Will modern marketing realities force companies to make better products?

by JS O’Brien

Despite pie-in-the-sky economic theory, competitively priced, quality products do not always trump those of lesser quality in the marketplace. A variation of Sony’s Beta format video was used for decades by professionals because of its superiority to the VHS format, but this didn’t stop VHS from becoming the dominant consumer format. McDonald’s does not make food that is cheaper, more nutritious, or even better tasting than a good sandwich from a local deli, but this hasn’t stopped the burgermeister from selling untold billions of its artery-clogging offerings. The US health care system gets arguably fewer positive results per dollar spent than any other health care system in the world, but there are US consumers who will defend it as being “the best” right up to their untimely deaths.

The truth is that marketing techniques often trump product value when determining marketplace winners and losers. The growth of advertising in the late 19^th century taught marketers that they could make profitable products that had no value whatsoever. These included electrical trusses, waistbands, and other devices to improve health, universal medicines that were mostly alcohol mixed with God-knows-what, and “arctic” boots guaranteed to produce frostbitten toes for the clueless Yukon prospector. Breakthroughs in psychology in the 20^th century gave marketers powerful new tools for their arsenals. For instance, they learned that products could be sold while ignoring their real attributes by attaching them to an image. Cigarettes, a product that tastes pretty much like you would expect burning leaves to taste, could make you so sexy and alluring that people would ignore your tobacco reek. Rocks could be packaged and sold as pets. A coonskin cap could make you Davy Crockett, and becoming a fake blonde would make you irresistible to men, while having little or no effect on your intelligence (or that’s the claim, anyway).

In one sense, nothing has changed much. A brightly colored, but underpowered, computer can be sold because it’s been carefully linked to “cool,” or a lousy video game can fly off shelves because it’s based on a popular movie. There are signs, though, that the days of sizzle counting for more than steak are coming to an end, and the best current example of this may be the Panasonic Lumix DMC-LX3 camera, a product that most traditional marketing departments would consider very difficult to sell, but that is selling so well, in fact, that it is going for up to 50% over suggested retail price at those few outlets that can manage to keep it in stock. The reason the LX3 is selling so well is that it is a superior camera for its class. The marketing issue is that it does not appear to be superior, and therein we have both the mystery and the hope for the quality of future products.

Most of us have walked through consumer electronics stores and seen the compact camera displays. Generally, there is at least one long row of small cameras, each having a little card next to it with the brand name, model name and number, price, and a few sales points. Most common among these sales points is the number of megapixels a camera’s sensor possesses. There was a time, indeed, when the number of megapixels on a sensor was a pretty fair indication of a camera’s resolution, which is one of the key factors of image quality. Early compact electronic cameras had barely enough resolution to make a decent 3×5 print, so there was a race to pack ever more pixels onto small chips to improve images.

It was true then (and now) that a three megapixel camera will almost always outperform a one megapixel one, and a six megapixel camera will make a much sharper image than a camera with only three. But once one gets above six megapixels, the issue becomes much more complex. Understanding why is a bit technical, and it’s the very complexity of the issue that has kept camera marketers trumpeting ever more megapixels — while tolerating ever-decreasing image quality at most settings — to sell their products. Simply put, consumers have come to equate megapixels with higher image quality even though it is not true, so marketers have forced camera manufacturers into degrading image quality to sell to badly informed camera buyers. Consumers also seem to like large range zooms of almost telescopic power, not realizing that these relatively slow lenses also work to degrade image quality. The LX3 bucks this trend and, contrary to expectations, consumers have rewarded it for doing so.

Some Technical Notes

Note: I’m going to go into a bit of a technical explanation here, and will try to make it as painless as possible. Those who would prefer to skip the technical part are welcome to read down below this marked section for my conclusions.

The race for ever-more megapixels has an enormous quality drawback. By their nature, electronic components produce fields that interfere with other electronic components. Pack too many pixel-sized sensors on a tiny chip, and this interference manifests itself as noise in the final image. The noise is caused when a number of pixels produce colors (often white) that are at odds with the colors they should produce. The result is a sort of static that is roughly like the grain one can see on high-speed films.

