I don't know how hi fi companies work, but in the world of high volume manufacturing, the direct labor (the people who build the product) is about 2-3% of the cost. Parts are about 60-70% of the cost. Overhead, including salaries are about 15-20% and the remaining is EBITDA. When EBITDA runs 15% or more, investors are happy and the company can reinvest to develop new products. When it is below 5%, the future is bleak. Don't forget that warranty costs and scrap eat into EBITDA too. The earnings also cover all of the investment costs like a building, manufacturing tooling, and taxes. In a low volume specialty business, I could see labor being up to 20% of the cost. In the end the biggest margin is the middle man- ie. the dealer. Brokers make money anytime a deal is made. I don't believe markets can handle 40% margins on big ticket items in today's climate, in general, but I could be wrong. Even a box of cereal has a fairly thin margin these days. I notice cell phone companies do fairly well...
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?
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?
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- 39 posts total
- 39 posts total