DAC for less then $550?

PhilNYC · « **Reply #20 on:** 17 Nov 2005, 12:57 pm »

Quote from: rmihai0

Our statistics shows that for small electronics (in our case DACs and phono stages) the optimun price that will generate the largest profits is, very exactly, $548. Any lower price we make you loss additional profits per unit, and higher price will make you sell less units, resulting on the long term in smaller revenue. This is what we call "price elasticity ...

What if his cost of goods is $550?

rmihai0 · « **Reply #21 on:** 17 Nov 2005, 01:05 pm »

As in other financial analysis, we MADE assumptions.

In this case the asumption was that COGS (Cost of goods sold) for this particular DAC is 1/4 of the selling price of $600.

That means $150.

Of course this assumption might be eronate. The only one able to clarify things is Dusty.

PhilNYC · « **Reply #22 on:** 17 Nov 2005, 01:35 pm »

Quote from: rmihai0

In this case the asumption was that COGS (Cost of goods sold) for this particular DAC is 1/4 of the selling price of $600. .

That's a pretty good assumption for a product that is sold thru distributors and retailers. But CI sells direct...

Marbles · « **Reply #23 on:** 17 Nov 2005, 01:38 pm »

I don't think it's right for Dusty to post his COGS..it's nobody's business but his...

Assume all you want, you know what happens when you do.....

PhilNYC · « **Reply #24 on:** 17 Nov 2005, 01:50 pm »

Quote from: Marbles

I don't think it's right for Dusty to post his COGS..it's nobody's business but his...

I agree. Was just trying to make the point that without knowing it, it's impossible to calculate profitability...

JoshK · « **Reply #25 on:** 17 Nov 2005, 03:17 pm »

Really I think the problem with rmiha0's argument isn't so much all the other reasons stated (although they are correct), I think it is the falacy that one study on a population will hold true for a completely different population. Here you are equating Dusty's customer audience (audiophiles) with, presumeably, the average consumer (for which you did your elasticity study) and average B&M electronics. Everyone knows that audiophiles aren't rationale participants! Even that aside, audiophiles elasticity of demand is much different than average consumers. If fact there is a perversion within this system that actually makes some audiophile desire the most expensive product rather than the cheapest (pride?).

miklorsmith · « **Reply #26 on:** 17 Nov 2005, 03:37 pm »

And further, considering the entire population of DAC's available (Zanden anyone), $599 is pretty damn close to $548.

Dusty, I appreciate your hard work and commitment to your craft, however the ultimate product is seriously hampered by your lack of an entourage. From what I can see, you need to add the following to your payroll:

Financial analyst (any volunteers?); Marketing Guru - your logo is too plain. Ever think of calling yourself "Rock"? We'll work on it; Market Penetration Expert - 'nuff said; The Channel Islands Girls - yeah, we're on fire now; Superbowl Ads - how can people take you seriously if you don't advertise the Superbowl; Beer - well, that's just for me and my Ideas.

We'll come up with more, this is just "sketchwork". That stuff all sounds expensive, and it is, but it's all about realigning your business model. We've identified at least 4 core issues that need to be addressed with the campaign. I think you'll find that with a properly oriented program, you WILL be the exception to your own rule that there aren't too many rich guys in audio.

Bon apetit!

rmihai0 · « **Reply #27 on:** 17 Nov 2005, 04:06 pm »

Josh,

I agree with you about the non-representability of the population chosen.

And to confirm your point - I've decided myself to get a CI Audio DAC-2 for $599 from Dusty.

CIAudio · « **Reply #28 on:** 17 Nov 2005, 04:24 pm »

Quote

From what I can see, you need to add the following to your payroll:
Financial analyst (any volunteers?); Marketing Guru - your logo is too plain. Ever think of calling yourself "Rock"? We'll work on it; Market Penetration Expert - 'nuff said; The Channel Islands Girls - yeah, we're on fire now; Superbowl Ads - how can people take you seriously if you don't advertise the Superbowl; Beer - well, that's just for me and my Ideas.

you're probably right..I'm the Financial Analyst (I check our account weekly to see if there's still money in there).

