Hello. I hope the time I put into this post is perceived as a simple contribution to the discussion of two issues often debated in these public forums.
Please, no flames. Please.These are only my views. I don’t mean to pontificate. Disagree all that you want, but please no insults.
The first topic is about pricing & profits.
First, I want to clarify that MSRP is not the retail price, (necessarily). MSRP is an accronym (sp?) for Manufacturer’s Suggested Retail Price. Retailer may follow it or may just disregard it.
The first thing that puzzles me is that all these formulas start with a retail price. Why? We are talking about an invention. We are talking about a new product with no sales history.
It appears very clearly to me that the formula should start with all your production costs, distribution costs, etc. of course including all the profits and/or royalties that wholesaler, retailer and inventor are working for.
And this is not a simple question at all, as your costs, and hence your prices will be impacted by a number of factors. How many pieces will you be manufacturing? How many geographic markets? What distributionn Channels?… Stores, ASOTV, Catalog, Mail Order, Door to Door? Internet?… Manufacture in China, Honduras or USA? (And this is the other issue I discuss below)
Then you get your full cost. Then, you estimate two things: 1) What percentage you are entitled to profit from your efforts, and 2) How much the consumer will be willing to pay for the product.
The answsers to these questions should help you determine:
1) Is the necessary retail price reasonable? Will it be paid for by a reasonable number of consumers?
2) Is it then a profitable product? How profitable is it?
3) As a result of 2) Do you want to proceed?
And there you go. If you have a completely new product, how else can you go about it? (And “New Product” is what defines an invention as an invention) I don’t understand the rationale of a backwards approach. Retail price is a result of costs, and not the other way around. It may be affected by other facts, but only after you eestabblish that the product may be sold by say between this and this number.
Now, The Asian factor.
I write about this because I love my country, the USA, and I think there’s a little more to it than meets the eye.
The commerce of the 21st Century is ruled by a new global paradigm, that no opposing campaign will be able to overcome. This is just the beginning of a whole new era.
It all started when the world ceased to be polarized between two antagonizing powers, and West Europe became one singular organization trading under one single currency. The changes were further catalyzed by other economical and political factors around the world. e.g. China and India emerging as industrialized countries.
Lastly, and perhaps more determining is the fact that technology and communications have for good or for bad made the planet a very small village. This is a fact.
Italian auto maker Fiat will be bringing their famous “Topolino” soon to the US. (I think the engine is only 900 cc.) Many motorcycles have more engine than that. China is making a car that retails for US $2000 (in China). I heard yesterday on TV that India already has a car for about that price. They may eventually bring them to Europe, and yes, also the US. (Of course with import costs & Taxes that price would be dramaticallyy higher) “Yugo” failed in the 80’s. That was then. This is now.
On the other hand, Toyota, a Japanese company makes cars in the US. Employing US workers. (And, incidentally, they’ve been having unprecedent recalls lately). They do it because manufacturing here is much more cost effective. This enables them to compete in this market. I am sure Japanese people don’t resent this. Same for Honda, mazda, etc.
This a heavy, highly technical industry, but it serves to illustrate the point that the market is the world, and that the goal is to get as much of a share as possible. And you manufacture where you need, in order to compete and hopefully succeed. I know it is not the ideal situation, but unfortunately, we have no control over it.
It can not be denied anymore. The world as a market is a very small village today. The solution is not condemning manufacturing abroad, when manufacturing in the US will triple the retail price of the product, IMHO.
We certainly need to adopt measures to adapt (no pun intended) to the new paradigm. Refusing to manufacture our product wherever is more cost effective, to then profitably commercialize it in the US and EVERYWHERE in the world will actually cripple our competing resources, and ultimately weaken our economy by depriving us of employment in wholesale and retail areas. This includes advertising, banking, insurance and a long list of many other collateral industries that may benefit from the successful merchandising in the US of products made abroad by American companies.
This benefits the American public by making products more affordable and by activating other sources of employment and stimulating the circulation of good old money, the blood of the economy.
This is non-related to inventing, but since we are in the subject… What I, as a citizen absolutely deplore is “Customer Service” and “Technical Support” employments located abroad, by banks, insurance companies and technological product companies, which do not benefit the American consumer at all, or enable that merchant to level the field for fair competition, because that is not the case. The rates and prices remain the same for the consumer.
That is absolutely Un-American, and I think there should be legislation against it. This practice is simply designed to increase the profits of a corporate elite.
Please, no flames. Please.Disagree all that you want, but please no insults.
