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>I wondered why many of those cost 3 to 4 times the electronic parts: This is the markup you need if you don't want to sell at a loss. Only in an indirect way.
by starky 3y ago
>I wondered why many of those cost 3 to 4 times the electronic parts: This is the markup you need if you don't want to sell at a loss.
Only in an indirect way. They cost 3-4 times the electronic parts because that is what customers are willing to pay for them.
A company ideally prices their products such that the net profit is maximized (theoretically). Markup is more of an indicator of whether the product is worth producing at all. If your margins are too high a competitor has room to sell a competing product that undercuts yours which will reduce the optimal price.
- atoav 3y agoWell yes and no. If you price in operations, wages and other overheads and a modest margin you will typically land just there. Sure, it depends a lot on the thing, and that multiplier is only the lower limit. If you create a butique guitar fuzz pedal that consists of five parts that multiplier can easily be much higher, especially if you somehow convince people to pay for that. But if it was any lower you will sell at a loss unless you sell huge numbers.