Pricing

I thought this would be interesting to hear other perspective on this.

1- Product mark up, and pricing, What do you think is fair? Straight percentage above cost, if possible just lower than any other sellers, or match something like amazon. To make it easy assume zero DOA.

2- Do you have experience with this in some capacity or just your opinion? No need to give details if you would prefer not to.

As an example, I worked at Costco. Most items were under a 10% markup, with bottled water being the highest at the time at 11%. Things like Gas, could actually sell at a loss as it was priced under all nearest station, but brought in a significant amount of new shoppers. Majority of the profit is actually from that memebership fee. disclamer, I have not worked there in a long time, never management, all second hand info from higher ups-while I was there

Just an opinion, markup percentage is irrelevant. It’s about the value it provides and the alternatives available. Unless it’s “unfair” in which case the intangible goodwill is eroded.

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I think a percentage above cost for you would be a good place to start. I wonder how many people are like me and feel that it is fair to buy at least something from you because you made the design available. I got electronics because of installed firmware and assured compatibility of everything and I knew I was getting a well-sourced board What I could source in terms of hardware and wires I did. Plus I printed my own.

If you get a lot of orders for complete kits, including printed parts, that may be a good indication that folks will pay for the convenience of having everything set to match and then just have to assemble. Yours is still the best deal for a comparably sized and equipped machine. I can’t give you perspective from a business owner standpoint, but your prices are good for a consumer because your personal presence in this project and willingness to stand by what you provide is worth something.

I’d say the folks who know enough about electronics and control and mechanics would be able to cost things out themselves anyway and even if you only charged a slight premium, they would still shop for the bargain.

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Do you have a good handle on the real cost of the products? Not just wholesale/inventory, but shipping (in and out), handling (unpacking, shelving, picking, packing, etc), supply chain management (contacting vendors, tracking late/missing shipments, leveraging volume sales), personnel management (including day care, if applicable), marketing, and such like.

You said to assume no DOAs, so not much customer support (Jeff and Barry do most of it anyway :laughing:), and no reverse logistics.

The better your numbers, the tighter your margins can be. But if there’s a lot of slop in there, you have to leave plenty of room to avoid the bleeding edge.

And again, with better metrics, you can make better choices on what products to mark way up (because they are expensive to manage), or which ones you can set razor thin (because they are easy and you sell a ton of them). But don’t set a negative margin without a really, really good reason. You don’t really have a good parallel to CostCo’s gas pumps. I assume you get good traffic on your bits, but if you set those as loss-leaders, you’ll die a death of a thousand cuts. I’d be more tempted to go thinner on the slower-moving, big-ticket items (if you have any). It seems like you have no problems on the demand side for printed parts. You could use price manipulation to manage that particular headache… :male_detective:

This is all opinion based on suspect intellect and distant retail experience.

One piece of advice I’ll give as a consumer: if you look at your pricing and need to make significant changes, set a date, and creep up on it. I’m OK, with pricing fluctuating a bit, especially for a small shop like I assume yours is, but it might irk me if suddenly the prices doubled overnight. But if you know, and I mean know, you can drop a price or three, advertise it!

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Let’s assume something simple, like bearings. I buy them by the pallet. I have full understanding of time and costs involved and zero support needed. Packaging for shipping is simple and fast.

If a bearing cost $0.30, what would you charge and why?

So I spend a life time marking things up as a contractor. 100% markup is not unusual in the contracting business. Lets say a relay (SPDT) cost the company to purchase at 20$ wholesale. The customer is charged at 60$ an hour. The customer would be charged 60 + (40 up to 80) for part depending on company policy. So the call could average between 80 and 140 for a simple relay not including tax. I also had a boss that would charge customers retail for things +50%. He actually made more. Another way is to charge todays price regardless of what you paid in the past. So if you have stuff in inventory for 6 months and purchased for 16 dollars and today the price is 20 then charge based off of 20.
My point is to sell the thing for what you can get. What you feel is fair that will support your business. Meaning inventory, overhead like rent and payroll, and anything else that covers your business. WE live in America and no one tells you how to price out your merchandise unless you sell to the government and that is usually under contract.
And Yes I Earned an MBA. Honestly Biggest waste of government money I ever spent. :smiley:

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OK, hard example.

Bearings. Cost: $0.30 (assuming this is the complete cost of the bearing, less shipping to customer). $0.35/ea, 10 for $3.20.

