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Neil McCauley
15-12-2008, 13:51
A insight into how many makers define the retail price of a product might be of interest. Generally, the manufacturing cost per item (sometimes with the R&D cost amortized, or not as the case maybe) is multiplied by say 10, 15 or 21 - or any other number that springs to mind, albeit with one eye open to see where competitor products are sitting in the price band. Thus an audiophile product that retails for say £900 ex VAT might have a base manufacturing cost perhaps as little as £45.

On the face of it, without knowing the facts, you might feel this is greedy. But do stop to consider that within that multiplier is the need for retained profit at the maker, transport to the UK, transport to the retailer, the dealer’s margin, marketing, promotion and so on.

Anyway, I have come across a supplier (not one I currently use) who is thinking of a radical approach in that their multiplier may be as low as x (7). They argue, with some justification I think, that they will sell far more of this product if it has an RRP of (maker’s true cost) x (7) rather than maker’s true cost) x (21).

As a retailer, my own margin as indeed the maker’s would be drastically reduced. But both they and I are confident that we can sell four times as many @ x (7) than @ x (21). It’s an interesting opportunity and being a commercial gambler by inclination, I may well agree to this. But therein lies a dilemma.

This product (confidential currently) would in the x (21) situation probably sell for say £3,000 inc VAT and at x (7) around £1,000 inc VAT. In a nutshell, would anyone believe that at such a low (comparatively speaking) cost, the £1,000 unit had credibility? I wonder just how robust the 'snob' value of silly pricing still remains a buying motivator. I do believe that Richer Sounds with the Cambridge brand have pioneered this approach in the hi-fi arena, but I have yet to see it in the high-end arena.

Regards

HP

Colin
15-12-2008, 14:23
It may simply be reality taking a bite. We supply one off manufactured products to customer specs, and I would happily settle for manufacturing cost x 7, rather than the more normal x 1.5 - 2.3

Neil McCauley
15-12-2008, 14:36
It may simply be reality taking a bite. We supply one off manufactured products to customer specs, and I would happily settle for manufacturing cost x 7, rather than the more normal x 1.5 - 2.3

Yes, I can easily imagine you would. I hope your buyers appreciate your effort. I'm assuming here that you sell direct. Is that correct?

Colin
15-12-2008, 14:37
Yes, into engineering companies for use on their workshops.

Steve Toy
15-12-2008, 15:17
All this company needs to do is be transparent about their pricing structure and perceived VFM will take over from pure snob value. In these troubled times this strategy is more likely to work than during times of greater prosperity.

Neil McCauley
15-12-2008, 15:29
In these troubled times this strategy is more likely to work than during times of greater prosperity.

Both logical and rational. And yet ......... I'm not so sure. Buying decisions are not always rational nor logical and I believe that the 'snob' factor is alive and thriving in many environments. It may be in decline, but not terminally so.

Clive
15-12-2008, 15:35
Both logical and rational. And yet ......... I'm not so sure. Buying decisions are not always rational nor logical and I believe that the 'snob' factor is alive and thriving in many environments. It may be in decline, but not terminally so.
I suspect the snob factor is significant. One of the greatest costs is often the distributor margin, quite often this is around 40% for items such as cartridges. Of course distributors have costs to recover out of this.

muffinman
15-12-2008, 15:47
Howard,
in your opinion would you say/guess that the majority of hifi 'snobs' could be classed as recession proof ?
I don't think we've seen anywhere near the worst of the current financial situation and i'd be inclined to think that any company who has the balls and transparency to reduce their prices must stand a better chance of meeting more custom.
new punters will get a bite of the apple, brand loyalists might remain and the snobs can go and spend their money elsewhere.
i have no idea how lively the high end market is - could you please give me some idea. i always imagine it's footballers who send their P.A to go get them a nice stereo :)

ps
your posts are always a good, thought provoking read

tfarney
15-12-2008, 16:10
I can think of a few very "midfi" (based on price) product lines that perform head to head with the high end, and they are universal dismissed on the rare occasion that they are noticed at all by the high-end community. I think your friends may, indeed sell a lot more product, but not to the high-end audiophile community. Do let us know who these audio philanthropists are as soon as you're able, though. I'm always on the hunt for the kit that hits way above its weight.

