[Elecraft] On the advisability of selling kit radios

[Dave - AB7E]

Spoken like a true sales guy.  In some businesses (including the one I managed for several years before I retired), that is indeed a viable business strategy.

But it's a brainless strategy to use indiscriminately, and lots of companies have sunk their ship by not understanding how and when to use it.  How many additional K3's do you think Elecraft would sell ("pull-through") because they marketed a high power amplifier?  How much additional profit margin do you think Elecraft would make on their other products (overhead dilution and vendor leverage)) because they marketed a power amplifier?  How much do you think Elecraft would learn that could be applied toward building even better transceivers because they were building a high power amplifier?  Next to nothing in all cases, in my opinion.

And, maybe most importantly ... how much sense does it make for your most costly (by far) product to be your loss leader?

As I said before, if Elecraft can develop and sell a high power amplifier for a reasonable profit, that's great.  Otherwise, I hope they don't try because I'd sure like to see them still be here a few years from now.

Dave   AB7E 




------Original Mail------
From: "Terry Schieler" <terry.schieler at wirelessusa.com>
To: "'Phil Hystad'" <k7peh at comcast.net>,
    "'Conway Yee'" <yee at bronze.lcs.mit.edu>,
    <elecraft at mailman.qth.net>
Sent: Tue, 9 Feb 2010 10:11:56 -0600
Subject: Re: [Elecraft] On the advisability of selling kit radios

It's known as a "loss leader" Phil.  Been around in retail marketing for
years.  Advertise Pepsi at an unbelievably low price hoping to draw
customers into the store that might just pick up some Doritos or other
products in that aisle at a decent enough profit margin to keep the bottom
line in the black on average.  And, it works!

73,

Terry, W0FM
K3 474

-----Original Message-----
From: Phil Hystad [mailto:k7peh at comcast.net] 
Sent: Tuesday, February 09, 2010 12:21 AM
To: Conway Yee
Cc: elecraft at mailman.qth.net
Subject: Re: [Elecraft] On the advisability of selling kit radios

I learned a little new thing about Toyota marketing just this week.  Toyota
of course has been 
in the news lately with the massive recalls.  It was reported that the
Toyota Prius Hybrid
is subsidized by about $2500 to $3000 by Toyota.  That is, the Prius whole
sale price to
the dealers is a few thousand dollars less then it costs to build.  Every
Prius car sold is a money
loser for Toyota!

Toyota is happy with this though (they said so) because it is their
front-line product.
It is the product that gives them name recognition, the product that brings
them
Kudos for high-tech achievements, and the product that brings customers
through
their doors.

Thus, a company does not need to make money on a given product to justify
its
production and sale -- there are other reasons to build products.

A smart company will choose the profit margin for each product individually.
It is
rare for all products to be treated the same.  Some will bring in a margin
of 40%,
others only 5%, and then maybe others, by plan, minus 10%.

The Elecraft K3 may have a 30 % margin and maybe the K2, being in production
for so long is now about 50 % margin.  But, a new solid-state amp may only
be
5% or 7% -- enough to make their customers happy without losing money but
not
earning money like a K3 or a K2 either.

phil, K7PEH



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