This is a basic bulk commodity. Are you trying to be a bearing supplier, or are you pricing to include in your bundles? Are they something that someone might say “Oh, I need a few bearing while I’m ordering bits from V1, might as well get a sleeve of them there.” Same would go for screws, bolts, etc. (although you already buy those pre-packaged for your bundles, don’t you?)

Obviously, don’t price yourself out of selling any bearings, but I don’t see a clear benefit to spending a huge amount of time and effort to fine tune a commodity like that.

The exception to that would be bits. Yes, they are commodity-ish, but they are the raisons d’être of what you do. The MPCNC and LR exist to get those bits into wood/platic/metal… Therefore, they deserve more consideration and care. If bits were a more rare item, I’d say stock a few higher-end bits, but it’s so easy to get good/expensive bits. I think you’d be better served by finding and stocking solid, inexpensive bits good for hobbyists and makers.

Steppers are another commodity-adjacent item that still requires some consideration. On one hand, you want to provide a good product for a decent price, but you also want to be able to sell a replacement stepper for a kit that won’t be too terrible far out of spec with what they got from you before. And again, do you want to be a stepper outlet, or provide a solid value for your customers?

The things you really need to think about are the printed parts (heavy investment in time and money on your end), and electronics (higher money investment on your side, plus support time).

And I still haven’t given you a solid answer. That’s because it’s your fridge. That’s what is or isn’t filled at the end of the day, and even if you don’t know me from Adam (actually, especially for that reason), I don’t feel comfortable giving direct advice about what to do when that’s on the line. You have to make that decision. :smiley:

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When I worked at circuit city, the cheaper something was, the more the markup. Something like. $9.99 RCA cable cost maybe $0.25. Speakers were about 80% markup. Electronics like TVs and Stereos were about 50% markup. Computers were only about 10%, unless you went with a “Build Your Own” which was closer to 25%. Those numbers were all based on the cost to get the box of stuff to the store. Costs like sales people, rent, customer service, mgmt, all came out of those markups. In the end, if $100 worth of stuff went walking out the door, stolen, it would be closer to $1k-$10k to recover that. So in general, closer to 1-10% profit. Of course the warrantees were usually 100% profit, and any repair or exchange costs were passed to the manufacturers.

I’ve also seen that in food court type settings, the markup meeds to be close to 75%, because so much food ends up being garbage during the slow times. It doesn’t help you much, but it is another reference.

I would be pretty shocked if costco really only had 10% margins. Especially on things like candy and cocacola. But even still, they are leveraging thousands of stores and hundreds if not thousands of customers per day at each store. They then use as little labor as they can and end up with a small shaving on tens of millions of dollars per day of sales.

Your business is entirely different. You have basically three categories of stuff. a) printed parts. b) Stuff you make very easily available, like bags of screws, or sharp stuff and c) commodities, like power supplies, belts, enstops. Things like commodities are going to be used to comparison shop. But they also shouldn’t be a waste of your time. Things like your parts don’t have a good comparison, but end up in the whole machine price, which people will use to compare to other cnc machines. Also, people will weigh their own prints against it. Things like bags of screws, sharp stuff, preflashed controllers, those things should have a higher markup because 1) They have more than their weight in value. 2) They are labor and higher intelligence labor heavy.

Prices also have a funny way of sending their own signals. Don’t hate me, but I think the #1 reason people thought bose made good speakers was because they cost more. They paid CC a lot of money to put up separate bose displays because if you heard them side by side against a polk audio speaker, the polls sounded better. I’m not suggesting you be like bose (I hate them). But don’t assume people will dislike your products if they cost more. Many people want to spend more money on a better quality product. If you can deliver a better product that no one else can, you can ask for a higher price and be praised for it.

(I’ve already typed so much, but I have to add)

Sparkfun may be a good example to follow. They have straightforward shipping rates (no free shipping games). They make a lot of their own parts (which are reasonable, and good profits for them) and they sell a lot of common stuff. They are usually near the most expensive for commodity things. They also often will only sell you 10x. So if you’re selling bearings that cost you $0.30ea. You could sell a 10pk. for $5. No one is going to come to v1 for bearings (unless they want to support you personally). You don’t want them to. But they might sell in a kit or as an add on to some bits, saving some money on shipping and getting a competitive price out of it.

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Yikes! I watched my dad, who was a General Contractor before he retired, and his markup was usually 20%, and always enumerated as such in the bid. I guess that’s the difference between the General Contractor (project manager) and the Contractor (vendor). :slight_smile:

Of course, he also regularly worked on $1M+ houses. My son has a little collectable Saints helmet signed to him by Drew Brees early the season they won the Super Bowl. My brother got it while they were renovating Drew’s house.

