Surveillance Pricing: MSRP and DiscountsBy: John Honovich, Published on Jul 07, 2011
To compare prices in video surveillance, one must understand and factor in discounting variances. Significant differences exist between manufacturers in how and what level of discounting they offer. Making it more challenging, manufacturers tend to obscure what their specific practices are.
MSRP as Start
Essentially all manufacturers offer a "Manufacturer's Suggested Retail Price" (or MSRP) which is generally the highest price that anyone would pay for a product.
At the same time, almost all manufacturers sell through channel partners to reach end users. That is, the manufacturer sells to distributors, dealers, integrators, etc. and those intermediaries then re-sell to the end user. Manufacturers always sell their products to their channel partners at a price less than MSRP, i.e., 'dealer pricing'. The level of pricing a channel partner receives often varies - primarily based on the ongoing order size and the level of commitment / exclusivity to that manufacturer.
Rarely do end users pay MSRP pricing, similar to how car buyers do not usually pay 'sticker price'. The actual 'street price' that an end user pays is less than MSRP. How much less depends usually on two factors:
- The size of the purchase and the negotiating power of the end user (as in any business deal)
- The size of the standard dealer discount structure
2 Types of Dealer Discount Structure
In the video surveillance industry, there are two general and very distinct types of dealer discount structure. These are critical to recognize and factor in:
- Traditional Security Dealer Discount: Generally 40% - 50% off of MSRP, this is a very sizable discount from MSRP. For example, a manufacturer using this structure may have an MSRP of $1000 for a camera but might sell that to its best dealers for $500. The effective street price that an end user will pay may be $600 or $650, far less than the MSRP. While the actual numbers vary by manufacturer, region, etc., this is the general structure of this approach. Like its name implies, the manufacturers that typically use this are traditional security companies such as Pelco, American Dynamics, Honeywell, March Networks, etc. However, some startups adopt this approach as it is the preferred one by long time security integrators.
- IT Dealer Discount: Generally 10-20% off of MSRP, this is a modest discount. For example, a manufacturers with this approach may have an MSRP of $1000 for a camera but might still that to its best dealers for $850. The effective street price might be $950. Like its name implies, this is common with newer companies with a greater IT orientation. Axis and Vivotek are two camera manufacturers who take this approach.
When comparing prices, it is critical to factor dealer discounting structure differences. For example, comparing the MSRPs of a Pelco and Axis camera would be highly misleading without factoring in that Pelco's effective street pricing is much lower than its MSRP because of their larger dealer discounts.