One of the components is to understand what it costs to make. Get some quotes from manufactures by using an NDA. That is what I am doing right now. Several companies are giving me cost data and also helping me engineer cost savings as well. You can also estimate a selling price by looking at retail establishments that may carry similar products such as yours or that possess the same or similar components as yours. Chances are that because similar manufacturing processes would be used to make what you have, the pricing would also be similar.

Jane, I wondered that also..and wondered if I was a little “off” in my estimations, would that be something that the EN team would be lenient on and alter if needed (when going through the LPS submission process)? This is the only past thread I could find…..http://www.edisonnation.com/forums/manufacturin...

Very good advice Tom – you’ve been doing your homework.

In the industry they are called “comps” products that are like yours. Look in stores, catalogs, and on line to find the best cross section of products. Then adjust the number up or down for values your product offers (or does not offer) that may have an impact on the consumer value. The result is an MSRP for the product based on real market values.

http://blog.edisonnation.com/?p=3093 Have you read this yet, Jane? If the EN team decides they would have to change a few things about our product ideas to make it more cost effective, patentable and thus marketable….I would imagine they would “have our backs” on the price point as well! They are in this to win, too!!

I think on our submissions to EN they just want an estimate. I imagine the EN team wants to see if you think your idea could be sold for a realistic price and if it is good price match for the sponsor.

So, for example a product with an estimated price of $150 probably isn’t a good fit for the ASOTV searches. Similarly, if you want to sell a diamond encrusted product for $9.99 then you’ll need a design tweak or you’ll get weeded out with a red X.

I come up with estimates by looking at comps (see Mark’s response) and thinking about what I would be willing to pay for the product (and I’m stingy). I get it down to a $5-$10 range and then pick a price point in the middle.

When pricing the pillowcase, I not only researched stores but also catalogs. I went on-line to low-end and to high-end catalog companies. In addition, I checked out trade magazine advertising: not only the sleep industry but the energy and energy conservation industries to see what was being sold.

After 10 prototypes, made of different fabrics, I found that just one particular flannel would work even though it was a bit more expensive. I could have skimped with the amount of yardage but that would have thrown off one the weight of the attachment and that element was key. I always kept the Nordstrom stores in the back of my mind: was the product good enough for a Nordstrom’s customer? For me, quality had to enter into the equation. Hope this has helped a little.

Hi Jane,

I have learned as a rule, a products manufacturing cost ahould be around 1/6 of its retail value.

EXAMPLE: $3 MANUFACTURING COST AND $18 RETAIL VALUE.

Hope this is what you are looking for.

Julie, As a customer of yours I appreciate that you took the extra time in selecting a quality material for your pillowcases. Right out of the box I knew that I had ordered a fine well thought of product. The flannel you selected is so soft ! The actual weight of these pillowcases shows that these are not made from a cheap material. So what’s my point as far as pricing ?…certain products are worth a few more dollars when quaility is concerned. Best sleep I’ve had in years…“Like being tucked in by Mom”…Sleepyhead – Kevin !

I missed that forum about price points. Thanks, Sherri. I had seen that blog about the research and design stage and thought it was really helpful information. I appreciate the input from everyone. It still seems that a lot of it is subjective. I keep getting “19.95” in my head from all the TV infomercial stuff. Not sure if mine would be better at “9.95” though. Hopefully, I’ll get a chance to find out!!

bump for Kenneth

Oh, Jane..I got all teary-eyed ’cause I remember when you and I first came here to EN..newbies..trying to figure this stuff all out real fastlike!!

And our first submissions..the wait, angst, and agony of it all! I was hysterical when I read your blog because you really explained dashboard newbie-ism the best—LOL!!

Almost seems like an eternity ago and it was only nine months ago!!

We were so “wowwed” by this place and EN still has that wow factor!! Wow! :-)

You just gave me a huge smile, Sherri!! :-D
I remember… and then the X’s started!!! LOL!!
but the wow is still there and, even more,… the friends!!!!

No matter what company you are dealing with there will be changes that affect pricing. They may have a better deal going with the company that is going to do the manufacturing due to the volume of work they get from that factory. They may find a better method of making the product that was not included in your quote you got from a manufacturer. You want to give your best researched quote, but you also have to understand that it will most likely change.
You have to remember, the quote you get for a product and the quote Wal-Mart would get for that same product will be vastly different. Because you each bring something different to the table.

http://www.rogerbrown.net

Well, as far as pricing goes I tend to look at comparable products and
ballpark my ideas based on that. I use to be a contractor pricing is not my strong suit.
Jane and Sherri, we started edison nation about the same time. I tend to be shy and keep to myself. You guys are in the mix and have made it your mission to encourage the community at large. I can’t tell you how many times you have encouraged me. Now I’m getting weepy. You guys are awesome.

ditto Shawn, Sherri and Jane are so nice and welcoming. Great thread btw.

Hello again everyone

I have a little experience with this sort of thing but not a lot so I’m just going to weigh in with what I’ve experienced and perhaps that will help a bit.