Tim

Neil McCauley
15-12-2008, 17:16
Howard,
in your opinion would you say/guess that the majority of hifi 'snobs' could be classed as recession proof ?

ps
your posts are always a good, thought provoking read

Strangely, since the early days of Subjective Audio in 1976 I have not seen any credible correlation between the 'snobs' and the recession proof. I can cite many examples of the reverse, some of which are very sad. Thank you for the PS. i aim to please.

Neil McCauley
15-12-2008, 17:19
Howard,
I don't think we've seen anywhere near the worst of the current financial situation and i'd be inclined to think that any company who has the balls and transparency to reduce their prices must stand a better chance of meeting more custom.
new punters will get a bite of the apple, brand loyalists might remain and the snobs can go and spend their money elsewhere.


I agree that we've not seen the worst. But then again I'm only (like the rest of us) taking a view on what the media feeds us. As for organisations with 'balls' - yes they would - on the face of it - stand a better chance. However I have experienced first hand 'hidden' factors which I can barely comprehend let alone describe which can distort what otherwise might have been a logical outcome to marketing objectives. Regretfully, standards are slipping, aspirations are increasing and greed knows no boundaries.

Neil McCauley
15-12-2008, 17:25
I have no idea how lively the high end market is - could you please give me some idea. i always imagine it's footballers who send their P.A to go get them a nice stereo :)


For me, but I am atypical in the way I communicate with customers, I've had the best 4 months ever. I can offer no credible explanation.

As for footballers and other famous celebrities, my policy was [and remains] always always to quietly screw up the demo. I don't want their business because I don't want the hassle that usually goes with it. I made an exception with Daley Thompson and with Midge Ure. Both gentlemen from the start.

John
15-12-2008, 17:31
Its a pity that some people see high costs as meaning high performance and may dismiss a item because of its low costs or may purchase the item due to branding This is what marketing people love but is the death to true value and sometimes even choice

StanleyB
15-12-2008, 17:32
7 to 1 is quite a high ratio for people like me. I work off far less than that otherwise I couldn't compete with the direct sellers in China and HK.

Alex Nikitin
15-12-2008, 20:30
A insight into how many makers define the retail price of a product might be of interest. Generally, the manufacturing cost per item (sometimes with the R&D cost amortized, or not as the case maybe) is multiplied by say 10, 15 or 21 - or any other number that springs to mind, albeit with one eye open to see where competitor products are sitting in the price band. Thus an audiophile product that retails for say £900 ex VAT might have a base manufacturing cost perhaps as little as £45.

Howard,

My experience at Creek was very different from what you describe. At that time I've calculated that the VAT on the final sale was sometimes more than our profit (before taking R&D into account) :( . With my current products I have a similar approach to pricing, that means my profit is about 15-20% of the retail price. Perhaps I am following a wrong business model... :)

Alex

Neil McCauley
15-12-2008, 20:52
Its a pity that some people see high costs as meaning high performance and may dismiss a item because of its low costs or may purchase the item due to branding This is what marketing people love but is the death to true value and sometimes even choice

I am certain this happens and i can cite instances. However Marco might go into one if I name names. So you'll have to guess.

Neil McCauley
15-12-2008, 20:53
Howard,

My experience at Creek was very different from what you describe. At that time I've calculated that the VAT on the final sale was sometimes more than our profit (before taking R&D into account) :( . With my current products I have a similar approach to pricing, that means my profit is about 15-20% of the retail price. Perhaps I am following a wrong business model... :)

Alex

Interesting point. I'm not experienced to comment on your business model of course. Do you sell direct?

StanleyB
15-12-2008, 21:02
Perhaps UK sellers have to branch out more and cater a lot better for orders from other European countries. In the last few weeks my level of sales to neighbouring countries has exceeded my UK sales. The weak £ is having a positive effect on my quantity of goods sold, even if margins are lower.

Neil McCauley
15-12-2008, 21:04
Perhaps UK sellers have to branch out more and cater a lot better for orders from other European countries. In the last few weeks my level of sales to neighbouring countries has exceeded my UK sales. The weak £ is having a positive effect on my quantity of goods sold, even if margins are lower.

