When the Name Brand Purchase is a Bad Deal

January 26, 2010 by  
Filed under Fools of Finance

Paying more for a “name brand” product is a tricky proposition. A few high-end or luxury brands are worth the extra cost because they legitimately provide a valued upgrade in performance or durability. The cost-benefit analysis is favorable to the consumer. But that is not always true and the trend may be downward.

The worst reason to buy a name brand is to fulfill the purchaser’s desire to impress others and to create feelings of self-importance. There are plenty of consumers who play that game and the expensive name brand merchants are happy to oblige. We see a lot of that in the constantly changing world of high fashion. (Sorry ladies, but I think you are the primary players in that money-wasting area.) Today I learned of an extreme example of a “name brand” manufacturer taking advantage of careless consumers.

The product in question is a Blu-Ray disc player. The manufacturer is Lexicon.

The average consumer has never heard of Lexicon because its target market is the high-end home theater business. You won’t find Lexicon products sold at a big box retailer or even online. A professional home theater designer will sell you a Lexicon component – for a lot of money. Presumably, this means that you will be receiving the very best in quality and performance.

Not so fast.

Recently Lexicon introduced its BD-30 Blu-Ray player. You can pick one up for a mere $3,500. What do you get for your money? The same player that a value-conscious buyer can get from Amazon for $500.

Lexicon has taken the concept of product re-packaging to the max. If you open up the fancy aluminum enclosure for the Lexicon BD-30 Blu-Ray player you will find inside an intact $500 OPPO BDP-83 player. Seriously.

The full re-badging expose is in this article from Wired magazine. It’s funny, sad, and upsetting all at the same time. Sort of like popping the hood on your Porsche, scraping away the engine paint, and finding a Chevy V-8.

To compound the brand name value deception, the Lexicon  “product” is THX-certified while the OPPO player stuffed inside is not. The “different” products tested the same so how can this be? Check out the comment from THX after the article. Totally lame. The THX brand takes a hit along with Lexicon.

Does a consumer who pays $3,500 for a Lexicon BD-30 Blu-Ray player deserve this outcome? Perhaps. Who pays $3,500 for a standard video component that you can get at Best Buy for $150? Do they check the specs and compare them to units costing 1/10 as much? Probably not. Instead, they assume (wrongly in this case) that the Lexicon brand name brings important features and huge benefits not attainable by the lowly masses at Best Buy. Actually, the list of features found in many high-end A/V components far exceeds the ability of the average consumer to perceive a benefit from them.

The Lexicon re-badging makes you think again about buying brand name, doesn’t it? It should. Gosh, that Kirkland brand at Costco is looking better all the time.

P.S. Thanks to our first born son and tech guru who alerted me to this.

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5 Responses to “When the Name Brand Purchase is a Bad Deal”
  1. Craig says:

    On some things like over the counter medicine I would say generic, but a lot of times name brand does mean quality. Especially with electronics, there is a different between a named brand and a generic brand.

  2. ParisGirl111 says:

    I almost purchased one of their dvd players before (not the blue ray), but after I read reviews online, decided to go with another brand. Now I am really glad I didn’t purchase it!

  3. debra says:

    If you love that, then consider this gem.. a company gorrila by the name of Luxottica manufactures approx 75-80% of the sunglass brands on the market like RayBan, Oakley, Arnette, and all the designers like Versace, Channel, Prada, Ralph Lauren..they may charge $80 for a pair of Ralph Lauren glasses and $600 for a pair of Chanel or Pradas that aside from the name badge look a lot alike.. Same glasses different designer name on the side pathetic!

  4. Enigma says:

    Rebadging is extremely common in the tech industry. Sounds like Lexicon did this unilaterally, but there are many cases where this happens bilaterally with the consent, support, and help of the original manufacturer. Some years ago, Sony was selling DVD-RW drives for $100 on store shelves, right next to DVD-RW drives produced by a Taiwanese company named Lite-On that cost half as much. The problem? Sony had closed its own drive manufacturing plants and had contracted with Lite-On to produced Sony-branded drives (they also produced drives for Memorex, Imation, and a bunch of other brands). With the exception of the decorative bezel, the sticker, and packaging, these Sony-branded and Lite-On-branded drives were identical, produced by the same manufacturer, probably all in the same factory. In fact, the Lite-On drives were arguably *superior* because you could get support (e.g., firmware updates) directly from the manufacturer, while the the firmware updates available via Sony were often outdated (if they even bothered to offer them at all sometimes).

    It really comes down to the industry. For drugs, FDA regulations state that generics must be 100% identical to the equivalent name-brand in ingredients, recipe, dosage, etc., so that’s one industry where going generic is a sure bet, backed by federal inspections. With very few name-brands actually manufacturing and instead out-sourcing to a handful of Taiwanese, Chinese, Korean companies (though Korea is now starting to follow the US’s and Japan’s footsteps and outsource its manuf as well), a lot of tech are either rebrands or at least share a lot of the internal components in common. But there are some industries where brand more often than not is a mark of durability (e.g., shoes), so it’s hard to make a blanket statement…

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