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From: John Larkin on 20 Jul 2010 11:12
On Tue, 20 Jul 2010 15:56:20 +0100, John Devereux
<john(a)devereux.me.uk> wrote:

>John Larkin <jjlarkin(a)highNOTlandTHIStechnologyPART.com> writes:
>
>> On Mon, 19 Jul 2010 21:58:44 -0700, "Joel Koltner"
>> <zapwireDASHgroups(a)yahoo.com> wrote:
>>
>>>"John Larkin" <jjlarkin(a)highNOTlandTHIStechnologyPART.com> wrote in message
>>>news:0jv946ttf0aha1s406o0doi7966h3ir8ju(a)4ax.com...
>>>> I recall reading some studies that suggest that most companies tend to
>>>> set their selling price below the peak point, because more sales make
>>>> them feel better.
>>>
>>>...and it builds long-term value as well, since not only will that many more
>>>people will know your company's name, but they'll think of your products as a
>>>good value.
>>
>> Yes, yet another intangible that makes pricing even less scientific.
>> Lowish pricing also discourages competitors from joining the market.
>>
>> We're considering one product now that will sell for maybe 1/3 of what
>> we could reasonably charge, practically a giveaway, because of side
>> effects.
>
>Another one is the value of ongoing spares & repair business, if you are
>selling into an industry where they keep breaking stuff!

Low-end cars are often sold at cost so the dealers can get the repair
business. Unfortunately our stuff is pretty reliable and doesn't need
scheduled maintanance. We cite a 1-year calibration interval, and only
we can calibrate them, but hardly anything comes back for cal.

John

From: krw on 20 Jul 2010 18:03
On Tue, 20 Jul 2010 07:04:55 -0700, John Larkin
<jjlarkin(a)highNOTlandTHIStechnologyPART.com> wrote:

>On Mon, 19 Jul 2010 23:09:25 -0500, "krw(a)att.bizzzzzzzzzzzz"
><krw(a)att.bizzzzzzzzzzzz> wrote:
>
>>On Mon, 19 Jul 2010 18:52:23 -0700, John Larkin
>><jjlarkin(a)highNOTlandTHIStechnologyPART.com> wrote:
>>
>>>On Mon, 19 Jul 2010 19:47:52 -0500, "krw(a)att.bizzzzzzzzzzzz"
>>><krw(a)att.bizzzzzzzzzzzz> wrote:
>>>
>>>>On Mon, 19 Jul 2010 17:33:23 -0700, John Larkin
>>>><jjlarkin(a)highNOTlandTHIStechnologyPART.com> wrote:
>>>>
>>>>>On Mon, 19 Jul 2010 19:12:32 -0500, "krw(a)att.bizzzzzzzzzzzz"
>>>>><krw(a)att.bizzzzzzzzzzzz> wrote:
>>>>>
>>>>>>On Mon, 19 Jul 2010 00:47:16 -0700, Robert Baer <robertbaer(a)localnet.com>
>>>>>>wrote:
>>>>>>
>>>>>>>John Larkin wrote:
>>>>>>>> We blew up a couple more of the SIP dc/dc converters, CUI type VASD1.
>>>>>>>> This one is 12 volts in, +-15 out, rated 1 watt. I don't totally blame
>>>>>>>> the bricks, since certain un-named parties likely shorted the outputs
>>>>>>>> while probing channels, but it would be nice if they could stand a
>>>>>>>> load short.
>>>>>>>>
>>>>>>>> There are 12 on this board...
>>>>>>>>
>>>>>>>> ftp://jjlarkin.lmi.net/V220_top.jpg
>>>>>>>>
>>>>>>>>
>>>>>>>> Anyway, I took one home and tore off the potting shell. It's potted
>>>>>>>> with something soft and a bit gritty, maybe a filled soft epoxy.
>>>>>>>> Looking around the garage, I had some Jasco paint remover (methylene
>>>>>>>> chloride mostly) some acetone, and some MEK, so I mixed them all in a
>>>>>>>> glass jar and soaked the thing overnight. The potting swelled up and
>>>>>>>> got really soft. I did lose the transformer, which stayed in the epoxy
>>>>>>>> glob when I ripped it off the board.
>>>>>>>>
>>>>>>>> ftp://jjlarkin.lmi.net/VASD1_top.JPG
>>>>>>>>
>>>>>>>> This looks like a simple 2-transistor forward converter on the left,
>>>>>>>> and a couple of dual diodes and caps on the right. The substrate is a
>>>>>>>> pc board, unlike the Muratas which are ceramic.
>>>>>>>>
>>>>>>>> Maybe we'll add a polyfuse or something to protect them, although
>>>>>>>> things like this tend to quit failing when people quit probing.
>>>>>>>>
>>>>>>>> With another part or two, they could have made this short-resistant.
>>>>>>>> But these are only about $4 each and work very nicely otherwise.
>>>>>>>>
>>>>>>>> John
>>>>>>>>
>>>>>>>>
>>>>>>> It has been said, for a car, that addition of a 50 cent part
>>>>>>>increases the consumer price by 5 dollars.
>>>>>>> So...the addition "of another part or two" would almost double the price.
>>>>>>> "QED"
>>>>>>
>>>>>>In the real world there is no correlation between them, other than price >
>>>>>>cost. Put another way, if I shave $.50 off the cost of a product there is no
>>>>>>corresponding drop in our price. Price is set by a completely different set
>>>>>>of equations than cost.
>>>>>
>>>>>If we add a part, the price goes up 4x the part cost. If we delete a
>>>>>part, the price doesn't change.
>>>>
>>>>That's because you have no idea where to price your products.
>>>
>>>That's often true. There is theoretically a curve of total profit
>>>versus unit selling price, a sort of inverted parabola. Many small
>>>companies have no idea where they are exactly on that curve, and have
>>>no good way to find out. If you have a lot of competition and a lot of
>>>history, you know; the flip side is that, in that situation, margins
>>>are usually low. When you have a high-margin niche product that is IP
>>>intensive, and no direct competition, it is hard to set pricing.
>>
>>Nevertheless, car companies do. Price and cost are totally separate (noting
>>the obvious exception).
>
>But they have lots of competition, thousands of dealers, and armies of
>marketing and research people. It's easier for them to do the math.
>And they still mamage to come up with Edsels and Novas and other
>blunders.

