Test equipment price haggling

[JohnG]

I've seen plenty of corporations go down the shitter once they start micro-accounting everything and account R&D as a "cost" of a product.

rant
This is so true. My first job was with one of these. It was great and successful, and was the biggest, or one of the biggest, electronics companies in the world. MBAs, beancounters, and micro-management of engineers by accountants and statisticians turned hucksters (Six Sigma^TM)* played a big role in bringing them down. Anyone remember Motorola...?
/rant

John

*not to be confused with statistical process control or anything sensible

[Daniel Bogdanoff]

Test equipment >= $10k, the COGS is a very tiny fraction of the list price, or in other words it's > 90% profit. COGS is defined as the incremental cost to manufacture a unit, and does not include R&D costs. However it is stupid to charge R&D costs to a product or even product area, since it is an investment that carries over to all future products.

Sorry, this is simply not true. I know for a fact that some of our products at >$10k list are barely viable and only sold because there are higher margin products in the same family that help carry it.

Also, if you don't amortize in R&D, support, sales, and marketing costs into your total product cost model (COGS + business stuff + lights-on stuff) it's a sure-fire way to run out of money in a hurry. But, that analysis is more about product viability in the planning and development phase and less about equipment volumes once it's shipping.

[Electro Detective]

@Electro Detective...

You ARE Kevin Bloody Wilson and I claim my free-night-in-a-brothel prize!

Sorry mate, that offer's been pulled due to global Social Distancing compliance

You can reapply again in 2022 by the time corona fizzles out,
but the regal ladies of leisure will be out of business and a closed shop by then, in all respects

There's always warm apple pie   

[james_s]

Sorry mate, that offer's been pulled due to global Social Distancing compliance

You can reapply again in 2022 by the time corona fizzles out,
but the regal ladies of leisure will be out of business and a closed shop by then, in all respects

There's always warm apple pie   

Can you stop bringing up your nutty covid rants in every damn thread please? There are several threads already dedicated to that topic, which the mods have been exceptionally generous in allowing such off-topic posts to go.

[james_s]

My last new car I negotiated 35% off and got the options I wanted thrown in. Didn't even spend a day on the lot they ordered it straight in from the manufacturer. It's unrealistic to expect everyone to know how to even approach doing a deal like that, but I gave you hints earlier.

Don't worry about having just accepted full price in the past, most people either don't negotiate or when they do get an option or something thrown in and think they have made a huge windfall. It's just experience of dealing with sales people and being direct and confidant.

I've always just bought an older car for 1/10th what it cost new, and in some cases I've kept it longer than the original owner had it. I'm more than happy to let some other sucker take the massive depreciation hit and break it in for me.

Then again, I do that with test equipment too.

[Electro Detective]

Sorry mate, that offer's been pulled due to global Social Distancing compliance

You can reapply again in 2022 by the time corona fizzles out,
but the regal ladies of leisure will be out of business and a closed shop by then, in all respects

There's always warm apple pie   

Can you stop bringing up your nutty covid rants in every damn thread please? There are several threads already dedicated to that topic, which the mods have been exceptionally generous in allowing such off-topic posts to go.

FYI: my reply was directed to Mr. Gandalf_Sr, and chances are the gent got a giggle out of it

well, maybe not the pie bit 


@ james_s: isn't there some 'ignore' function on the forum you can click on ?

Do us both the favor so we can move on, I'm not happy if you're not mate 
 

 

[Shock]

Do us both the favor so we can move on, I'm not happy if you're not mate 

You posting about Covid is spreading at a faster rate of infection than the actual virus in Australia. Ignoring you is not a solution to the epidemic. We need to cut it off at the source.

[OwO]

Also, if you don't amortize in R&D, support, sales, and marketing costs into your total product cost model (COGS + business stuff + lights-on stuff) it's a sure-fire way to run out of money in a hurry. But, that analysis is more about product viability in the planning and development phase and less about equipment volumes once it's shipping.

I'm not saying R&D costs shouldn't be accounted, but that an investment + payback model should be used rather than an amortized cost model.
For example, you might invest $100k developing a product to get a $50k/year gross profit (income minus COGS), meaning payback in 2 years.
If you instead amortize that R&D cost over each unit sold over the 2 years, at the same sales projection and pricing, your costing will find out that you are making zero profit, and you will want to raise prices further to get some "margin". However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years, and it's free money at that point. Not to mention designs can be reused, team expertise got improved, etc etc. R&D is fundamentally an investment and not a cost. You have to constantly pay into it to keep your team expertise up to date, but it costs nothing to make use of a design that has already been done.

