Friday, May 12, 2006
Supply & Demand
I got a call yesterday from someone looking at our BDM-2 Battery Drain Meter for hearing aids. He wanted to know what the price was. I told him $127 for the BDM-2 or $107 for the BDM-1 - plus $21.00 if he needed a battery pill to connect to the hearing aid. He seemed a little agitated at the price. He asked why this device costs so much when his cell phone which connects to the internet, has a camera and cooks breakfast costs half as much? He hung up uninterested, and leaving me feeling a little agitated.
I thought he had a good question though, and one that can plague the small business supplying a niche market – Supply and Demand.
Whenever you manufacture a specialty item like a battery drain meter to a limited number of customers, it is going to cost more. From parts to labor, you are going to pay more to make your product. Most components for example, are quantity priced – which means the more parts you buy the less expensive they become, and the less expensive your device becomes to manufacture. And if it is a very niche market (like the hearing aid industry) you are likely to pay more for labor to assemble the product because it doesn’t make sense to buy expensive equipment to automate the process – that would really drive the price of the product up.
Now with a huge market, like the cell phone industry, you would likely be making millions of units so component costs would be extremely cheap, as well as labor as the whole process would likely be automated. Same with computers, televisions, iPods – anything that has a large public appeal. I know because I used to work in the semiconductor industry. Everything is automated, and parts are cheap.
So it comes down to this: Is the product worth the price? Is it going to save time and money? Is it going to make my your easier? As far as the BDM products – YES.
I wonder if he called Starkey. They used to get $300 for their battery drain meter.
I thought he had a good question though, and one that can plague the small business supplying a niche market – Supply and Demand.
Whenever you manufacture a specialty item like a battery drain meter to a limited number of customers, it is going to cost more. From parts to labor, you are going to pay more to make your product. Most components for example, are quantity priced – which means the more parts you buy the less expensive they become, and the less expensive your device becomes to manufacture. And if it is a very niche market (like the hearing aid industry) you are likely to pay more for labor to assemble the product because it doesn’t make sense to buy expensive equipment to automate the process – that would really drive the price of the product up.
Now with a huge market, like the cell phone industry, you would likely be making millions of units so component costs would be extremely cheap, as well as labor as the whole process would likely be automated. Same with computers, televisions, iPods – anything that has a large public appeal. I know because I used to work in the semiconductor industry. Everything is automated, and parts are cheap.
So it comes down to this: Is the product worth the price? Is it going to save time and money? Is it going to make my your easier? As far as the BDM products – YES.
I wonder if he called Starkey. They used to get $300 for their battery drain meter.