Believe it or not, we do have a small advertising budget and "Channel Islands Girls". If you come to CES, you'll find Clarisse and Christine greeting you at the door with a nice CIAudio bag full of literature on all the new stuff.
We might even have a wine maker from San Luis Obispo serving up some of his finest...we're workin on it

kenk · « **Reply #29 on:** 17 Nov 2005, 04:45 pm »

Quote from: rmihai0

Our statistics shows that for small electronics (in our case DACs and phono stages) the optimun price that will generate the largest profits is, very exactly, $548. Any lower price we make you loss additional profits per unit, and higher price will make you sell less units, resulting on the long term in smaller revenue. This is what we ca ...

Maybe this is good for stuffs that sell at Best Buy, but for high-end audio, pricing alone does not predict optimum profit. What if the product sucks?

To be honest with you, I can tell you that if you price it too low, some people will automatically think this stuff is crap because it is too cheap.

JoshK · « **Reply #30 on:** 17 Nov 2005, 05:05 pm »

Ahh...the wines of SLO. That is where I learned to love wine. I am an alumni of Cal Poly and we use to go wine-tasting on the weekends for fun. Great times and a great place to live!

Occam · « **Reply #31 on:** 17 Nov 2005, 05:41 pm »

Quote from: rmihai0

As in other financial analysis, we MADE assumptions.

To quote my hero, Benny Hill - 'When you assume, you make an ASS out of U & ME.'
or in terminology you might understand - The consistent error made by quants is confusing mark to model with mark to market. Or are you seriously telling us that your metrics are the same as that of the 'mass market', and that you would base your own purchasing decisions on your extensive market analysis?

Nor does your sharing you CV particularly impress. But sharing you Investment Banker background does explain your tendancy to come accross as a horse's patoot.

True story -

Ten years ago I recieved a call from the teacher of my then 10 year old. She related that when asked what his father did for a living, he replied to the assembled class-
'He the main pimp hereabouts, wit a fine stable of HOs!'

The teacher was incredulous, and said -
'Very funny, but what does your father really do?'

He again insisted, with a rising quivver in his voice -
'He the main pimp hereabouts, wit a fine stable of HOs!'

Seeing the teacher's mounting consternation, my son ran from the room, crying.
Upon hearing of this, I was quite embarassed for my son and felt I had to explain the reason for his outlandish behavior. So I explained -
'Well, you must understand, I'm an Investment Banker on Wall Street .....'

and she rapidly cut in -
'Oh, now I understand....'

revolver · « **Reply #32 on:** 5 Apr 2006, 04:10 am »

The 'investment banker's' analysis is ridiculous in the extreme. It is possible that if Dusty's business was a monopoly, and if the info pointed out elsewhere was available, then it might be possible to identify an optimal price. The other possibility is if the market is perfectly competitive (implying conditions that are just as unlikely as Dusty having a monopoly on DACs) and Dusty's marginal cost is $550. But we have just heard it was assumed to be a quarter of that.

In reality the market will be one of monopolistic competition, MC will be less than AC, the industry will not support a natural monopoly, customers will perceive differences between DACs, etc etc. Any decent investment banker would be looking at Dusty's sources of competitive advantage, his business strategies to exploit them to create differentiation, the position of market power he is seeking to ultimately create, who stands in the way of that and the sustainability of such a position should he ever get there.

viggen · « **Reply #33 on:** 5 Apr 2006, 06:44 am »

The financial analyst possibly made a close assumption regarding the COGS. I remember CIA used to sell through a network of retailers. I don't know if these retailers bought directly from CIA or from a wholesaler/marketer, but, as far as I know, most prices of CIA products are the same before and after CIA started selling direct exclusively.

I bought the VDA1 and external PSU from an online retailer like 3 years ago, and the price back then is the same as now until it was discontinued recently. So, the current pricing method, atleast for the products CIA carries since a year ago, wasn't based on a direct marketing model.

That being said, I have no idea how one can come up with an optimal price for dac with only the knowledge of COGS. As far as I know, the VDA2 is a new product at a very different price point compared to the VDA1, hence, you do not have historical data to extrapolate from. Hence, it'll be very vague assumption to make regarding price elasticity.

Ofcourse, if CIA is going purely off cost plus pricing, you can do away with price elasticity. But then you're really do not have "optimal pricing" in mind in this case. So, it behooves me how one can come up with $548.

Don't get mad at me guys. I just found this to be a fun discussion.

bluemeteor · « **Reply #34 on:** 18 Jun 2006, 11:58 pm »

Let me throw in the DIYEDEN Great March(s), Lite DAC AH -- and various mods thereof and the always mention Lite DAC 60 - a vacuum tube DAC that is always less than $500.