At their lowest sensitivities, when there is the least current or “gain” in the electronic sensor, small chips with very high megapixel counts can perform quite well. When the sensitivity is turned up to account for low light, however, or to allow greater depth of field by closing the aperture or faster shutter speeds to freeze motion or avoid camera shake, the noise increases. Camera-makers have fought this problem with software that identifies the noisy pixels and guesses at the correct color replacement. This software inevitably blurs the image until, in some cases, it appears to be almost a watercolor. As a result, camera manufacturers have tried to set their software to allow some noise in order to maintain sharpness. The end result is that small-sensor, compact cameras tend to produce poor image quality and/or unacceptable noise at anything above the film equivalent of ISO 400. For some cameras, even ISO 400 produces too much noise for acceptable images.

Compounding this problem is the race toward ever-more-powerful zoom lenses for these little cameras. Zoom lenses tend to be long lenses, and long lenses are a bit like looking down a cardboard tube – they are “slow” because they simply admit less light than larger, less zoomy lenses. So, a camera with a sensor and software that tend to produce poor images in low light is often equipped with a lens that lets in a half to a quarter of the light allowed by cameras with less-aggressive zooms, meaning that it will produce many, many more inferior, noisy images than the “faster” lens-equipped camera.

The obvious technical solution is to build compact cameras with larger sensors and/or fewer megapixels than is currently possible, and equip them with large, fast, wide-angle lenses of limited zoom range. All other things being equal, cameras built this way would produce superior images in more lighting conditions than cameras equipped with small, megapixel-packed sensors and slow, long-zoom lenses. They would also allow higher shutter speeds and greater control over depth of field in lower-light conditions, giving both more creative control and less possibility of hand-held camera shake.

The obvious marketing solution is to build cameras with ever more megapixels packed onto a small chip, more aggressive software to gloss over the noise, and longer and slower lenses to wow consumers with telescopic range most of them will seldom use, because these things are supposed to be what consumers want and will buy.

Can Internet Product Reviews Overcome Marketing Hype?

The LX3 uses a larger-than-normal sensor for a compact camera, limiting it to only 10.1 megapixels. It also uses a fast, 2.0 to 2.8 zoom with a rather limited 35mm camera equivalent range of 24mm to 60mm. It is also built around a high-quality, Leica lens with minimal barrel distortion for a lens this wide and this small. It also has a retro, rangefinder look and a manually removed lens cap that is dictated by its fast lens and larger-than-average sensor. None of these attributes is supposed to make buyers of the average consumer. So, why is the LX3 flying off shelves for nearly $700 in some places, when its suggested retail price is around $500?

I wish I knew for sure, but I suspect, and hope, that we are witnessing the power of the Internet. Key “Panasonic LX3 review” into google.com, and you’ll get a list of glowing reviews. Or just go here for a thorough review or here for an abbreviated review comparing the LX3 to its competition.

If one tracks the pricing history of the LX3, it’s clear that the initial pricing curve was what one would expect; discounting to around 80% ($400) of its suggested retail price within a few weeks of its introduction. Within a few months, however, large outlets such as Dell, B&H Camera, and other on-line camera stores were sold out, and prices soared. When I phoned around my metropolitan area for a camera store with the LX3 in stock, I couldn’t find a single one. They all wished they had them because they could sell as many as they could stock, but they’re sold out and had no idea when they’ll receive a new shipment.

What could explain the LX3′s phenomenal sales performance other than the power of Internet reviews? Based on its design, it appears that they were trying to produce a camera compact enough and with a high-enough quality image to appeal to professionals and serious amateurs who don’t want to haul around 30 pounds of camera equipment and a tripod everywhere they go. In other words, the camera is meant to appeal to experts or semi-experrts – not the average consumer. Panasonic must have expected the product to have limited appeal in a high-end compact market being threatened by a price drop in digital single-lens-reflex (DSLR) cameras. Instead, they can’t make enough LX3s to meet the demand.

Have we entered the beginning of an age when information, in the form of product reviews, will be so available to the masses that consumers will start to make better quality buying decisions? Will this trend force manufacturers to actually make better products instead of gimmicky devices that sell by fooling consumers? Will the promotion-oriented marketers lose power and influence to product development departments?

We can only hope.

Here are some images taken with the LX3 the day after delivery:

Editor’s Note: Space limitations prevent us from displaying these images at full size and resolution.