Price markups: the truth on how much the products you know and love are really worth

2000%. That is the markup on the latest pair of Beats by Dre Headphones, the Beats Solo 3 Wireless. Unbelievable, was my first reaction. Unbelievable, that a company with such a large impact on the audio community, would rip their customers off so badly. However, those numbers may not be all to the story.

“That 2000% number may seem astonishing at first, but that’s not really the profit, they’re receiving,” junior Matt Jakimovski said. “All the middlemen, the designers, the manufacturers, the truck drivers, the retailers, they all receive their cut of the money earned. Despite this, most      companies have markups of far less, floating around the 400-500% mark. This, I believe, is a complete exploitation of the consumer, simply to receive a higher profit.”

The extra money companies such as Beats by Dre get from this ridiculously high markup is not going straight into their pockets, but it goes into marketing. If you were asked to name a headphones brand, one of the first names that comes to your mind is probably Beats by Dre. But, if you were asked to name a couple other companies in that same field, like you would basketball shoe brands or cell phone companies, you might struggle to find more than a few answers.

“You don’t buy Beats because of the product you’re receiving,” junior Kyle Stejskal said. “You buy it for the name, the brand. When you go on the street, you see other people wearing Beats, on TV you see your favorite athletes and artists wearing them. They’re not a high quality product, it’s just the consumer craze.”

Beats currently is selling 64% of all the headphones sold at a price higher than $150 in the audio industry. Why is it that a company like Beats has risen to the top of the audio industry, while other companies struggle to hold a reasonable amount of stake in that same demographic?

The answer is priorities. What bothers me the most about Beats by Dre is not the absurd prices they charge for their headphones and speakers, but the amount of money they spend on advertising, instead of pouring that money into research and diagnostics and making a product with a higher quality of sound and feel.

“I think anytime a company begins to value the brand and the advertising higher than the quality of the product actually being put out, it’s so morally wrong,” business teacher Karen Roberts said. “We assume, as consumers, when we see athletes and entertainers that we look up to wearing a product, that it’s a product that must be worth the price, and therefore purchase it. That’s why these companies don’t have to spend too much on research and development, because they don’t need to.”

Simply looking at the athletes and entertainers signed with Beats should tell you how much they value their marketing over creating actual quality products. The long list of sponsors includes Serena Williams, Conor McGregor, LeBron James, Neymar, Richard Sherman, Michael Phelps, Justin Bieber, Nicki Minaj, to name just a few. Consumers today idolize these people so much, that if an exclusive version of these headphones are released with their favorite artist or athlete’s name on it, they will flock to buy them regardless of the quality. This is something that can be detrimental to hard-working companies, such as Sennheiser or Audio-Technica, who provide products with twice the quality at half the price, but will never climb out of the hole Beats has dug them into.

“If people want to buy Beats, knowing full well the product is not nearly worth the amount of money they’re charging, go ahead.” Stejskal said. “I personally don’t believe that it’s a smart use of money; it’s like spending $700 on a phone that’s going to last you half as long and perform half as well as one that costs $300.”

Beats will continue to be priced so high as people continue to buy them. There’s no logical reason to pay for a pair of headphones that you definitely know will not perform nearly as well as another cheaper, higher quality pair, but that won’t stop consumers who believe in the product. If you’re thinking about purchasing a pair of Beats, understand that what you’re paying for is not a quality product by any means, but an overpriced piece of junk.

A pair of Sennheiser Momentum headphones will set you back $250.00, but includes genuine leather earcups, an adjustable metal headband, and sound quality that has received superb reviews by audio fanatics worldwide. Or a pair of the Audio Technica ATH-M50X, costing $150, and often dubbed as the “Beats Killer,” due to the unmatchable comfort and sound quality raved about by millions of consumers worldwide. In short, there are plenty of products that are worth your money besides Beats by Dre.  

From a business standpoint, however, you may say that Beats has done a great job in the marketing department. But one of the main reasons Beats has gained such a following from the get-go is the name of the creator himself: Dr. Dre. Before 2006, no artist had ever put his name on an audio product. Dre’s product claimed to provide studio lIke quality on the go with the Beats, properly dubbed, Studio headphones.

“Certain people demand outrageous salaries at the CEO position, and when you markup your products 2000%, it’s very easy to provide them with what they want. Dr. Dre, I’m guessing, is one of those CEOs,” Jakimovski said.

Beats has an opportunity to provide the audio industry with amazing, technologically advanced products that can push the boundary of “the way we hear sound,” as Beats puts it. But instead, they pour millions and millions of dollars into a section of business they’ve already mastered. If a fraction of that was put into development of a quality product, Beats could expand their range into the audio community, and please almost everyone.

“As a consumer, it’s disturbing to see that they have this much power over what has become, at this point, simply a name,” Roberts said.