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Author Topic: Adobe pricing in US vs. Europe  (Read 18269 times)
feppe
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« on: March 09, 2008, 07:15:34 PM »
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I was looking at the pricing of Adobe DreamWeaver to update my site. I was shocked to learn that DW download costs 2.2 times as much on the Dutch site as it does on the US site ($399 vs €570). While us euros are painfully aware of pricing differentials in various products, this is outrageous.

I did some googling and stumbled upon an  article with in-depth analysis, good comments and some useful responses from Adobe. The best Adobe reply is near the bottom - but it still leaves questions open for those who don't want a localized version of the software:

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Here are some concrete examples of factors that make costs higher in Europe compared to North America.

    * It costs Adobe 5 times more to manufacture and manage inventory in Europe because:
      —We must maintain different sku’s for each language version to support different labeling requirements, support information, and sales requirements.
      —We maintain smaller quantities per language, in keeping with market sizes, which increases costs for printing, inventory management, and inventory disposal.
    * The costs associated with our value-added reseller channels are 25% higher.
    * We maintain 2.5 times as many field marketing employees in Europe as in North America to support our creative business at a certain level of quality across local markets. However, the revenue per employee is smaller, so the overall costs per unit of revenue is 4:1 in Europe compared to North America.
    * Variable marketing expenses are 46% higher.
    * Development costs are approximately $2.5–$3 million per language for each of the 14 languages Adobe Creative Suite supports.
I'm tired of subsidizing features I don't need - ie. translation and support in a local language. It's as if the higher taxation we have to endure isn't bad enough, even companies have to squeeze extra margin from our hard-earned euros just because they can get away with it.

I wonder what would happen if I bought the download from the US site...
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TMcCulley
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« Reply #1 on: March 10, 2008, 12:00:59 AM »
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I wonder what would happen if I bought the download from the US site...

[a href=\"index.php?act=findpost&pid=180297\"][{POST_SNAPBACK}][/a]

Might as well try.  The worse that could happen is they do not let you.  Then you could buy the retail version from B&H for 399
« Last Edit: March 10, 2008, 12:01:20 AM by TMcCulley » Logged
Slobodan Blagojevic
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« Reply #2 on: March 10, 2008, 12:03:35 AM »
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... I was shocked to learn that DW download costs 2.2 times as much on the Dutch site as it does on the US site ($399 vs €570). While us euros are painfully aware of pricing differentials in various products, this is outrageous..

So, the price differential is about $450... Your American counterpart, however, will have to pay approximately that amount for, say, his medical insurance, and you do not.

In a free market economy, companies exist to maximize profit, and consumers try to minimize their cost. Companies are free to set whatever price they can get away with (as you rightly noticed), and consumers are free to buy or not to buy at that price, or to buy a competitive product. There is no such thing as a "just" price, hence there is not such thing as an outrageous price differential, nor there is a need to justify or explain pricing.
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« Reply #3 on: March 10, 2008, 01:12:39 AM »
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I wonder what would happen if I bought the download from the US site...

Seeing the effort Adobe invested in the activation and in clandestine communications, I guess you would have to use a US proxy, not only when activating but constantly.

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Your American counterpart, however, will have to pay approximately that amount for, say, his medical insurance, and you do not

What does this have to do with pricing? Even Adobe does not try such idiotic "arguments".
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Gabor
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« Reply #4 on: March 10, 2008, 01:21:18 AM »
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It's a global market. People have every right to be annoyed at large price differentials across countries when most software can be downloaded directly. I bought CS3 on ebay (CS2 with the update cd) for a fraction of the price in NZ. It registered with Adobe with no problems at all.
Adobe will probably not let you download direct, but check out other sources like ebay.
Look, the customer base for every business is varied in their needs, and the profit margins will always swing wildly. Even in a shop some customers will tie up a staff member  for half an hour and some will be out in two minutes. Any pricing structure that doesn't average this out to some extent will be too open to abuse. David
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feppe
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« Reply #5 on: March 10, 2008, 02:33:46 AM »
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There is no such thing as a "just" price, hence there is not such thing as an outrageous price differential, nor there is a need to justify or explain pricing.
[{POST_SNAPBACK}][/a]

If they want to get the (European) business from this customer they will have to justify the price differential. And by the sounds of googling the matter, there is plenty of outrage out there about this.

