Upload & Sell: On
Gregg Heckler wrote:
If a product is really "worth" a $1,000 you sell it for a $1,000 or close to that. Good business people owe it to their company, employees, and shareholders to make as much profit as the market will bare.
I have to disagree with this. First, I don't have share holders - just myself. Second, this whatever the market will bear stuff is rather old school. Businesses who follow this are facing a brave new world where they leave themselves open to third world producers who are rapidly invading the US and Euro markets with cheap labor and cheap prices. Compare Walmart with Macys, or B&H VS the now nearly extinct local camera stores, Amazon VS the now defunct book and music stores . . . people don't want to pay more than they need to, and won't. What most want is the best they can get for the least money, and a sense of caring and support from the people they buy from.
I buy a lot of stuff myself and long ago got sick and tired of buying things that become disposable when they break (they all do), paying extra for extended warranties that usually have so many loopholes they are often not honored.
Let's say I have a product that costs me $200 to make, and I make it in the US when possible. If I follow the rule you suggest, I set an MSRP of $800 for it, then give 40% to a dealer network. I get $480 for it. The dealers don't stock the products (they can't afford to stock a bunch of ever-changing technology and can't get inventory loans anymore.
When you get to the store, they say "I can get it for you an a few weeks" and they really know little about the product. When it has a problem, they say "You have to send it back to the factory." The store is just there to sell, and passes you and the problems back to the manufacturer, but the manufacturer doesn't deal directly with customers, so you run into a brick wall of buck passing, policies and the near impossibility of communicating with anyone.
Now, back to the manufacturer . . . he still has to to the advertising and repair work, but he also has to deal with receivables (usually including half the accounts being 90 days late, collection agencies and bankruptcies, dealers returning unsold stock that is aged and often out of date . . . on and on . . . I've been there. In order to cope with the receivables and cash flow problems, both the dealers and the manufacturers have to depend on the bank to finance everything . . . and we all know where that is going this decade.
So, there goes another $100 in costs to the manufacturer and he ends up with $380. He ends up with a 53% cost of goods and you end up paying $700 for the $800 product because the dealer has to discount to compete.
My business model gets you the same product for $400, a direct line of communications to people who really know the product,no nonsense customer service, and always current product, usually shipped from stock. And my cost of goods is 50% and I have fewer money handers and more technical and customer service people (who I pay very well). But my bottom line beats the daylights out of the other example because far more people buy the same product at $400 than would at $700.
I'm not advocating everyone should do this . . . it takes time and effort to develop this sort of business plan, and it also takes employees who understand the process and management to match. The core is rather simple . . . do customers want to pay salesmen, banks and money shufflers, or engineers, manufacturers and customer service people? The GDP is largely in the service and financial sectors and this is crashing the global economy at an alarming rate.