Setting the
price of your invention
By
Arik Bannister
When
manufacturing your own product, try to keep costs as low as possible.
This seems obvious, but here is why it makes sense from a retail
marketing standpoint.
The retail price for consumer products is generally 4 to 5 times the
cost of production.
For instance, a hairbrush that costs $3.99 at the store costs $.79 -
$.99 to manufacture. The manufacturer (you) then sells the product for
$1.60 - $2.00 to the retailer who marks it up 50% to make his profit.
Hence the $3.99 price tag.
Keep this in mind when shopping for materials and manufacturers to
produce your invention. Outsourcing, or foreign sourcing, is so popular
with American inventors because we can have products produced for
pennies overseas and sell them for dollars in the United States.
This is how millionaires appear to materialize overnight. The right
invention can be produced quite inexpensively, sold for a large markup,
and make their inventors quite wealthy in a year or two. This is why you
see so many new products crop up and disappear.
Many companies are in the business of introducing new innovations that
really serve no purpose, but they sell well for a brief period of time
because they are new and interesting. So the company produces this neat
gizmo for a few cents, makes a couple million bucks, and pulls out when
sales begin to fizzle.
If you pay close enough attention, you will see that you can sell an
invention for well above the price of production if it is novel enough.
Consider mp3 players. Some of these musical devices sell for as much as
$300, and they only cost around $12 to produce. Do the math on that one;
that’s a mark up of 2400%!
So choose your supplier with price and quality in mind, and aim for the
highest markup while still being fair. If you are providing real value,
consumers will not mind paying for it.
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