I agree there is no such thing as just price. And as said, I'm fully aware that companies charge what what they can get away with. Maybe I'm an idealist, but it would be nice if [a href=\"http://tutor2u.net/economics/revision-notes/a2-micro-price-discrimination.html]price discrimination[/url] worked both ways sometimes - ie. to not be forced to subsidize localized versions.

If enough people complain and inform Adobe that this is unacceptable, they will have to adjust their pricing.
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David Sutton
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« Reply #6 on: March 10, 2008, 02:57:15 AM »
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If enough people complain and inform Adobe that this is unacceptable, they will have to adjust their pricing.
[a href=\"index.php?act=findpost&pid=180353\"][{POST_SNAPBACK}][/a]
Why beat your head against a brick wall? Fully legal retail versions of Dreamweaver CS3 are on ebay .com for around $US 375 including shipping to Europe.
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Slobodan Blagojevic
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« Reply #7 on: March 10, 2008, 09:55:42 AM »
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...What does this have to do with pricing? Even Adobe does not try such idiotic "arguments"....

Hey, thanks for the personal touch (the "idiotic" part of your comment). Just because you do not understand it, does not make it idiotic. As to what it has to do with pricing, you might want to check the income elasticity concept.
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Slobodan Blagojevic
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« Reply #8 on: March 10, 2008, 10:15:54 AM »
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... And by the sounds of googling the matter, there is plenty of outrage out there about this.
I did not say there is no outrage over price differentials... I said there is no such thing as outrageOUS price differential... like there is no "outrageous" gravity, for instance.

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... If enough people complain and inform Adobe that this is unacceptable, they will have to adjust their pricing.


Complaining and informing will not get you there. Adobe is fully aware of the price discrimination policy, as they are doing it deliberately (and rightly so). So, bitching about it won't help... but not buying  it (or buying a competitive product) would.

Here is another angle: buy Adobe stock. That way you will participate in their "outrageous" profits. And as a fringe benefit, it will change your perspective on their pricing strategy, turning you into a vocal supporter of the charge-as-much-as-you-can-get-away-with pricing.  
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« Reply #9 on: March 10, 2008, 11:02:42 AM »
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The current exchange rate:


[span style=\'font-size:14pt;line-height:100%\']1.00 EUR = 1.53668 USD[/span]

and he is complaining?
« Last Edit: March 10, 2008, 11:04:17 AM by jerryrock » Logged

Gerald J Skrocki
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« Reply #10 on: March 10, 2008, 11:29:53 AM »
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You arn't paying $10.50 a gallon for gas.  Wayne
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KevinA
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« Reply #11 on: March 10, 2008, 01:14:53 PM »
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Quote from: slobodan56,Mar 10 2008, 05:03 AM
So, the price differential is about $450... Your American counterpart, however, will have to pay approximately that amount for, say, his medical insurance, and you do not.



I was unaware you needed medical insurance to download Adobe products.

Kevin.
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Kevin.
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« Reply #12 on: March 10, 2008, 01:36:45 PM »
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I was unaware you needed medical insurance to download Adobe products.

Kevin.
[a href=\"index.php?act=findpost&pid=180444\"][{POST_SNAPBACK}][/a]

I'm sure my premiums are going up with the increased blood pressure...
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Misirlou
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« Reply #13 on: March 10, 2008, 01:44:53 PM »
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So, the price differential is about $450... Your American counterpart, however, will have to pay approximately that amount for, say, his medical insurance, and you do not.
I was unaware you needed medical insurance to download Adobe products.

Kevin.
[a href=\"index.php?act=findpost&pid=180444\"][{POST_SNAPBACK}][/a]

When you see what the cost of a new Adobe product is, you may have a heart attack. You will have a drastic spike in stress hormones, at a minimum.

Seriously though, in many Asian countries, one can easily find bootlegs of every kind of software product for sale, all over the place. If I were a large software corporation, I'd think very hard about publishing versions in Asisan languages, knowing that I would actually sell very few copies, relative to the number of end users at least. I have no idea if the same thing happens in Europe, but it points out the fact that market conditions around the world vary greatly.