Identical here too!

Alex Nikitin
15-12-2008, 21:05
Do you sell direct?

The cheapest model is sold only direct, otherwise I would not be able to make any profit at all ;) . All the rest sold mostly trade and if I sell direct occasionally I would only sell for a full retail price, no discounts.

Alex

Steve Toy
16-12-2008, 03:01
As for footballers and other famous celebrities, my policy was [and remains] always always to quietly screw up the demo.


Given how undiscerning these types probably are, I really wonder how you could possibly screw the dem other than by turning off the tweeters or just the whole thing (or just doing something that simply relieves them of the tits-'n-arse thrill as well as making the setup strip the paint from your walls. Or do you not let them choose their own music and instead force them to listen to Paverotti? :D

Neil McCauley
16-12-2008, 09:36
Given how undiscerning these types probably are, I really wonder how you could possibly screw the dem other than by turning off the tweeters or just the whole thing (or just doing something that simply relieves them of the tits-'n-arse thrill as well as making the setup strip the paint from your walls. Or do you not let them choose their own music and instead force them to listen to Paverotti? :D

There are many many ways of deliberately screwing up. Depends on how far you need to go to get them to go elsewhere. The easiest was to wire the system out of phase. Yes, even some footballers could tell. Moving up from this, reversing the left and right channels when playing a piece of music well known to them. A sure fire way was to tell them straight out that I always charge a 20% premium for celebrities.

The effort was devoted to getting them to go to some other hapless retailer. In the Camden Town days, I'd direct them to KJ Leisuresound. Jim Dovey [a very decent chap] was far better at dealing with the neurotic and potentially hysterical than I was.

Marco
16-12-2008, 09:47
Haha, you're far too considerate, Howard. I'd simply sell them whatever they wanted, relieving them of their money A.S.A.P (in the most painless way possible) and, kerrrrchinnnggg! - Sink it in my back pocket quicker than you can say "That's Asda price!", then laugh at them afterwards whilst enjoying a rather nice holiday (or whatever) paid for at their expense!

I'm nice that way ;)

Marco.

Neil McCauley
16-12-2008, 09:59
Haha, you're far too considerate, Howard. I'd simply sell them whatever they wanted, relieving them of their money A.S.A.P (in the most painless way possible) and, kerrrrchinnnggg! - Sink it in my back pocket quicker than you can say "That's Asda price!", then laugh at them afterwards whilst enjoying a rather nice holiday (or whatever) paid for at their expense!

I'm nice that way ;)

Marco.

Really? You think I didn't try that in the early days?

These people have very nasty lawyers. It doesn't matter how 'correct' you are as a retailer, you still get celebrity s**t. For example, what would you do if a cheque from a celebrity bounced AND at the same time you get a letter from their lawyer telling you than on their client's behalf they taken 'grave offence' that the client has been sold a pair of speakers when surely one individual speaker would do? Moreover they are considering bringing an action for the 'distress' caused to their client.

Of course one could fight it in Court - and win - but look at the amount of time and distraction it would cause to a one-man retailer. And they know it. So I didn't.

Marco
16-12-2008, 10:43
Yep, I agree.

Just take a cash payment only on supply of goods from these sorts of people; accept no other form of payment from them unless it's guaranteed by their bank or credit card company, that way the genuine ones without 'issues' will pay up accordingly in return for a nice hi-fi system, consequently you're quids in with no hassle, and the 'loons' will take their 'business' elsewhere...

If you scare them all off then it's business as usual with nothing lost.

Or from your experience does that not work? :)

Marco.

Neil McCauley
16-12-2008, 10:50
Yep, I agree.

Just take a cash payment only on supply of goods from these sorts of people; accept no other form of payment from them unless it's guaranteed by their bank or credit card company, that way the genuine ones without 'issues' will pay up accordingly in return for a nice hi-fi system, consequently you're quids in with no hassle, and the 'loons' will take their 'business' elsewhere...

If you scare them all off then it's business as usual with nothing lost.

Or from your experience does that not work? :)

Marco.

VERY rich people do not carry cash. Well, not usually £25k's worth. Might be different culturally different in your business though.

