Setting price points...

[Don Y]

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

 

[server]

On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
<blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

What data do you have for analysis?



--

John Larkin Highland Technology, Inc

The best designs are necessarily accidental.

 

[Phil Hobbs]

On 11/25/20 11:58 AM, jlarkin@highlandsniptechnology.com wrote:

On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

One mistake I\'ve see people make is to set their prices too low, based
on BOM cost times some constant multiplier, and thus destroy the market
when they could have made a metric buttload of money by just
undercutting the existing players by 20% or so.

Cheers

Phil Hobbs

--
Dr Philip C D Hobbs
Principal Consultant
ElectroOptical Innovations LLC / Hobbs ElectroOptics
Optics, Electro-optics, Photonics, Analog Electronics
Briarcliff Manor NY 10510

http://electrooptical.net
http://hobbs-eo.com

 

[Dave Platt]

In article <a3a10140-2444-3af7-5334-08733d62c846@electrooptical.net>,
Phil Hobbs <pcdhSpamMeSenseless@electrooptical.net> wrote:

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

And, things become even more complicated when you combine these two
factors, with the effect of pricing feedback between competitors.

I suspect that, at best, the resulting play of price-and-demand looks
like a highly rippled sheet, with multiple profit-maxima and
profit-minima for various parties scattered across a warped plane.

At worst (and I think this likely) it\'s chaotic, and not solvable
in a closed form.

 

[Don Y]

On 11/25/2020 9:58 AM, jlarkin@highlandsniptechnology.com wrote:

On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

What data do you have for analysis?

I have no idea what data *they* compiled to justify their analysis.
Nor do I think any of us would be qualified to evaluate that data
as to it\'s accuracy.

My question has to do with identifying *issues* that we could
raise to see *if* the analysis might be lacking, in some way.

E.g., a new product comes at some cost to your existing
product line. It may compete with other products that you
already offer. In which case, any sale that COSTS you some
other sale has to be burdened by this fact. If the
analysis did not address this, then I would throw shade on it.

Likewise, you have to divert (or add) resources to the development,
marketing and support of yet another product. This can also
directly (and indirectly) burden existing products. Failure to
factor this into the analysis would similarly cause me to
mistrust the analysis.

As we can\'t (likely) critique the data in the analysis, I\'m hoping
we can find fault (or not!) in the approach they have taken and
use that to suggest lower (or higher) confidence in their results.

 

[Don Y]

On 11/25/2020 10:48 AM, Phil Hobbs wrote:

On 11/25/20 11:58 AM, jlarkin@highlandsniptechnology.com wrote:
On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator for
quality, so if you drop the price below some poorly-defined threshold, unit
sales will go _down_.

Yup. \"It must be cheap (crappy) to sell for such a low price\"

One mistake I\'ve see people make is to set their prices too low, based on BOM
cost times some constant multiplier, and thus destroy the market when they
could have made a metric buttload of money by just undercutting the existing
players by 20% or so.

The goal of *pricing* should always be to determine what the market WILL pay
for the product (which is a continuous function).

My other half has an occasional drink at bedtime. I watch the price
vary almost weekly at the store where I typically purchase it. You KNOW
their cost isn\'t changing weekly. So, they are trying to \"feel\" what
folks are willing to pay for it. When the price drops to my sweet spot,
I\'ll buy half a dozen bottles.

I see the same sort of price variation in many other items. I use a lot
of balsamic vinegar. I never pay the retail price so MY portion of
their sales is nonexistent -- until it goes on sale at a particular
price point. At which time, I buy a few gallons. So, anyone watching the
sales figures sees lots of traffic at that price and relatively less at
the \"other\". When they try to entice me at some intermediate price,
I simply don\'t bite -- eventually the price I *want* returns.