Another factor might be the risk of exposure to government interference. Look at what the EU has done to Microsoft lately. That would get my attention if I were attempting to sell software in Europe. What's to stop the EU from sueing Adobe for incorporationg noise reduction features for example, since that adversely impacts makers of noise reduction software? Pretty similar to the argument against Microsoft incorporating media features in Windows.

If you don't like the local price, don't buy the product. It's that simple. If Adobe's revenues start to dry up, they'll adjust their prices accordingly. No sense in complaining to anyone about it.

While living in Tokyo, I became friendly with several Oylmpus camera designers. They could not believe the prices for Olympus cameras in the US. Even with their Olympus employee discount, they were paying more for cameras than B&H was advertising them for in US camera magazines.

You should see the prices of new BMWs here in the US. A car my wife bought in 2001 for around $30k would cost at least $47k to replace today. So guess what - She's going to keep driving the old one until market conditions change, and pray she doesn't get in an accident.
« Last Edit: March 10, 2008, 01:45:26 PM by Misirlou » Logged
Diapositivo
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« Reply #14 on: March 10, 2008, 01:44:54 PM »
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When you distribute a product abroad you make certain deals with distributors and distributors with shops, all the inventory in European shops would not cost less because the Euro went up against the dollar. Generally speaking retail prices tend to be quite unresponsive (in the short term) to variations in the exchange rate. They will have to slowly adjust in the long run.

Also it is a marketing rule that it is much "harder" to raise prices than to lower them. You'd better stick with your prices rather than lowering and raising them according to the variations of the exchange rate, because you will lose more clients while raising than you would gain while lowering (and by lowering your product is perceived as "devalued", than when you raise the raise is perceived as unwarranted, you have to wait for the next version).

One of the reasons Adobe might not have quoted is that in Europe I suspect there is more piracy between individual uses, such as individual photographers. Programs are bought mainly by firms (whether huge or tiny) so there is a smaller client base.

If you are content with the US version you don't need to bear the extra-cost of the localized versions. The cost of the localized version is entirely on the shoulder of the clients who buy a localized version.

Any comparison between products in different country should take into account the fact that in Europe prices are always quoted with VAT included (unless otherwise stated) whereas in the US, where mostly there is no VAT, the price is net of taxes.

So the difference is not really that outrageous, and it is somehow "normal" if you consider how important and extensive is the documentation for such a program and how expensive professional documentation is.

Cheers
Fabrizio
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feppe
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« Reply #15 on: March 10, 2008, 01:49:03 PM »
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Hey, thanks for the personal touch (the "idiotic" part of your comment). Just because you do not understand it, does not make it idiotic. As to what it has to do with pricing, you might want to check the income elasticity concept.
[a href=\"index.php?act=findpost&pid=180415\"][{POST_SNAPBACK}][/a]

I'd like to hear how you think income elasticity comes into the picture. Are you implying software has less (income) elasticity in Europe than in the US, so software is less susceptible to decrease in quantity demanded due to increase in prices?

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I did not say there is no outrage over price differentials... I said there is no such thing as outrageOUS price differential... like there is no "outrageous" gravity, for instance.
Complaining and informing will not get you there. Adobe is fully aware of the price discrimination policy, as they are doing it deliberately (and rightly so). So, bitching about it won't help... but not buying  it (or buying a competitive product) would.

Here is another angle: buy Adobe stock. That way you will participate in their "outrageous" profits. And as a fringe benefit, it will change your perspective on their pricing strategy, turning you into a vocal supporter of the charge-as-much-as-you-can-get-away-with pricing. 
[a href=\"index.php?act=findpost&pid=180417\"][{POST_SNAPBACK}][/a]

Not buying it won't help, that is certain: companies don't know why there's less demand for their products unless consumers tell them. So "bitching" - as you so eloquently put it - does help.

Buying Adobe stock would mean that I'd have to be confident in the company's fundamentals. And I'm not, especially with the USian economy doing as bad as it is.

