Daniel Bogdanoff and Mike Hoffman sit down with Brig Asay to talk about how to price a hardware project. Listen in as they discuss the complexities of pricing a new hardware product in a global economy.
Follow Brig Asay on Yelp @baasay.
Video Version (YouTube):
How should you price hardware?
Tell us in the comments what you think our green screen should be!
Economics 101: Supply & Demand
This is how we generally set prices for hardware
Top down pricing takes into account your cost of manufacturing.
But if you price based on production costs, you’re going to fail in your pricing.
It’s all about what consumers are willing to pay.
Pharmaceutical companies are the example of bad pricing schemes. They justify high prices based on high R&D costs.
But the reality is that consumers don’t care about R&D costs. They care about how bad they need the product, and this will determine how much they are willing to pay.
The newer the idea, the harder it is to price because there’s no real market value.
Talking to potential customers is a good way to start pricing in white space.
Marketing 101: Who are your customers?
Determining who you are trying to sell to and talking with them can help with pricing.
Competitor pricing is a good baseline, but then you often get into value-based pricing.
Spreadsheets are the killer of pricing. They compete with your gut feeling.
$10K per GHz of bandwidth is a standard in oscilloscope pricing, but it doesn’t always apply. When we came out with the Infiniium Z-Series, a 63 GHz scope, we knew the market couldn’t support a $630K price.
Price/volume curve = Supply and demand chart
Different regions have different pricing expectations.
Currency, cultural expectations, and import taxes all come into play when considering regional pricing.
Should a small company even worry about regional pricing?
You need to be willing to adjust pricing.
Dynamics of the market and the value of your product can change over time.
If you’re not selling anything, you need to adjust your price.
Priced too low and people may have the perception that you’re selling a low-quality product.
Pricing too low may also inadvertently shrink your market size.
Overly undercutting your competitor may hurt you in the long-run.
Does the psychological side to pricing always apply?
What’s the stigma around prices ending in a 9 or 8?
Stupid Questions with Mike:
What is your favorite price and why?
What is your favorite currency and why?
Tell us about your software or hardware project in the comments!