 

[Don Y]

On 11/25/2020 11:41 AM, Dave Platt wrote:

In article <a3a10140-2444-3af7-5334-08733d62c846@electrooptical.net>,
Phil Hobbs <pcdhSpamMeSenseless@electrooptical.net> wrote:

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

And, things become even more complicated when you combine these two
factors, with the effect of pricing feedback between competitors.

I suspect that, at best, the resulting play of price-and-demand looks
like a highly rippled sheet, with multiple profit-maxima and
profit-minima for various parties scattered across a warped plane.

At worst (and I think this likely) it\'s chaotic, and not solvable
in a closed form.

You don\'t have to \"solve\" it. What you want to do is come up with
a reasonable estimate of the amount of volume you can push at a particular
price point. Then, decide if that is profitable, for you.

I recall seeing a televised interview with a guy (?) selling cupcakes
for $4. (if you\'ve ever baked cupcakes, you realize $4 is outrageously
inflated price). The video showed a block-long line of folks (NYC?)
waiting to purchase one.

The interviewer asked why he didn\'t raise his price to $5! The guy pointed
to that line and said, \"At $5, the line would likely be shorter. The
LONG line is an effective marketing tool!\"

There seem to be special price points for \"personal indulgences\". $5
seems to be one as folks will pay that for a cup of coffee, cupcake,
etc.

There similarly seems to be a price point for charitable donations as
you see an increasing number of folks looking for \"just $19 per month\".
It\'s hard to believe the needs of these different groups all hinge
on $19/monthly. Rather, it seems that someone has determined that
they have a decent chance of coaxing \"< $20\" monthly from people
than they would $20 or more!

As with other pricing strategies, they are trying to figure out what the
market will pay for their product (even if their product is \"feel goodism\").

 

[Jeroen Belleman]

On 2020-11-25 20:44, Don Y wrote:

On 11/25/2020 11:41 AM, Dave Platt wrote:
In article <a3a10140-2444-3af7-5334-08733d62c846@electrooptical.net>,
Phil Hobbs <pcdhSpamMeSenseless@electrooptical.net> wrote:

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

And, things become even more complicated when you combine these two
factors, with the effect of pricing feedback between competitors.

I suspect that, at best, the resulting play of price-and-demand looks
like a highly rippled sheet, with multiple profit-maxima and
profit-minima for various parties scattered across a warped plane.

At worst (and I think this likely) it\'s chaotic, and not solvable
in a closed form.

You don\'t have to \"solve\" it. What you want to do is come up with
a reasonable estimate of the amount of volume you can push at a particular
price point. Then, decide if that is profitable, for you.

I recall seeing a televised interview with a guy (?) selling cupcakes
for $4. (if you\'ve ever baked cupcakes, you realize $4 is outrageously
inflated price). The video showed a block-long line of folks (NYC?)
waiting to purchase one.

The interviewer asked why he didn\'t raise his price to $5! The guy pointed
to that line and said, \"At $5, the line would likely be shorter. The
LONG line is an effective marketing tool!\"

There seem to be special price points for \"personal indulgences\". $5
seems to be one as folks will pay that for a cup of coffee, cupcake,
etc.

There similarly seems to be a price point for charitable donations as
you see an increasing number of folks looking for \"just $19 per month\".
It\'s hard to believe the needs of these different groups all hinge
on $19/monthly. Rather, it seems that someone has determined that
they have a decent chance of coaxing \"< $20\" monthly from people
than they would $20 or more!

As with other pricing strategies, they are trying to figure out what the
market will pay for their product (even if their product is \"feel goodism\").

Obviously, most product and services are priced that way, or there
wouldn\'t be so many nines in them.

Jeroen Belleman

 

[Don Y]

On 11/25/2020 2:00 PM, Jeroen Belleman wrote:

On 2020-11-25 20:44, Don Y wrote:

As with other pricing strategies, they are trying to figure out what the
market will pay for their product (even if their product is \"feel goodism\").

Obviously, most product and services are priced that way, or there
wouldn\'t be so many nines in them.

