Hi Brian:
This is an excellent post. Your explanation of the economics is consistent
with my experience in the industry. I would challenge you on one point
however; and this may be controversial!
I don't think you represented the actual cost of adding the FM radio because
you talked about the cost of firmware spread across all units but then
assumed that the FM radio chip was a given. If you add the $10 figure you
estimated for the chip to the $2 you suggested for the firmware, the cost of
goods would be 12 for adding the radio not $2 as you stated. Further, the
retail price is a function of the whole sale price. I won't guess at HW's
marke ups but I will suggest that your $2 figure is $12 plus the retail
mark up. If the FM radio was highly reliable, high fidelity high definition
digital FM radio it might be worth it, but from what I've seen it's been
more of a frustration for customers then a coveted feature. Naturally these
things are much easer to see in a rear view mirror, but I would suggest that
this "spreading cost across all users" philosophy is a slippery slope.
Let me end where I started though, congratulations on an excellent
discussion of the economics of blindness products.
Alan Holst
----- Original Message -----
From: "Brian Lingard" <[EMAIL PROTECTED]>
To: "BrailleNote List" <[email protected]>
Sent: Saturday, August 11, 2007 1:09 PM
Subject: RE: [Braillenote] Some thoughts:
Ottawa Canada
Hi Alex and list:
The expensive part of the BrailleNote is the Braille display.
While time and effort goes into the development and testing of
firmware, the cost of putting it onto each unit is minimal as its
an EEROM download, not physical precision parts that require
delicate assembly and testing by trained hands.
You spend good money developing firmware, but once its written
and working, the duplication cost is pretty low.
So if there were different versions of the BrailleNote, they
might contain exactly the same physical circuits and display, but
have different software on them.
This would let the product target users of particular features
more directly, but would spread the firmware development cost
over a narrower customer base, raising the cost to each customer
who wanted it.
The FM radio chip Humanware uses probably costs less than $10 per
chip in production quantity. Asking someone to pay $10 for a
feature they may or may not use, but may if they wish is pretty
reasonable.
Once the firmware to use the FM radio chip is written, tested and
working, it is bought and paid for and the development cost can
be charged against each unit it is put on over the life of the
product, possibly several years and many thousands of units.
So if it say cost two thousand dollars to write, test and get the
FM radio code working right and the exact same program is put
into each of four thousand Braille and VoiceNotes, the unit cost
of the program is 50 cents, plus the cost of duplicating and
installing it.
But if it were optional and only two thousand people ordered it,
the unit cost is a dollar per unit or double. Plus there is the
cost of taking orders for it and shipping them etc.
While in this case double the cost is not a lot of money, on a
more expensive and complex program, double the price may be a
whole lot. And if only one quarter of the people buy it, the
unit price is four times what it would be as a standard feature!
Hope this example gives you an idea of the economy of scale.
Brian
Brian K. Lingard
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