[Fungus]

However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years

Says who?

(and R&D gets exponentially more expensive, not linearly)

[stafil]

However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years

Says who?

DSOX models that still sell 10years later maybe?

[Mr. Scram]

Can you stop bringing up your nutty covid rants in every damn thread please? There are several threads already dedicated to that topic, which the mods have been exceptionally generous in allowing such off-topic posts to go.

Agreed. Anyone's entitled to even a senseless opinion, but starting the same shit in every thread not even remotely connected to it is just disruptive behavior.

[nctnico]

Also, if you don't amortize in R&D, support, sales, and marketing costs into your total product cost model (COGS + business stuff + lights-on stuff) it's a sure-fire way to run out of money in a hurry. But, that analysis is more about product viability in the planning and development phase and less about equipment volumes once it's shipping.

I'm not saying R&D costs shouldn't be accounted, but that an investment + payback model should be used rather than an amortized cost model.
For example, you might invest $100k developing a product to get a $50k/year gross profit (income minus COGS), meaning payback in 2 years.
If you instead amortize that R&D cost over each unit sold over the 2 years, at the same sales projection and pricing, your costing will find out that you are making zero profit, and you will want to raise prices further to get some "margin". However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years, and it's free money at that point. Not to mention designs can be reused, team expertise got improved, etc etc. R&D is fundamentally an investment and not a cost. You have to constantly pay into it to keep your team expertise up to date, but it costs nothing to make use of a design that has already been done.

Where this goes wrong is when you want to make sure there is an ROI on the investment. So basically you have to factor a bit of R&D cost in each product sold. You can't go on investing R&D money into the best product ever and hope it sells. The latter is a recipy for a financial dissaster. Before developing a product you need to have an idea on how much you can spend on R&D for the product to be viable.

[james_s]

However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years

Says who?

DSOX models that still sell 10years later maybe?

Or longer, the TDS3000 series scopes for example, they've been in production for ~20 years with minor revisions. A brand new TDS3054C should be a $2k scope today, not a $20k scope. I guess someone must still be buying them though.

[philipz]

However, this is wrong, because you are forgetting that the income stream is still going to be there after 2 years

Says who?

DSOX models that still sell 10years later maybe?

Or longer, the TDS3000 series scopes for example, they've been in production for ~20 years with minor revisions. A brand new TDS3054C should be a $2k scope today, not a $20k scope. I guess someone must still be buying them though.

I don't know how good is selling TDS3054C for $20K, but if price was $2K I'm ready to bet one TDS3054C (for $2K) that sales will increase with hundreds or thousands percents. For last 10 years all T&M equipment I buy is mostly HP or Agilent, but only second hand, in most cases defective, and all of them now is working. Of course I like also Fluke, Textronix, Rohde&Schwarz, Keithley. Price policy of all this companyes is the same and of course quality is very good, best, perfect, The One. And most of them have successful products, staying on market for many years and unfortunately list price go up even R&D bill was paid long time ago. And unfortunately the reason is not only inflation.

[Gandalf_Sr]

..and unfortunately list price go up even R&D bill was paid long time ago. And unfortunately the reason is not only inflation.

Not that it's fair to single out Keysight but they pay their CEO $9 million per year, that's got to come from somewhere /s

[Mr. Scram]

People don't seem to understand the price of a product is almost exclusively defined by what people are prepared to pay for it, not by cost.

[OwO]

People don't seem to understand the price of a product is almost exclusively defined by what people are prepared to pay for it, not by cost.

That's what happens in a monopoly market. In a free market with competition the price "should" approach the cost of production over time, as long as there is sufficient economy of scale. Such economy of scale evidently exists with oscilloscopes, and lately the nanovna has shown it exists with network analyzers too. It has baffled me for years why no one came up with more reasonably priced test equipment much earlier, but it is happening (slowly).

[Mr. Scram]

That's what happens in a monopoly market. In a free market with competition the price "should" approach the cost of production over time, as long as there is sufficient economy of scale. Such economy of scale evidently exists with oscilloscopes, and lately the nanovna has shown it exists with network analyzers too. It has baffled me for years why no one came up with more reasonably priced test equipment much earlier, but it is happening (slowly).

That's only true for a commodity market where competition can't distinguish themselves from their competitors. That's rarely the case as even plain water is sold at wildly differing prices. You definitely don't need a monopoly for the price to be different from the cost of production. If you can provide something over your competitors you can set a different price. This can be quality or a history of excellent support or a product others can't quite match or simple exclusivity and many others things. It's also worth noting that the market place is not driven by pure rational reasoning.