Porter\'s _The Price of Everything_ gives some interesting insights as
to how/why we accept certain prices for products -- and not others.
This is especially interesting as so many products have no real,
discernible \"intrinsic value\" -- so, an artificial valuation can
be *imposed*.

 

[Bill Sloman]

On Thursday, November 26, 2020 at 3:29:48 AM UTC+11, Don Y wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

There are only two points that matter.

How much does the competition charge? And how good is the competitive product?

If you part is decidedly better, you can charge more. If you can produce lots of product - enough to saturate the market - you can charge less and hope to grab most of the market.

If charging less will buy you more customers, it may make sense to charge quite a bit less. The usual rule of thumb is that making ten times the volume lets you halve your minimum price, but that only tends to be interesting if you\'ve got a mass market product.

If you\'ve got a unique product it\'s a different game, and you charge as much as the market will bear - dropping the price as soon as you can make more than you can sell, or when some competition shows up.

--
Bill Sloman, Sydney

 

[bitrex]

On 11/26/2020 10:17 AM, John Larkin wrote:

On Wed, 25 Nov 2020 12:48:29 -0500, Phil Hobbs
pcdhSpamMeSenseless@electrooptical.net> wrote:

On 11/25/20 11:58 AM, jlarkin@highlandsniptechnology.com wrote:
On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

One mistake I\'ve see people make is to set their prices too low, based
on BOM cost times some constant multiplier, and thus destroy the market
when they could have made a metric buttload of money by just
undercutting the existing players by 20% or so.

Cheers

Phil Hobbs

We have a new product, and our first customer told us what a great
deal it was for the price. That was the old price of course.

Tangentially related question, what are the conflicts of interest if any
if you do a one-off job for a client and get to thinking there might be
a market for the box if changed up a bit and sold as a stand-alone
product in the general market? No NDA was signed with the client and no
exclusive transfer of IP or manufacturing rights etc. was signed off on
or implied.

Like as an example the client needs a custom lighting controller for
their own personal/business use and you design and build it to the spec
for them and then realize there might be a market to other businesses
for the same design.

 

[Don Y]

On 11/27/2020 11:16 PM, bitrex wrote:

Tangentially related question, what are the conflicts of interest if any if you
do a one-off job for a client and get to thinking there might be a market for
the box if changed up a bit and sold as a stand-alone product in the general
market? No NDA was signed with the client and no exclusive transfer of IP or
manufacturing rights etc. was signed off on or implied.

Like as an example the client needs a custom lighting controller for their own
personal/business use and you design and build it to the spec for them and then
realize there might be a market to other businesses for the same design.

Google \"work for hire\".

But, also consider how such an action will affect your \"rep\", going forward.

[IME, I just avoid the markets that my clients operate in; in my case,
that\'s relatively easy! But, that doesn\'t mean that I can\'t benefit from
what I\'ve learned while tackling their project! Just like THEY have benefited
from what I learned from the previous client.]

When in doubt, get things in writing. Paper is cheap. Litigation isn\'t!

 

[bitrex]

On 11/28/2020 1:31 AM, Don Y wrote:

On 11/27/2020 11:16 PM, bitrex wrote:
Tangentially related question, what are the conflicts of interest if
any if you do a one-off job for a client and get to thinking there
might be a market for the box if changed up a bit and sold as a
stand-alone product in the general market? No NDA was signed with the
client and no exclusive transfer of IP or manufacturing rights etc.
was signed off on or implied.

Like as an example the client needs a custom lighting controller for
their own personal/business use and you design and build it to the
spec for them and then realize there might be a market to other
businesses for the same design.

Google \"work for hire\".

But, also consider how such an action will affect your \"rep\", going
forward.

[IME, I just avoid the markets that my clients operate in; in my case,
that\'s relatively easy!  But, that doesn\'t mean that I can\'t benefit from
what I\'ve learned while tackling their project!  Just like THEY have
benefited
from what I learned from the previous client.]

