Case—Inkjet Printer Pricing

Abstract

Inkjet printers are the most commonly owned printers because of their low cost, high printing quality, and ease of use. The four major inkjet printer manufacturers are Canon, Epson, Hewlett-Packard, and Lexmark. The inkjet printer business has adopted the “bait and hook” business strategy, offering the basic printer product at a low (possibly below cost) price while charging a higher price for their proprietary ink cartridges. Table 1 shows the pricing of different ink jet printers and ink cartridges from the four major manufacturers. With technology advancement, inkjet printers have improved in quality and reduced in price. As seen in Table 1, the printer (being more technologically complex to make than the ink cartridge) is relatively inexpensive. This is a business tactic used to attract more people to buy the printer. The manufacturers are trying to improve their overall profit margin by charging higher prices than they would have normally done for their proprietary ink cartridges. The setting of printer and cartridge prices must therefore be closely linked and studied, as they affect the overall profitability and survival of the printer company. According to LYRA research (http://www.lyra. com/), the total revenue from inkjet printers and ink cartridges exceeded $45 billion in 2006. I.T. Strategies (http://www.it-strategies.com/) expects the inkjet printer market to grow to $58 billion by 2009. It expects the largest segment of the revenue to come from ink cartridges, with the revenue rising from $20 billion in 2004 to $33 billion in 2009. The printer business is very lucrative, and it is crucial for the survival of a company that produces printers to use a “good and flexible” business decision tool to price the printer and ink cartridges. Allan Table 1 Sample Inkjet Printer and Cartridge Prices