Funny how you lambaste me for using a judgment call when I used the word "outrageous," when in the same paragraph you use your own judgment call ("and rightly so"). But let's try to keep on the subject.
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Slobodan Blagojevic
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« Reply #16 on: March 11, 2008, 12:59:18 AM »
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I was unaware you needed medical insurance to download Adobe products.

I am glad I provoked you to display your humorous side  

No, you do not need medical insurance to buy Adobe products. But after you pay $12K a year for medical insurance (as I do), there is that much less of your income left at your disposal to buy other stuff, including Adobe software. And my European counterparts have that much more to spend on other stuff, therefore can afford to pay more for Adobe products. Adobe knows that and charges accordingly.

This example of course is extremely simplified, but since this is a photographic forum, I will refrain from going into detailed economic analysis of the multitude of factors that shape pricing in each market. Suffice to say that different markets will always have different size, different supply and demand, different uniformity (e.g., common language), different infrastructure, different price and income elasticity, different spending pattern, different taxation, etc., and, as a result, will always have different pricing even for the same product.

In other words, the pricing differential is quite normal, legitimate, and can not be labeled "outrageous".  We do not  consider the differential between day and night to be outrageous either, we just take it as it is.

Another reason I used the example with medical insurance is to point out to those complaining about price differentials that they should not cherry pick the object of complaint. They of course always find to complain about things that are more expensive in their markets, and never about things that are more expensive in other markets (like medical care).

On a more personal note, when I was living in Spain, I did not have a medical insurance (nor I needed one). After spending a week in hospital, following a complicated operation, I had to pay the "outrageous" amount of exactly O euros (zero, zilch, nada). I shudder to think how much would the same event cost me here in the States.
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feppe
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« Reply #17 on: March 11, 2008, 02:29:16 AM »
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No, you do not need medical insurance to buy Adobe products. But after you pay $12K a year for medical insurance (as I do), there is that much less of your income left at your disposal to buy other stuff, including Adobe software. And my European counterparts have that much more to spend on other stuff, therefore can afford to pay more for Adobe products. Adobe knows that and charges accordingly.
[{POST_SNAPBACK}][/a]

That argument is a snap to disprove: real income in the US is much higher than in most European countries.

[a href=\"http://www.sprc.unsw.edu.au/dp/DP120.pdf]http://www.sprc.unsw.edu.au/dp/DP120.pdf[/url]
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Slobodan Blagojevic
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« Reply #18 on: March 11, 2008, 07:28:03 PM »
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That argument is a snap to disprove: real income in the US is much higher than in most European countries.
Nice try. However, I was NOT speaking about ABSOLUTE amounts, I was speaking in RELATIVE terms: how different spending priorities result in a different percentage of one's disposable income spent on, say, software.
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Slobodan

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Slobodan Blagojevic
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« Reply #19 on: March 11, 2008, 08:08:11 PM »
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I'd like to hear how you think income elasticity comes into the picture. Are you implying software has less (income) elasticity in Europe than in the US, so software is less susceptible to decrease in quantity demanded due to increase in prices?...
I do not have the exact numbers on income elasticity in different markets, so I can only assume it is so.
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Funny how you lambaste me for using a judgment call when I used the word "outrageous," when in the same paragraph you use your own judgment call ("and rightly so")

Well, in public forums, I try to refrain from personal comments, so my intention was not to lambaste you, nor anyone else personally, and if that came across as such, my apologies. Whatever emphasis in a debate I try to make, be it humor or sarcasm, or the use of certain terms, it is meant purely for rhetorical purposes.

As for "rightly so", I am not sure that constitutes a judgment call (in the sense of "value judgment"). I was using the word "rightly" in one of its two possible meanings, i.e., "correctly" or "with good reason". The other meaning implies a moral stand, and that was not my intention, although I can see how it can be interpreted otherwise.

Price discrimination is a method for maximizing profit that is legal, legitimate, widely used, and widely taught in business schools across the globe, hence my comment that it is "rightly so", i.e., correct. Whether it is morally right is a whole new discussion, of course.

But back to purely photographic subjects: I enjoyed your gallery and would be happy to buy you a drink if you ever come to Chicago (from whatever resources I have left after I pay my medical insurance   ). Alternatively, we can always "go Dutch"  
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