When in doubt, get things in writing.  Paper is cheap.  Litigation isn\'t!

My gut instinct in this case tends to be even though it was a very slick
one-off there\'s not enough demand to make it worth developing further,
the application (automotive widget) is pretty niche, not too many
customers are interested in retrofitting an older vehicle the way the
client wants to. /shrug

 

[John Larkin]

On Sat, 28 Nov 2020 01:16:09 -0500, bitrex <user@example.net> wrote:

On 11/26/2020 10:17 AM, John Larkin wrote:
On Wed, 25 Nov 2020 12:48:29 -0500, Phil Hobbs
pcdhSpamMeSenseless@electrooptical.net> wrote:

On 11/25/20 11:58 AM, jlarkin@highlandsniptechnology.com wrote:
On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

One mistake I\'ve see people make is to set their prices too low, based
on BOM cost times some constant multiplier, and thus destroy the market
when they could have made a metric buttload of money by just
undercutting the existing players by 20% or so.

Cheers

Phil Hobbs

We have a new product, and our first customer told us what a great
deal it was for the price. That was the old price of course.


Tangentially related question, what are the conflicts of interest if any
if you do a one-off job for a client and get to thinking there might be
a market for the box if changed up a bit and sold as a stand-alone
product in the general market? No NDA was signed with the client and no
exclusive transfer of IP or manufacturing rights etc. was signed off on
or implied.

Like as an example the client needs a custom lighting controller for
their own personal/business use and you design and build it to the spec
for them and then realize there might be a market to other businesses
for the same design.

We do that all the time. The first order is just that, and is an
indicator that at least someone wants the product.

If a customer pays for units only, there is no conflict. If they pay
any one-time fee, we make it clear in advance whether they have any
design rights. We prefer to make it clear that we are customizing our
proprietary technology to their needs and that they have no ownership.
Somtimes they have exclusivity for a limited time.

With no NDA, the seller can sell to others, but has no IP protection
beyond the usual copyright or patent.

--

John Larkin Highland Technology, Inc trk

The cork popped merrily, and Lord Peter rose to his feet.
\"Bunter\", he said, \"I give you a toast. The triumph of Instinct over Reason\"

 

[Don Y]

On 11/28/2020 1:43 AM, bitrex wrote:

On 11/28/2020 1:31 AM, Don Y wrote:
On 11/27/2020 11:16 PM, bitrex wrote:
Tangentially related question, what are the conflicts of interest if any if
you do a one-off job for a client and get to thinking there might be a
market for the box if changed up a bit and sold as a stand-alone product in
the general market? No NDA was signed with the client and no exclusive
transfer of IP or manufacturing rights etc. was signed off on or implied.

Like as an example the client needs a custom lighting controller for their
own personal/business use and you design and build it to the spec for them
and then realize there might be a market to other businesses for the same
design.

Google \"work for hire\".

But, also consider how such an action will affect your \"rep\", going forward.

[IME, I just avoid the markets that my clients operate in; in my case,
that\'s relatively easy! But, that doesn\'t mean that I can\'t benefit from
what I\'ve learned while tackling their project! Just like THEY have benefited
from what I learned from the previous client.]

When in doubt, get things in writing. Paper is cheap. Litigation isn\'t!

My gut instinct in this case tends to be even though it was a very slick
one-off there\'s not enough demand to make it worth developing further, the
application (automotive widget) is pretty niche, not too many customers are
interested in retrofitting an older vehicle the way the client wants to. /shrug

I *really* don\'t like dealing with \"customers\" -- clients are just a tiny
bit better! So, my approach with marketable products has been to find
someone who is interested in marketing it and then giving them generous
terms so they\'ll manufacture the items that *I* (personally) want.

As much of a device\'s functionality now lies in the firmware, I can already
have ideas as to how to tweek that firmware for a purpose of my own.
So, I benefit from a \"production quality\" product (instead of \"prototypes\"
that might lack things like custom injection molded cases) in the
small quantities for which *I* may have a personal use. :>

\"Unethical\"? <shrug> I\'m not competing with them; rather *using* them
to get something that STILL won\'t be available, commercially!

