The Consumer Electronics Scenario

In the traditional Japanese consumer electronics scenario, you create entities that have great overlap in features/performance and place them at different price points. You then add features/performance that clearly establish the price differential, preferably features that don’t really cost you anything substantive in your parts costs. You want enough “good stuff” in the upper models that is compelling to get as many folk to pop for them over the lower model, despite the fact that your gross profit margin on the top models is nearly the same. If you get more dollars with the same GPM or better, you simply do better economically (well Nikon does, not you ;~). As I’ve written before, in a three-model lineup (D3300, D5300, D7100 or D610, D750, D810), generally the middle model is the one that the company wants you to buy, as it usually has the best GPM (though not always). 

Nikon is following this model. Consider the new FX lineup:

  • D610 — This is the base upon which we build.
  • Df — For US$850 more we get…different controls. 
  • D750 — For US$500 more we get a better and tilting LCD, a better metering sensor, a better AF sensor, the new EXPEED chip, the ability to control the aperture in live view/video, plus some other minor features that come along for the ride due to the others. Nikon has added costs here, but probably not as much as the current price differences would suggest.
  • D810 — For US$900 more we get a better shutter, a full metal frame, more internal memory, a shutter for the eyepiece, some extra buttons, and the pro-style menus (banks). Again some extra costs, but not nearly enough to justify the price jump. Yes, there is a difference in sensor, but I’m not sure that there are extra costs in that sensor, as it is the same size on the fab and doesn’t need an AA filter over it.

This is classic consumer electronics line proliferation. Extract as much money as you can from the customer by offering something enticing for a few dollars more. Okay, more than a few dollars more in the case of the FX bodies, which is one of the problems I have with what Nikon is doing. In essence, they’re saying that you’re only going to buy one camera, and by not offering anything above the D7100 in the DX line, that’s going to be an FX camera. At the old D300s price point we have a “stripper” FX model (and one with a poor reputation due to the D600 fiasco). You’ll obviously want something more than that.

For some time now, Nikon has been trying to extract US$2300+ out of serious Nikon DSLR users instead of the US$1800 you would have paid for a D300, D300s, or D400 had they produced it. It started with the D600, continued with the D610, and now has carried over to the D750. Nikon really wants you to forget that there was a pro DX camera body, then hand them even more money what is essentially a consumer FX body. (Technically, the US$2300 price point first appeared with the DX D100.)

Now, some folk would gladly make that exchange. There’s no doubt that 24mp FX is better in image quality than 24mp DX. By about a stop. If you need that stop, then you’re already bought into the upsell. But you’re getting a lower quality product at a higher price in Nikon’s current FX-happy line. Basically, the D7100 body has now found its way into the D600, D610, Df, and D750 with little change (other than the Df’s big control changes). 

As many have pointed out, Nikon is doing what Nikon thinks it needs to do to survive. If volume will be lower, then they need higher priced product with higher gross profit margins. This is what businesses try to do: survive and grow. Nikon’s no different there. But it really seems like they’re more spreadsheet and survey driven in how they’re doing that these days, and less thinking about what established and built the brand in the first place, which was more creative thinking about cameras.

To me, the real danger for quite some time has been what Nikon has been doing to its brand reputation. The last time that my surveys showed that the majority of Nikon’s established customers were very happy was the D300/D700/D3 era. Since then, a series of decisions, products, and quality issues have eroded that strength. It’s not gone, by any means, but Nikon’s brand is now weaker than it’s been in years, I think. Brand decline is very, very difficult to reverse, as Sony has discovered after decades of similar pursuit of volume over quality in the consumer electronics business. 

So where are we today? Well, with Nikon here’s my current report card:

  • Coolpix — generic, cheap, break easily (lens covers in particular), and deep in decline. While other brands have gone upscale in compact cameras with some success, Nikon’s attempts to do so have been particularly feeble other than perhaps the AW. The Android Coolpix have been the miserable failure I predicted they would be back in 2010 before any were announced. After building to the tens of millions of volume a year, Nikon now has literally nothing to show for it brand-wise. F
  • Nikon 1 — all over the board to the point where potential customers are wary. The V series, in particular, has veered from one idea to another, not ever getting the balance quite right, while the S series sort of makes the J series look duplicative. I said from the beginning that the Nikon 1’s should have been branded Coolpix Pros, and given what happened in the market, who the cameras should have appealed to, Nikon’s lack of actual high-end Coolpix that resonated, and more, I believe in retrospect I’ve been proven right about that. C- (being liberal and giving the latest models a bit more credit than they may deserve).
  • DX DSLRs — if you’ve ever had a clogged drain then you know the feeling Nikon seems to have about DX DSLRs at the moment: they can’t seem to get things unplugged. There really should be just three consumer models, yet due to models that never sold out, NikonUSA currently lists nine they’ll be happy to sell you. Nine cameras in a US$500 price range. Talk about your crowding. Unfortunately, Nikon has kept these cameras solely consumer by iterating a raft of lookalike consumer zooms that further muddy the waters. Heaven help you if you’d like to buy a consumer DSLR with a few primes or maybe some fast zooms. Even consumer primes and fast zooms. C (and headed lower)
  • FX DSLRs — the only bright spot in Nikon’s camera group, at least if you ignore the repeated quality control problems (D600 sensor/shutter debris, D800 left focus problem, D810 thermal problem) and you think that 16mp justifies a new battery and card over 12mp. Once past those issues, the cameras themselves are classic Nikon, which is a good thing. Is it enough to save the Imaging Group?

Sorry, no A’s given out this year. I don’t grade on a curve. The good news for Nikon is that all the other students aren’t exactly doing well, either. The perfectionist in me says that’s not a good reason to be average. 

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