> I'm trying to put a price on a product that's ready for small-medium
> manufacture. It's based around a fairly simple F628 program that
> took around 20 (productive) hours to write and about NZ$47 worth
> of components. Hand assembly takes 4-5 hours
>
> The opposition product, which does exactly the same job, costs
> NZ$1350. I've never physically examined this product to copy it, I
> was told what it does and just did it my way, actually improving it.
> Apparently the opposition product does sell quite well, and as far
> as I know, my version is the only other competitor
>
> Spread over a first run of 12 units, even charging $100/hr for s/w
> and $30/hr for assembly, this comes to about NZ$334/unit, which
> is over $1000/unit less than the other product
>
> There's very little in the way of further costs - no packaging, no
> distribution, no advertising
>
> My feeling, because I'm a nice guy, is that NZ$334 is a fair price,

No, that's stupid, not nice.  $334 is your *cost*, although I suspect your
real cost is higher because I bet there are things you didn't consider.
What about the cost of sales, support, field failures, DOAs, plus the
unexpected things you have no way of knowing what they are?

You don't have a salesman, people will just call you directly to buy it?
You still have sales cost.  Nobody is going to call up and say "Send me
one here's my money and address by".  They are going to ask questions want
demos, require invoices for their accounting department, etc, etc, etc, ad
infinitum.  Then who's going to install it, answer the dumb questions,
spend half a day on the phone with a customer that bungled an installation
and keeps insisting your unit it dead?

In the end though, your cost has nothing to do with your price except tell
you whether the whole venture is profitable or not.  The price only has to
do with what customers are willing to pay, which has nothing to do with
what it takes you to produce it.  It sounds like you've found a great
niche where customers are probably willing to pay a lot more than your
cost.  Great, go for it.  I would price it about $950.  That's 30% below
the competitors price, which feels about right.  It's also just below the
psychological $1000 threshold.

Remember, not everyone is suddenly going to buy your product just because
it's 30% cheaper, even if it does everything the existing product does.
There will be a ligitimate worry about support and quality from an
unproven source.  A lower price would only reinforce those fears.

First you need to capture significant market share from the competition.
Then you can evaluate the price elasticity.  In other words, how much
bigger would the market be at a lower price?  If you could sell a lot more
at a lower price, then come out with a "lite" version in 6 months for
$550, even if it's just the same product with a new label and package.  If
you think that further price reductions could lead to significantly more
sales, then you can look into serious cost reduction and volume
manufacture with a much lower price target.  But you don't do that until
the first price drop proves the price elasticity.


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