Jan. 29th, 2017

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Продолжаю постить статьи для LinkedIn, поскольку он у меня заблокирован.

pic:Some off the charge
When you can put it on sale

Today Microsoft sells Surface Book and Surface Pro 4 with a discount, dropping as much as £195. It's not Black Friday, definitely. But a drop nevertheless.

Why do they do it? I think, you agree with me, not only out of generosity. Let me dig down.

The drop relates to cheaper models. Black Friday sale related to more expensive ones. Obviously, the sale is trying to cover all the consumer segments, so everyone wishing for precise model can buy it with a discount eventually. Or, by other angle, Black Friday one had sold gross of units and someone in consumer world noticed it, going to buy what they want. Rich ones get it without discount, and upstart get it cheaper.

Why is it ever possible?



Well, Surface units don't grow on trees like Intellectual Property, isn't it?

One of first economy University lesson, at least for me, is that there are peaks of ideal production on cost-per-unit to unit number graph. So it is more viable to produce, say, 35m of Surfaces Pro 4 or 46m, than 40m.

The surplus goes to sale.

Essentially, Microsoft loses around 20% off the charge, but saves around 30% in production costs.

It's simple: you either cargo up 3 freighters, than 3 and a half more and running around dividing loading and unloading with ABB. And transporting costs is production ones too. Count in shipping, they too have peaks of ideal production (fourteen-and-half logistic centres or just fifteen?)

Fixed costs arithmetics



Time to fixed and variable costs to enter. Wikipedia says fixed cost consist of salary and rent, and has a nifty graph displaying total cost calculation, which has absolutely no relation to the real world as there's no peaks of ideal production.

In reality, majority of fixed cost consists of lease, price of units of other manufacturers, property tax and management and consulting fees. They are called "fixed" as paid non-dependent on what production goes into the facility, if some at all.

But you probably say: "I can lease surplus factories and freighters!" Yes, this where peaks of ideal production comes from, we have discussed it in the previous section.

Variable cost on one production line of a facility is almost always proportional to the numbers of units produced. But only by the matter of one production line. When lines are combined, the peaks arises. And problems too, that's why you will need management and consulting fees if go to production.

There's not an easy question: do you need to lower fixed cost and rise variable ones of vice versa? First gives you unit stocks, the second rises cost of a unit and gives you greater operability.

But nevertheless you are able to set some off the charge.

Service is taken in account



Though, there's one more component of the equation: the service fees to you.

Microsoft Store has Microsoft Complete in. What it is? Extended warranty covering free lessons and free replacement, I got it.

But what it really is? An Intellectual Property! Sold in bundle. That's why Microsoft allows a customer to buy Surface Pro 4 without it as I told in Freebies in Intellectual Property.

Wait! It has price close to the discount! So Microsoft, essentially offers a customer to buy Microsoft Complete for free.

As I explained in Freebies in Intellectual Property, the IP has not term to wear down. And the real production unit has. So service allows to you to rule over the life-cycle of a unit.

Conclusion



Don't be fooled by comparison of Windows 10 and Surface Pro 4. Thise are different products. First is IP, second is real production. They are sold in one Store, but the price policy is completely different in both cases.

There is Customer Support fees, additionally. But I will cover them in Freebies in Consulting.
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pic: None Off the Charge
When you just cannot give it away

Can you imagine going to a physician, and not paying a thing? Oh, well, ObamaCare pays for you.

It's harder than just a mental exercise. Any consultant can work for free, as words doesn't cost a thing, but would he?

There's fixed cost of nourishing, lodging, self-improving, entertaining, and profiting. These are essential to every man or woman. And they must be paid. The last constitutes consulting cost.

But could I lower the price?



Nope.

Firstly, you train your customers to pay low, to beg discount, or to pose cheap. The price could varies on the income of a customer, but it's must be based on real data, not just overlooking the dress.

Secondly, any variation in price shall be preferably paid by some being. Else you could easily run into unpaid bills for you.

Once again: it's really bad to drop the price. Whether you are a single person or a company. It hurts the business and doesn't pay your bills.

Another question is how to set the price (as it could float to the extremes.) It's best to know the market, your place on this, and your concurrents. But it is perfectly huge topic, I cannot answer in this article.

Customer Service



Sometimes consulting is posed as a customer service. What's the difference?

Firstly, it's pre-paid in bundle with other products. This means limits on time and efforts spend on single customer. They may be pretty high, compared to literal price of a unit, but the head office ordering Customer Service shall take measures to not overbook.

Secondly, it's sold by Freebies in Real Production rules, as part of a unit. Even if unit is Intellectual Property as Windows 10, the Customer Service cannot be free off the charge. Someone must pay.

Happily, there are always many sides interesting in Customer Service, and it almost always possible to find one to pay. But the restrictions on the customers might be set.

Dip into Intellectual Property



What if you would built a database with automatic search by question, and sell it?

Viola, you are on IP side of freebies now. And can distribute it for free (for some.)

Essentially, every teaching on juniors, writing a spec or an instruction, or recording a primer, is a dip into IP. And this is exactly how consulting can lower the price.

Conclusion



If you do consulting, never drop the price.

I said before, and I'll repeat: someone must pay. Unless, you step into IP side. In this case make sure a consumer is informed that it isn't customised, neither precise, and customised and precise can be found at your office.

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