>From: "Richard M. Hartman" <[EMAIL PROTECTED]> >Date: Tue, 3 Jul 2001 13:10:38 -0700 > >"Todd Walk" <[EMAIL PROTECTED]> wrote in message >news:55169@palm-dev-forum... >> ... >> 2 developers x (roughly $80K salary + $70K overhead) >> means even small projects easily cost > $250K. >> >> $250K/$20 = 12,500 sales minimum, not counting the huge number >> of other fixed and varible costs (advertising, sales, support, >>distribution, taxes, etc...) >> > >You must also take into account that 1000*$20 < 5000*$10. > >If you price too high, you will make fewer sales ... very likely >enough fewer to bring your total revenues down below what >you would have made at the lower price. You also have build in the variable cost of support and processing exceptions (ex: returns/c-c credits etc.) So if 5% of your customers want a credit and 25% of your customers send you an e-mail with a question, and 5% on your customers either call you or hit you with multiple e-mails... Well it depends on how you value your time, but at some (low) price level it starts to cost you money every time your product is sold! Say your time is worth $60/hour. Processing a return or a credit is say 10 minutes ($10) An email response is say 4 minutes ($4) Handling a phone call or multiple e-mails is say 20 minutes ($20) (5% * $10) + (25% * $4) + (5% * $20) = $2.50 pro-rated But if 50% of your customers call you or contact you multiple times, and 50% e-mail you once, then the pro-rated cost becomes $12.50 So part of your pricing model has to build in the cost of support. A low value, high support product will cost you more than you earn. I'd recommend your net price (after PalmGear/Handango commission) is at least 3 times your pro-rated support cost. So you can afford to sell a product with a $2.50 support cost for $10. But if your pro-rated support cost is $12.50, then your price needs to be at least $45. (By the way, I'm not trying to start a thread on how long it takes to process an e-mail or a credit, these timings are just to create a realistic example) And this also doesn't compute in the cost of pre-sales support, e-mails or phone calls from people who are considering registering your product. This also has to be factored in... Roger Stringer Marietta Systems, Inc. -- For information on using the Palm Developer Forums, or to unsubscribe, please see http://www.palmos.com/dev/tech/support/forums/