 

[Phil Hobbs]

On 11/28/20 6:35 AM, John Larkin wrote:

On Sat, 28 Nov 2020 01:16:09 -0500, bitrex <user@example.net> wrote:

On 11/26/2020 10:17 AM, John Larkin wrote:
On Wed, 25 Nov 2020 12:48:29 -0500, Phil Hobbs
pcdhSpamMeSenseless@electrooptical.net> wrote:

On 11/25/20 11:58 AM, jlarkin@highlandsniptechnology.com wrote:
On Wed, 25 Nov 2020 09:29:27 -0700, Don Y
blockedofcourse@foo.invalid> wrote:

I suspect most of us routinely deal with determining product
*costs*. And, have little say (or interest) in *prices*.

Having said that...

I\'m hosting an offsite and one of my colleagues has asked to
have a review of a pricing policy (that has been recommended
to him) placed on the agenda.

I, frankly, don\'t see how any of us will be qualified to
comment on it\'s accuracy as we\'re not expert in the application
domain he\'s targeting. (If it was \"yet another\" product
similar to those that he\'s already brought to market, I
suspect he wouldn\'t have needed such an analysis!)

But, what are the sorts of issues that we should challenge
in that analysis?

Obviously, the qualifications of the folks who prepared the
analysis. Their knowledge of the market today -- as well as
predictions for the future. Their knowledge of The Competition
in terms of motivation and capability. Impact on my colleague\'s
existing business and product lines. Size of investment (and
risk to recovery) Etc.

I can\'t imagine we\'ll come up with anything that a /capable/
analysis hasn\'t already taken into account. So, the exercise
will likely be one of assuaging (or aggravating!) his fears
as to the analysis\'s competency.

Pricing is the least precise thing that we do. There is in economic
theory a curve of net profit vs selling price, an inverted parabola,
and we have no clue where the peak might be. We guess.

Plus it isn\'t that linear or symmetric--people use price as an estimator
for quality, so if you drop the price below some poorly-defined
threshold, unit sales will go _down_.

One mistake I\'ve see people make is to set their prices too low, based
on BOM cost times some constant multiplier, and thus destroy the market
when they could have made a metric buttload of money by just
undercutting the existing players by 20% or so.

Cheers

Phil Hobbs

We have a new product, and our first customer told us what a great
deal it was for the price. That was the old price of course.


Tangentially related question, what are the conflicts of interest if any
if you do a one-off job for a client and get to thinking there might be
a market for the box if changed up a bit and sold as a stand-alone
product in the general market? No NDA was signed with the client and no
exclusive transfer of IP or manufacturing rights etc. was signed off on
or implied.

Like as an example the client needs a custom lighting controller for
their own personal/business use and you design and build it to the spec
for them and then realize there might be a market to other businesses
for the same design.

We do that all the time. The first order is just that, and is an
indicator that at least someone wants the product.

If a customer pays for units only, there is no conflict. If they pay
any one-time fee, we make it clear in advance whether they have any
design rights. We prefer to make it clear that we are customizing our
proprietary technology to their needs and that they have no ownership.
Sometimes they have exclusivity for a limited time.

We do that too. Our preferred mode is know-how licensing plus NRE for
customization. Seems to go down pretty well in general.

With no NDA, the seller can sell to others, but has no IP protection
beyond the usual copyright or patent.

Cheers

Phil Hobbs


--
Dr Philip C D Hobbs
Principal Consultant
ElectroOptical Innovations LLC / Hobbs ElectroOptics
Optics, Electro-optics, Photonics, Analog Electronics
Briarcliff Manor NY 10510

http://electrooptical.net
http://hobbs-eo.com

 

[whit3rd]

On Friday, November 27, 2020 at 10:16:16 PM UTC-8, bitrex wrote:

Tangentially related question, what are the conflicts of interest if any
if you do a one-off job for a client and get to thinking there might be
a market for the box if changed up a bit and sold as a stand-alone
product in the general market? No NDA was signed with the client and no
exclusive transfer of IP or manufacturing rights etc. was signed off on
or implied.

