To Feel the Music by Neil Young

Author:Neil Young
Language: eng
Format: epub
ISBN: 9781948836630
Publisher: BenBella Books, Inc.
Published: 2019-07-01T16:00:00+00:00

COST AND TIME?

As part of the preparation for the Kickstarter campaign, I needed to provide a delivery date and pricing for the players offered. Ship dates are notoriously hard to predict at this stage because of the uncertainty about the problems that lie ahead. The product cost would depend on the final parts being used (called the bill of materials, or BOM), the manufacturer’s costs to manage and assemble it, and their profit. All of these costs depended on how many units we would build. We were months away from knowing any of these details with much certainty.

I had to come up with numbers to use; a date and price that would be attractive enough for supporters, but not so far-out or expensive that the campaign might fail. After considerable head-scratching, I estimated that we’d be able to start delivering the product in about seven months, in October. I estimated the cost, based on the parts we used for the first design, and assumed the new design would not add very much more. The other uncertainties were the manufacturer’s assembly cost and margin and the volume we’d build. I decided to use an estimate of $175 as our cost for the player. That was based on about $140 in material costs at the time and a belief we could make inroads in that cost with higher volumes. That turned out to be fairly accurate.

To be able to offer a variety of Pono models on Kickstarter with different prices to entice early pledges, we offered the player in two colors, yellow and black, with the first 100 units of each color being sold for $199, and successive units at $299, compared to a suggested retail price of $399. The $399 was determined by what we considered the maximum selling price should be. While that limited our margin if the cost was really $175, I was confident the cost would be lower as the volume grew, but that anything greater than $399 retail would seriously restrict sales. We all thought $299 was a much more attractive retail price but decided to settle on $399. Even that price would make it difficult to sell at retail and still provide much profitability.

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