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This is too interesting.

So what about sales? I do not offer them, I hate them. I never what anyone to feel like they missed out or need to wait for the next deal to pop up. I choose to offer the best price I can at all times, but there must be a reason literally everyone has sales, right?

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That’s about right. I don’t know the exact numbers, but that feels right from when I worked at Radio Shack. What people consider “inexpensive” is a pretty large range, and when you actually look at the cost of individual items, there’s a lot of room in that space. But when the digits start piling up, people start paying a lot more attention.

And what you cost them for when you build up a bundle price can be vastly different from what you price them individually…

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They let employees buy things at “cost” so we had a pretty good idea of the pricing. We also worked commision, so the amount they paid us was roughly proportional to the markup. It always seemed like a very small proportion at the time…

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Usually sales are to hit target sales numbers from the “Head Office”, to clear old inventory in advance of a new model, in response to a competitors sale, or because the customers all demand a sale (see cars and Memorial/Presidents Day, and “Black Friday” in the US)

I’m with you, though, I dislike sales. Although Valve takes too much of my money when they have their big ones…

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Bearings in particular, I have bought crappy ones and so have others and had to buy a second set that did not feel like they were filled with sand. It is impossible to get assurance that bearings are good, unless you pay a crazy amount like McMaster-Carr.

That assurance is what you are selling. The dollar cost to you is a factor but not the primary driver. The same would be true of printed parts. I can print them myself but can I trust my prints 100%? Am I willing to fight print problems simultaneously with whatever other problems I might encounter? Again that assurance has value and the cost of PLA and time is a factor but not entirely tied to the value of the offering.

Also just my opinions and not all buyers have the same expectation and valuation.

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I hope you don’t mind me offering my two cents as a practical consumer.

I jumped at the MPCNC kit. You designed it, support the kit you sell, and ensure quality. I probably would have bought a Dewalt 660 from you if you had them.

I don’t know enough about cutting bits yet, so I don’t know where I would go for a small order. Personally I am trying to balance supporting the guy who did the hard work and Amazon/AliExpress broad selection, reviews, with cheap and / or fast shipping.

I hope that helps.

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FWIW, the amazon links on Ryan’s pages give him benefit too (they are affiliate links) and he doesn’t have to touch them. It also seems reasonable to buy the stuff from wherever and either donate to Ryan for design, docs, support or for some kind of margin you think is fair. Buying straight from Ryan takes out a lot of headache though.

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I didn’t realize those were amazon affiliate links. Thanks for the info.

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I handle most of my company’s pricing by writing software that automates it based on a few guidelines given to me from the owners but I can’t add much that hasn’t already been said. A lot of good replies in here.

My take as a customer: To me, your prices sit in a sweet spot between ‘I trust what you sell works well for what you designed’ and ‘The prices aren’t high enough that I bother price shopping’. It’s not a black and white range, especially the last part, but I think its the ideal target.

Outside of that my industry’s norms probably won’t apply to you well but 25% over cost is our normal markup. Rarely that may go down based on competition and if its something we end up with a lot of stock of. More often it goes up, especially if its a low cost item. The percent over cost becomes irrelevant vs the $ amount of profit. It has to be worth an employee taking it from a shelf, testing it, packaging it and shipping it.

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Funny that you mention that. I am petty sure I have mentioned this in the forums before. Right out of high school I invested all my money in some screen printing equipment. I did so because my friend was doing that as a job and told me how much blank shirts cost, hanes, fruit of the loom, all of them. I thought this is a no brainier. If shirts cost me $0.99-$1.25 each and sell for $20-$25 in a stores I can double my money no matter what I put on the shirt and my friends can get stupid cheap shirts. WIN WIN!
Wrong.
No one trusted the shirts. Even when I showed my friends the catalog and invoices they all assumed I was using fake import shirts or something. I raised my price from $5 to $15 and sold tons of shirts. I could not believe it, and would not have believed it if someone else told me. Then When I sold them online and had a dud design I could put it on the clearance for $5 and still move them and I was still happy with the price. Maybe that explains sales…now that I think about it.

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I see a lot of the other side of that in my position here. Being the all around tech guy, I know what is worth spending a lot on and what make sense to go cheap on. A lot of the times that I pitch something cheap I have to do a lot of justifying that it’s “good enough”. When I pitch something expensive, hardly a word or discussion about it haha

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