I once heard from an architect, that he\'d seen a house exactly like his design
for a customer; he sent that other homeowner a bill. The homeowner paid it.
Usually, the architect has to provide plans, oversee contractors (decide
when they\'re paid) and deal with any emergencies that require change of plans,
but... customarily, the plans are only provided FOR ONE PROJECT, and reusing
the plans means he gets his cut, again.

The first homeowner had tossed a copy of the plans to a friend...

 

[Don Y]

On 11/26/2020 1:10 PM, dcaster@krl.org wrote:

On Wednesday, November 25, 2020 at 9:36:01 PM UTC-5, lang...@fonz.dk wrote:
torsdag den 26. november 2020 kl. 03.16.34 UTC+1 skrev dca...@krl.org:

A good many years ago I helped a guy whose business was fishing rods.
Fly rods used less material but were the highest priced rods. He tried
to price his rods about 20 % below his competitors. But they did not
sell at that price. So he changed the price to about 5% more than the
highest priced competitor, Sage. Sales picked up.

when men(and women) buy toys to show off to their friends they don\'t want
to be the one with the cheap stuff

Actually, your more likely to be ridiculed for buying expensive kit
and thinking that will make up for your lack of SKILL!

I do not think that is the reason. I think it is because the cost of a
fishing rod is small compared to the cost of a fishing vacation.

It\'s more likely that consumers have no realistic way of determining
the (monetary) \"value\" of an item without comparing it to some OTHER
item\'s stated value. (of course, THAT item\'s value was only determined
by a consensus of consumers opting to pay it\'s asking price -- \"Turtles
all the way down!\")

Look at most of the items that you encounter in a given day and
ask yourself to put a price tag on them. Then, try to recall what you
actually PAID for them!

Sometimes, I carry a PMP when I take my daily walks. As the device that
I use is pretty small, it\'s easy to clip to my lapel or even wrap my
fist around. So, *wired* earphones are no big deal.

I recently opted to move my music archive onto a rescued Droid MAXX 2
as it has a considerably nicer user interface (to select the pieces
I want to hear) and larger capacity (so I can put more of my collection
on the device instead of having to pick smaller subsets of it)

The MAXX2, however, is MUCH larger than the tiny PMP that I was using.
It\'s not possible to clip to my lapel and tedious to hold in my hand.
Slipping it into a pocket means I\'m always wary of getting entangled in
the cord.

Solution: wireless earbuds!

Wait. You want HOW MUCH for the convenience of cutting the cord???
Really??? And people are willing to PAY that much?? Sorry, Charlie.
I\'ll find a compromise solution that will allow me to spend that
hour a day comfortably without parting with all that cash...

 

[Tom Gardner]

On 26/11/20 20:45, Don Y wrote:

On 11/26/2020 1:10 PM, dcaster@krl.org wrote:
On Wednesday, November 25, 2020 at 9:36:01 PM UTC-5, lang...@fonz.dk wrote:
torsdag den 26. november 2020 kl. 03.16.34 UTC+1 skrev dca...@krl.org:

A good many years ago I helped a guy whose business was fishing rods.
Fly rods used less material but were the highest priced rods. He tried
to price his rods about 20 % below his competitors. But they did not
sell at that price. So he changed the price to about 5% more than the
highest priced competitor, Sage. Sales picked up.

when men(and women) buy toys to show off to their friends they don\'t want
to be the one with the cheap stuff

Actually, your more likely to be ridiculed for buying expensive kit
and thinking that will make up for your lack of SKILL!

Gliding aphorism: there is no substitute for (wing) span
Retort: there is, but you can /buy/ span.