a few new lenses).


Around that core you extend to other audiences with other products, but with that core you defend your dedicated customer and give them clear update/upgrade options, while reinforcing the brand identity you first established in the 70’s and renewed for 40 years.

New customers are not really being found by any camera maker. Failing to defend and retain your existing customers properly isn’t a good strategy when new customers aren’t to be found. 

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