We're working on pricing for OGD1, and we have some ideas, but we thought we might want to discuss this on the list to see if anyone knows the economics of it better than we do.
I'm not going to discuss OGD1 itself. Although we have some good estimates on things, we have no solid quotes for continuous supply of parts, fabrication, etc. Instead, let's just keep this in the abstract. Here are some factors that we thing we need to account for in pricing the product: A: Raw parts cost B: Engineering costs (design, testing, etc.) C: Other handling costs (overhead, packaging, etc.) D: Failure rate buffer (bad boards, warranty returns, etc.) E: Maximum discount F: Manufacturer profit G: Wholesaler profit H: Retailer profit For the sake of this discussion, I'm not going to address developer discounts. We'll compute that separately. What I want to figure out here is (a) what other costs needs to be accounted for, and (b) how the factors should relate to each other mathematically. The general idea is to keep the retail price constant. If you buy directly from us, you get the same price as if you buy from a retailer. (We don't want to undercut our downstream suppliers.) We're willing to charge less to a retailer, because it is worth it to us to have them do some of the work for us. We would prefer not to have to always track individual boards (they'd have serial numbers, and we'd use that for warranty stuff, but if we sell a lot of 100, we stick 100 into a box, ship it, and let the other guy sort out the remaining details). Let X be the the break-even point, whose value is equal to A+B+C+D, and let Y be the minimum revenue we want to make, equal to X+F. To a wholesaler, we would charge Y+p*E, where p is some proportion of the maximum discount. They are free to charge what they want to a retailer, but we have a built-in standard margin of G for them. (They can profit more or less than G. It's up to them to negotiate deals with retailers.) If we sold directly to a retailer, we'd charge Y+G+q*E, where q is a different discount factor. Since we're acting as the wholesaler here (lower volume sale for us), we get the G profit, and they are entitled to H. When we sell direct to the end user, we charge the full Y+G+H+r*E. [Usually r > q > p, but things will be negotiated on a case-by-case basis.] Another thing we need to determine is the volume cutoffs. While everything is negotiable, things start at a value that is based on the volume of the order. We would then let them negotiate down based on how much of the product processing they are willing to do and other factors. Hypothetically, a retailer could make a wholesaler-sized order. In that case, we would charge them Y+p*E, and they are entitled to G+H in profit. Suggestions? Discussions? _______________________________________________ Open-graphics mailing list [email protected] http://lists.duskglow.com/mailman/listinfo/open-graphics List service provided by Duskglow Consulting, LLC (www.duskglow.com)