Your power supply manufacturer has similar info.

>>>I recall reading some studies that suggest that most companies tend to
>>>set their selling price below the peak point, because more sales make
>>>them feel better.
>>>
>>>We have lately been adding sales reps all over the country, and we're
>>>asking them what they think of our pricing. They are better placed to
>>>research that than we are, since they talk to a lot of potential
>>>customers. The only feedback so far is the the e/o stuff looks cheap.
>>
>>"e/o"? "Cheap", as in inexpensive for the market, or "cheap", as in they
>>don't like your labels?
>>
>>>If you sold breakfast cereal, you could do experiments: increase the
>>>price 5% in 5 cities and wait and see what happens. We don't have
>>>enough statistics to do anything like that.
>>
>>I didn't say you were wrong to price the way you do. Obviously you're
>>successful. Car companies don't price a car up five bucks because they spent
>>another $.50 on a bolt. OTOH, they might price it up $50 because the $.50
>>chrome bolt looks spiffier than the $1 brushed bolt.
>
>Our custimers don't pay for chrome screws and racing stripes; pity.
>Many will pay for BIST and conformal coating and extended warranties.
>
>Nobody can price their products below cost for very long.

I said nothing about price < cost, just the opposite, in fact. That was the
limiting case.

>If adding
>something adds X more dollars to the cost, it shifts that inverted
>parabola profit curve a bit. The logical thing to do is raise the
>price a little and sell fewer units at a higher price. That makes
>sense from a statistical/competitive standpoint too; in the big
>picture, you competitors' costs are probably following similar general
>trends. Also, if I can sell lots of units for 10x cost, I may annoy my
>customers and stimulate competitors.

As you know, the market isn't a static thing. The "price parabola" certainly
must include competition and potential competition and as you note, it isn't
fixed in time.

>It's complex, and most people don't have enough information to set the
>"right" price. There's not even any way to know, years later, if you
>lost business because the price was too high, or left money on the
>table. One coarse indicator is the ratio of quotes to orders.

But my statement stands. Price and cost have nothing to do with each other
(other than the obvious). Because you use cost as your basis of price is
irrelevant. Even you admit that they're separate when you said that you don't
reduce cost if you eliminate a part.
From: krw on 20 Jul 2010 18:07
On Tue, 20 Jul 2010 15:56:20 +0100, John Devereux <john(a)devereux.me.uk> wrote:

>John Larkin <jjlarkin(a)highNOTlandTHIStechnologyPART.com> writes:
>
>> On Mon, 19 Jul 2010 21:58:44 -0700, "Joel Koltner"
>> <zapwireDASHgroups(a)yahoo.com> wrote:
>>
>>>"John Larkin" <jjlarkin(a)highNOTlandTHIStechnologyPART.com> wrote in message
>>>news:0jv946ttf0aha1s406o0doi7966h3ir8ju(a)4ax.com...
>>>> I recall reading some studies that suggest that most companies tend to
>>>> set their selling price below the peak point, because more sales make
>>>> them feel better.
>>>
>>>...and it builds long-term value as well, since not only will that many more
>>>people will know your company's name, but they'll think of your products as a
>>>good value.
>>
>> Yes, yet another intangible that makes pricing even less scientific.
>> Lowish pricing also discourages competitors from joining the market.
>>
>> We're considering one product now that will sell for maybe 1/3 of what
>> we could reasonably charge, practically a giveaway, because of side
>> effects.
>
>Another one is the value of ongoing spares & repair business, if you are
>selling into an industry where they keep breaking stuff!

In one product line, we get 100% of the widgets back each year for upgrades
and refurbishing. Last year it was expensive since we replaced a board with a
better performing one (weak design, originally). This year it's just firmware
features so the profit is better. ;-)
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