[Logic] Re: Buckmaster callbook web site

[Bud Hippisley, K2KIR]

At 01:51 PM 2003-07-18, ANTHONY BOYKIN wrote:
>I ask several members of my club about spending $20 for a call book lookup
>pre year many like the idea.
>About 30 or so ask were they could sign up. When I explain that you whated
>$80 they laugh. A number said
>this was the last year they were going to buy the Buckmaster cd. Too much
>data on the net available to warranted
>$80 a year they said.
>So get in
>there and push the $19.95 and get a winner by volume.

This is why I asked in my earlier e-mail if Buckmaster had any data on the price elasticity of the call sign look-up business.   The price point for optimum profitability may not be $80, depending on how many additional people would buy the subscription at $20 versus the number who would buy it at the prices Dan was quoting.

Quoting from Dan's e-mail:  "Producing the CD only costs us a few dollars and the buyer pays the shipping, so most of the cost and effort is in the labor and programming to add to/update/maintain the HamCall database.  We deal with hundreds of updates every day, plus all email questions/corrections and the country databases that we process."

I believe most of the costs Dan lists are there *regardless* of the number of CD buyers or web subscribers.  The updates have to do with the databases, not the customers.  They have to be made no matter how many customers Buckmaster has.  Only the "e-mail questions/corrections" part is proportional to the number of customers.

So I stand by my original impression that for a web-based subscription look-up service there's a high front end cost for the first customer, followed by a relatively low incremental cost for each additional customer.  And as Dan points out, unlike the CD-ROM product, there's no media, no package, no handling, etc. for a web subscription.  There *is* a small sign-up cost, and occasionally the cost of additional server hardware and internet pipe bandwidth as the number of subscriptions outgrows the initial server capability.   ("Problem?  What problem?" with that many customers....)  Plus the increased number of questions that Dan mentions.

However, even if the added cost per subscriber is very low, that high front end cost has to be amortized over the total number of subscribers.  WB2JRI has done some market research for Buckmaster at his radio club meeting.  It's clear from Tony's report, as well as the remarks here on the reflector, that there are *many* more potential buyers at $20 than at $80 or $50.    By quantifying that relationship you have the "price elasticity".     Once you have a handle on that and on your fixed and incremental costs (y=mx+b), solving a couple of simultaneous equations will tell you where the optimum price is.  In general, a company's objective should not be to maximize the *sales* dollars, it should be to maximize the *profit* dollars.  

In my shack, $10 or below is a "no-brainer".  $15 is probably an "OK deal", and anything above $19.95 is going to cause me to wishy-washy about it -- to the point where I'd probably never get around to buying it -- for all the reasons that everyone has mentioned on here.  Are there five times as many people out there willing to pay $19.95 as there are willing to pay $80?  I'm betting the answer is a very solid "Yes" -- just as I'm betting Buckmaster can make *more* profit at that level than at $80.

Bud, K2KIR