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Don’t Just Roll The Dice – eBook about pricing

I recently read a short book called Don’t Just Roll The Dice, available as a free pdf. The book is about different pricing models and how they work, why they work, the psychology of the different schemes, and how to choose the right model and prices for your business. The book primarily focused on software, but as a lot of hardware often now has a software connected component, it is still somewhat applicable. For example, the book talked about selling the Playstation and xBox as a loss leader but making up that revenue in increased game sales.

At around 70 pages, it’s a quick read; good if you have an hour to kill. The biggest lesson from the book is that you shouldn’t be afraid to just pick a price that you think makes sense and then experiment with it to maximize profit.

In the hardware world, things are in a lot of ways more complex than what the book described. There are so many extra costs that need to be considered that aren’t part of the physical product being manufactured. Things like shipping, tariffs, tax, support, returns, defective parts, assembly, licensing and certifications. Plus there are months of delays between making an order with the factory and getting the finished product delivered. There are people at every step who siphon off a chunk of the profit. There is a lot more risk that is outside your control. As a general rule, hardware pricing takes the cost of the goods sold and multiplies it by 3 or 4. That means every product you buy probably was produced for 1/3 to 1/4 of the price you paid, which is kind of amazing when you look at all the technology packed into a TV or computer. But all that markup is necessary because moving physical things around is expensive.

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