First, you cannot exclude price from cost, they’re inextricably bound! Common sense would suggest as others have here, that one might begin by looking at “similar” items already selling at retail to get a rough idea on what the retail traffic will bear. [More on my own experience with this in a minute!]

Once you’ve formulated what you think is a good price window for your product you then have to start looking at the costs to produce it. This can range from extremely easy to quite complicated depending entirely on what your product is. Someone tossed out a cost to produce vs. retail price ration of 6 to 1. According to Billy Mays Tips for Products that Make Millions the ratio is about 5 to 1 which is what I’ve been shooting for since day one. I’ve been told that it can actually be a bit lower than that.

You don’t necessarily have to distribute a flood of NDA’s just to start getting price quotes, in fact I would argue that in most cases they don’t even figure into it. That’s because you’re VERY early in the game at this point and chances are you’ll have to price out multiple product components even for simple products. You simply need to give manufacturers a rough idea of what the component is. For example, if your product requires a 14 inch length of stainless steel pipe you simply start by saying something like: I need some stainless steel pipe with a ____ grit finish inside and out, an inner diameter of _____mm, a wall thickness of _____, for an over all outer diameter of ____mm, etc. Once they quote a price per meter based on the total amount purchased you can then say something like: Okay fine, I also need in cut to 14 inch lengths +/- X and I need the ends to be de-burred. How does that impact the final price per meter?

Leaving aside the way I’m mixing and matching the length units all I’m saying here is this how you start the process which of course you would do with multiple manufacturers. No need for things like NDA’s until you’re forced to share some sort of information that must be kept confidential. You don’t have to tell them what that 14 inch piece of stainless steel pipe is for!

Okay, so now you’ve done that for all the components and you’ve even taken that list of components to someone who HAS signed an NDA and say something like: Here’s are my components and here’s my prototype or precise CAD drawing, how much will it cost me to have you build these things. Now you think you’ve probably gotten a handle on all your costs. But you’re wrong! You still need to price out packaging materials and what it will cost to do the packaging. Here’s a critical and often overlooked fact: For most items you see on store shelves today the cost of the packaging often exceeds the cost of the product contained within! Sooo… remember, you that information as well to get a good cost estimate!

John asked what kind of numbers you shoot for; 5,000, 10,000, etc. That will depend entirely on the manufacturer and what their MOQ (Minimum Order Quantity) is. As common sense dictates, the larger the size of the manufacturing run the lower the per item cost as economy of scale is achieved. Also, I learned that almost no MOQ is carved in stone. Virtually any manufacturer will produce pilot runs of smaller quantities but be prepared to pay extra. What follows are just a few of my own real life examples from developing the Magic Toob product.

My product is very simple so I apologize in advance to anyone dealing to complicated products with many parts. I needed silicone tubing with specific size, temperature and other specifications. The product simply consists of the tubing which is cut to 6 inch lengths and then split lengthwise. Sound pretty simple, right? Well here are some of the questions I had to wrestle with:

1. Do I supply it all cut to length and split or…
2. Do I simply have to split and cut to one long length and have the customers cut the tubing to length themselves? What is the difference in cost per unit (if any) if I package one five foot length of split tubing vs. ten six inch pieces.
3. Should I spend the added cost to have the tubing split at the time of manufacture or should I price out a separate splitting tool to include in the package. How do the costs compare? Will I have to alter my packaging design to incorporate that extra item? How much will that cost?
4. Do I package using plastic bags, a blister card or a PVC clam shell?
The list goes on but you get the idea and we’re talking about a VERY simple product here!

Lastly, I just want to comment on what I referenced above about determining what the traffic will bear. I’m the first to admit that I’m COMPLETELY out of my element here. I’m not a marketing & sales guy so I have little feel for this sort of thing but I can tell you that more than one person has suggested that I raise the MSRP for the Magic Toob. I’ve been resisting that because I want to keep the cost to consumers to about a dollar per lampshade. But maybe I’m wrong about that and here’s why: I recently posted that a lamp shop just purchased 48 units of the Magic Toob product. When they had originally purchased it I was leaning towards a 3-lampshade package but I have since opted for a 5-pack. I did is in part to to my own market research and because I didn’t want the packaging to become too high a percentage of the product’s cost. (This is ANOTHER important consideration to the cost formula!) As it so happened I told the customer that I was now selling 5-packs instead of 3-packs but I happened to have enough of the 3-packs in the an older packaging design on hand and that’s what they opted for.

Well I can tell you that THEY’RE making a hell of a lot more money on the product than I am! As I continue to target the dollar per shade cost I had set and MSRP of the 3-packs of $2.99 and I wholesaled them for $1.50. But the guy who bought them is selling those 3-packs for $4.29 each! And since this is a re-order that’s twice as large as his first order, he doesn’t seem to be having a problem selling them at that price! Clearly, I still need to think a bit on what what that MSRP will eventually be but I’ll worry about that if and when I can ever get the product through the whole process. In the grand scheme of things if I’m forced to RAISE the price of my product that’s probably NOT such a bad thing…

Jack