I installed a system in the early 1980s for one of the ex wives of a very famous Hollywood film star. She wouldn’t pay. There was no valid reason other than in her view, she could, because she could.

After a month had passed, on the pretext of wanting to adjust the turntable after the settling in period I returned with my wire cutters. This was before the days of IEC detachable power cords. I cut every power cord. I then started to pick up the equipment and walked out with it.

Truly truly, I can still hear her hysterical harridan shriek, right down the stairwell at Cheyne Walk of “Isn’t my effing money good enough for you?” I politely pointed out that it wasn’t. And that was that.

But that's nothing compared to a customer who was a latent racist (as indeed was his dog) and this was only discovered by my initially jovial Carribean installation engineer - when both of them attacked him; the man verbally and the dog physically. All in a day's work I guess.

And yes, I always did my own debt collecting. Why contract it out when you can do it yourself? Right? Lawyers? That's for the other person!

Marco
16-12-2008, 11:08
VERY rich people do not carry cash. Well, not usually £25k's worth. Might be different culturally different in your business though.


No, it's exactly the same in my business, too, although I've only very rarely dealt with footballers and such like. I do have some wealthy clients, though.

When I said "cash payment", what I really meant was 'cleared funds' in any shape or form - i.e. whichever way they pay, your money is secure in advance of them receiving any goods.

I'm sure that process would work with some of them, or if not, like I said you're no worse off. If it does work though you could make some very nice sales :)

Interesting stories, though, so thanks for sharing. I just love dealing with the public sometimes (not)!

Marco.

Filterlab
17-12-2008, 12:26
...A sure fire way was to tell them straight out that I always charge a 20% premium for celebrities...

LOL! Fantastic. :)

Spectral Morn
17-12-2008, 17:57
Hi Guys

Over the years I have had dealings with the rich and famous, with no issues from the famous. Tv people, radio people , DJ's, Musicians and the sons of Lords have been great. However the rich ( non-famous) don't get me started, it is a number of these people and their refusal to pay at all, further deposits and balances (mainly in the area of multi room ) are responsible for creating the cash flow issues that led to me being made redundant( the downturn in building was also a factor ). This sort of crap is unforgivable and this sort of crap should be rooted out. Only problem is you might go bust in trying to get your money. Imagine walking into Tesco's and pushing the trolley out without paying,errrrrrrrrrrrrrrrrrrrrrrrrrr. I hate this sort of thing. If a workman is worth his pay then pay him and promptly.

Regards D S D L ----- Neil :steam:

DSJR
17-12-2008, 18:04
The effort was devoted to getting them to go to some other hapless retailer. In the Camden Town days, I'd direct them to KJ Leisuresound. Jim Dovey [a very decent chap] was far better at dealing with the neurotic and potentially hysterical than I was.

Jim Dovey never dealt with clients, as he was ensconced in his inner sanctum "downstairs;" the likes of me did and we knew you rather well :lolsign: I say no more as it was around THIRTY YEARS AGO.........

Seriously though, I can't believe how things have changed in the intervening period. At KJ, we had some lovely well off clients, who were charming, never asked for discounts and never gave us hassle. When I went to work in the "A6" corridor not far from London, the snooty, condescending clients in the town (sorry, village) were unbelievable, although we sold a top line B&O system to a footballer who paid up without question. My years there gave me a complex about acquired money, such people and the homes and areas they live in. All the "old money" in the town tended to keep it in the bank or wherever and never spent huge amounts...

Spectral Morn
17-12-2008, 18:22
I agree DSJR

New Money exactly where the problems exist.:steam: Major attitude issues in those who were poor and then by getting rich have a god complex and the attitude of the devil.

D S D L ---- Neil :)

Neil McCauley
17-12-2008, 18:36
Jim Dovey never dealt with clients, as he was ensconced in his inner sanctum "downstairs;" the likes of me did and we knew you rather well :lolsign: I say no more as it was around THIRTY YEARS AGO.........

Got a Christmas card from sunny Jim this morning. No mention of 'flaming' June Dovey - his very supportive wife though. She was very seriously ill a while. I do hope he's not on his own now. I know what ...... I'll ask him. And then I'll figure out what to do.

Meanwhile, play nicely children. And that means you at the back Marco! No good crouching down where you think we can't see you!

