Roy Lewallen wrote:
Jim Lux wrote:

Bob John wrote:

Is Tarheel pricing their products out of the market? I had
consideration purchasing a little Tarheel II during our local Hamfest
last weekend in Aurora, IL. The dealer informed me the price had once
again gone up and they are now $289.99.


Seems a reasonable price for a retail thing. Someone has to buy the
parts, someone has to pay someone to assemble it, someone has to store
it in a warehouse, someone has to sit in a store to sell it, etc.
All those steps add up.

When I worked in product design, we used to figure that retail selling
price (w/o discounts) would be 5-10 times the raw parts (Bill of
Materials, BOM) cost.

So, based on that, the parts cost for that antenna would be somewhere
between $25-50. . .


It makes absolutely no sense to apply one rule of thumb for pricing to
all industries and situations.

This is true, but I figure that building small quantities of antennas is
comparable to what we did in my former employer, which made small
quantities of special effects equipment.



First, most rules of thumb are based on
what it takes for a given business to make a profit on an item, and this
varies tremendously on the volume, amount of R&D required for
development, and a large number of other factors. What do you think the
price of EZNEC is as a multiple of the cost of the CD -- or a printer
ink cartridge based on its parts cost? How about a $3.00 calculator? But
this doesn't have anything to do with what a product is worth, anyway.
What a product is worth is what people are willing to pay for it, no
more, no less.

This is generally true.

It's senseless to spend time figuring out what a vendor
*should* charge based on some contrived rule based on only one of many
factors determining its manufacturing cost. Vote with your pocketbook.
If people find that the value of the item is worth the price, they'll
pay it. Otherwise, they won't. And anyone thinking an item is overpriced
should jump at the opportunity -- use the time you would have spent
grousing and make it yourself and sell it for less. You'll be on your
way to your first million. . . or, more likely, on your way to learning
a few basic rules about business.

which is why the 5-10x sorts of rules work.. they're based on the
realities of small scale manufacturing and retailing. If you had some
really nifty device that is in great demand AND nobody else can make it
(due to trade secrets needed (e.g. Coke) or patents) then you can charge
substantially more, and people willlingly pay for it, because it has
value. However, in the case of something like a screwdriver antenna,
where there's no "special sauce" nor patent protection, that would leave
the field open for a competitor to sell essentially the same item at a
cost closer to the basic cost of manufacture and sales. So, in that
sense, it's easier to figure out what a "fair" price might be.

In the software business, one has a great advantage (and a curse too, in
some ways) because one can price it at what people perceive it's worth,
independent of the manufacturing cost (although, presumably, one prices
it at least high enough to recover the original development cost).
This, of course, fits in the "you can't build it yourself cheaper"
category (at least if you abide by copyright laws, etc.), and, most good
software has some unique "value added" that is non-trivial to do in some
competing software.



Roy Lewallen, W7EL