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How are Hig-End Speakers Priced?

I recently (early Feb 2012) purchased a pair of Model 61 Human Speakers, intending to build a small office system with them. I've been listening to them through my main system for a few days now, while breaking them in. These were purchased directly from the builder/designer; my cost was only $675, delivered to my door.

I am so very impressed with the build quality of these small speakers and the quality of the music emanating from them (even though they are not yet fully broken in). I'm honestly surprised they are as inexpensive as they are, and have begun wondering how high-end speakers are priced.

The speakers are manufactured in the Northeast US, and (so far as I know) the builder/designer doesn't advertise and doesn't attend trade shows. The speakers are built with only one pair of binding terminals, two hand-built drivers, and a very simple 1st-order crossover using a design I believe is refined from an 1970's-era design. I'm not sure how much the designer is actively pursuing R&D currently.

I'm wondering if there is a formula that speaker manufacturers generally use when designing/pricing their products. For example, does a manufacturer target a price point, and then decide to follow an "industry-standard" formula like (say) 15% for R&D, 15% for materials, 15% for manufacturing/assembly, 15% for marketing, 15% for distribution, 15% for manufacturer's profit, and balance for seller's profit? Certainly, eliminating (or reducing) one or more of the above categories could yield a speaker that is much less expensive than the price point it was designed for.

Any thoughts?
rx7audio

Showing 3 responses by david12

david12
1,454 posts
 
I had the manufacturer of my US speakers over to visit a year ago, to try and develop some interest here in the UK, at a show. He gave the example of an $80000 speaker, he thought would have a material content below $20000, similar to the range mentioned above. Most of the rest of the cost is marketing, dealer and distributor cost. The answer, is to go for a small direct sale manufacturer like him. I won't give his name, the conversation was in confidence.

Interestingly, I could get no interest in the speaker, partly because the dealers felt it was too cheap. Their margin would make it too expensive over the direct sale cost, even though the manufacturer would only have sold through the dealer in the Uk.
david12
1,454 posts
 
The editorial in this months HiFi+, discusses the new paradigm of what is expensive, in our hobby. A few years ago, $100,000 for a piece of kit, was a stupid waste of money, now it seems the norm. Who are these people, who can drop $500000 on a pair of speakers? The answer is, not us.
Another conversation with an idustry insider, about a US speaker company who decided to make a B..ls out, top of the line speaker, which came to about $1,500000. They were'nt expecting to sell a single pair, it was more as a marketing move. They took them to a Shanghai show. Some guy listened for an hour and paid for 2 pairs, by cheque.
david12
1,454 posts
 
Pubul57 That's a very interesting point you raise. How far is to far to expect to be able to buy from a dealer. This is much more of a problem in the US, with the size of the country. Here in the UK, 500 miles takes you from one end of the country to another. I also believe, that is why shows like Denver are so much more important to you than us. It really is impossible to audition a range of options, unless you go to a show.

What I do know, is direct selling by manufacturers, drives dealers crazy. Particularly when they dem the speaker and the client goes and buys cheaper from the manufacturer. Most dealers would drop a line of products under these circumstances. I think you have to ask a dealer, how far he considers, his patch covers
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