Marco
17-12-2008, 19:29
Meanwhile, play nicely children. And that means you at the back Marco!


Ok, daddy :o

If I'm really good can I get to lick the cake bowl?

Marco.

DSJR
11-10-2010, 14:46
Well, the little inexpensive boys have been giving the greedy big ones summat to think about - a certain £2K DAC which takes eight months to run in but still being at least equalled by DAC's at little more than a tenth of the price comes to mind, along with mark Grant and his £1K plus killing interconnect and mains cables....

Looks like Howard has left us now...

markf
11-10-2010, 16:07
Dave,
this was almost 2 years ago, so the 2k DAC would have been fully run in for approx
14 months now if you bought it back then.
Was Mark selling his £1K plus killing interconnect and mains cables back in DEC 2008 ?

We can all make good choices with hindsight.

DSJR
11-10-2010, 16:50
This is "from the grave," so I was responding to it as things appear to be NOW, rather than back then.

Welder
12-10-2010, 10:34
Eye Candy……audiophiles love it ;)
Strange how the price and look of something makes it sound better than the same components in a crap box :doh:
Anyway, just wanted to pull up you reactionary old bastards on the “New Money” big white brush work going down here ;)
The middle classes of England eh; no wonder we can’t get a decent revolution going in this country with you lot tugging your forelocks for the gentry while aiming a sly stream of phlegm at the tasteless working classes.
Hi Fi, it’s a luxury goods market init? That needs folding stuff to purchase. Not to mention the liberal quaffing of all the fine wines and typically discrete willy waving us British are so fond of :lolsign:

(As you were chaps; you know I love ya really)

jandl100
13-10-2010, 09:54
This is a good Graveyard thread to get revived ... :)

I think I have mentioned before a little eBay-sourced mm phonostage that punches way above its weight.

Well, prompted by my good self as to whether it can be modded to suit a low output mc cart (my beloved Denon 103, natch :)) the seller/designer has implemented a mc stage design he's had on the back-boiler for a while.

Of course, you'd expect to have to pay serious dosh for a serious design update, and that is the case here ... an extra £15! :eyebrows:

The phonostage arrived chez-J a couple of days back ... and it is fab!
Suits the 103 down to the ground.

Honestly, I'd put it up against the Heed and the MF XLPSv3 and expect it to win. As for the Cambridge Audio 640P ... fagedabowdit!!

Stunning at £48.50 delivered for the mm stage, and an extra £15 for the mc stage. And I feel sure the guy can match the gain to your particular cart - all you have to do is ask.

http://cgi.ebay.co.uk/Quality-HiFi-Phono-Stage-Preamp-Amp-Turntable-/130433278102?pt=UK_AudioTVElectronics_HomeAudioHiF i_Amplifiers&hash=item1e5e6de096

Strongly recommended. :)

DSJR
13-10-2010, 14:08
And he's VERY local to me as well :lol:

Alex_UK
13-10-2010, 17:30
And he's VERY local to me as well :lol:

I did wonder if it was you running a secret cottage industry and it would only be a matter of time before you tapped me up for one! ;) :lol:

Marco
13-10-2010, 17:41
Nice one, Jerry! Always nice to hear of this type of gear, as it fulfils the AoS ethos of maximum SPPV! :)

I don't see the 12 remaining lasting for too much longer ;)

Marco.

Reid Malenfant
13-10-2010, 17:45
SPPV! :)
Wassat? Special Police Pursuit Vehicle?

:lolsign:

I think i have sussed it... sound per pound value ;)

Marco
13-10-2010, 18:13
Correctomondo! ;)

We loikes that sort of stuff :)

Marco.

Rare Bird
13-10-2010, 18:21
You get nothing for your money these days but crap imho. I'd rather buy something old & well built second hand & put up with what people call 'Long In The Tooth'.. Makes me feel good saves me loads of dosh & lasts twice as long.

Reid Malenfant
13-10-2010, 18:32
You get nothing for your money these days but crap imho. I'd rather buy something old & well built second hand & put up with what people call 'Long In The Tooth'.. Makes me feel good saves me loads of dosh & lasts twice as long.
If not longer ;) Yep, i'm with you Andre. Things definately are no way built like they used to be & it doesn't matter what it is you are talking about. I have an old Electrolux cylinder vacuum cleaner that my parents bought before i was born & it still works fine & has never needed the brushes changing. It gets used by me quite a bit when woodworking etc. Must be near on 50 years old :eek:

I know people that have gone through 3 or 4 Dysons :lol: How old are they....

It's the same with audio equipment, the older stuff was better built. There is just no two ways about it ;)

DSJR
13-10-2010, 18:34
I did wonder if it was you running a secret cottage industry and it would only be a matter of time before you tapped me up for one! ;) :lol:

It's been suggested that I should set myself up as a Turntable Guru, but it would be a long way for people to travel. Our very local Naim dealer has a huge majority of clients well away from here and outside the county... Whether they travel or mail order I don't know.

hifi_dave
13-10-2010, 18:40
Quite right.

You should take in turntables for setting up, service and repairs. No one knows more than you about the subject and you would do the job far better and cheaper than most of the professional 'experts' out there.

I say - go for it and do everyone a favour....:trust:

Marco
13-10-2010, 18:59
What's to 'set-up' or 'service' on a Techie? :eyebrows:

Folk will faff around with bloody belts and bouncy suspensions! ;)

Marco.

Barry
14-10-2010, 00:06
If not longer ;) Yep, i'm with you Andre. Things definately are no way built like they used to be & it doesn't matter what it is you are talking about. I have an old Electrolux cylinder vacuum cleaner that my parents bought before i was born & it still works fine & has never needed the brushes changing. It gets used by me quite a bit when woodworking etc. Must be near on 50 years old :eek:

I know people that have gone through 3 or 4 Dysons :lol: How old are they....

It's the same with audio equipment, the older stuff was better built. There is just no two ways about it ;)

Dysons are expensive foreign built rubbish - I don't why people think so highly of them.

jandl100
14-10-2010, 06:40
Dysons are expensive foreign built rubbish - I don't why people think so highly of them.

The power of a big advertising budget :rolleyes: ... same as Bose, innit. :mental:

jandl100
14-10-2010, 07:00
Wassat? Special Police Pursuit Vehicle?




Nah - Spectrum P(P)ursuit Vehicle ...

http://i262.photobucket.com/albums/ii114/jandl100/SPV.jpg

Personally, I always fancied Melody Angel ... :eek:

http://i262.photobucket.com/albums/ii114/jandl100/melody4.jpg

Based on Eartha Kitt apparently ...

http://i262.photobucket.com/albums/ii114/jandl100/mleodyeartha_kitt2.jpg

I'm sure you all wanted to know that! :lol:

DSJR
14-10-2010, 07:26
What is it about some women? The likes of Eartha Kitt would have eaten me alive, but my Gawd I'd have loved the feline experience :eyebrows:

Rare Bird
14-10-2010, 08:10
I'm sure you all wanted to know that! :lol:

I did :lolsign:

Lodgesound
14-10-2010, 08:28
I honestly think that some equipment now is overpriced to gargantuan levels. I totally agree that Hi-Fi is a luxury goods market but honestly some of the pricing now on equipment which is clearly being built for a sometimes a tenth of it's sale price goes a long way beyond the boundaries of realism.

I agree that everyone has to make their cut and that the market has been difficult at the best of times but honestly take a look at the second hand market to see what is actually happening - you can buy high-end professional equipment that sold originally for tens of thousands for a few hundred pounds now and get an incredible sound to boot with very little previous experience if you care to look.

Couple this with the innate snobbery that I myself encountered at the Heathrow Hi-Fi show earlier this year - to be told that if I had to ask the price why was I bothering!!!???? Who is the customer here????? So if I don't drive an Aston Martin and wear a tailored suit does that mean I'm not worth the bother then?

Apologies for the rant but I'm sure that others here have encountered this - I was surprised I must admit at some of the dealer stories regarding celebs and so-called 'high-end' clientele but on reflection this does seem to be indicative of the world we live in just now.

To conclude I would say that around a 20 % overall reduction in prices might actually serve to get the business moving a little more than it is just now. People aspire to owning this equipment - they just simply cannot afford it.