When we started Simple Hardware 4 years ago we had lengthy internal debates on how to set up the pricing.
Based on my experience at Microsoft (totally messy pricing) and at Google (totally simple and transparent pricing), I was a big proponent and pushed a rather revolutionary scheme of single low flat public pricing from 1 to 10 000 units.
We calculated the sweet spot at 500 units (losing profit below and making a little bit more profit at larger volumes).
After profound internal discussions we came to the conclusion we have to change it.
There are 4 main reasons:
People come to us and they want discounts for 10 units. People simply love discounts. I underestimated that.
Product line development
We grew from 3 to 34 products with tens of cable and accessories variety in different radio zones. We originally intended to produce thousands of stock for each and achieve mass scale savings for stock items. This is not possible with 34 products.
Even though we produce in hundreds for stock, try to keep crucial items in stock and we have prepared components for rapid assembly, we need to produce the devices quite often in small batches at additional cost.
Parts and material and shipping price and availability
Current lead times for crucial components is around 40 weeks. Spot prices for some components are ten times higher than the calculated prices. Shipping is twice to 3 times more expensive than a year ago and suppliers are super busy.
With the current shortages we need to keep tens of thousands of components in stock in order to be able to deliver in reasonable time.
Partners complain about public pricing
Partners are not making a lot of profit on connectivity and services/integration and they want to earn profits on hardware and have stronger control of their pricing toward end-customers.
We still want to keep the pricing simple, transparent and fair.
The new pricing scheme should have a minimal impact on your current projects and field deployments.
We do 5 main things:
We introduce volume tiers of 100, 300, 1 000, 5 000, 10 000 and 20 000 where the legacy price matches exactly the 1000 tier. So for field deployments, there is no change or little change in price, for larger deployments qualified partners have a larger discount. For very small orders/ small proof of concept projects the price slightly increases.
Only the lowest volume tier price is public on the web for general users. The volume discounts are available only to qualified partners. They get the tier discounts lists and also after login into the portal they are able to quote and purchase devices with volume discounts.
We were frantically working on a system enabling us to better communicate availability and shorten lead times. Nevertheless for super urgent critical orders we now offer prioritized production and delivery at an express fee.
Until now we have had only one delivery term and that is payment at time of order. We are now offering for orders above 1000 units delivery terms 50% of price payment at order and 50% payment before delivery.
We Introduce pricing tier from 10 000 till 20 000 units where we used to have project prices only. Please be aware that for any large scale projects the timing and parts availability is critical.
The new pricing scheme applies to any new quotations.
Current orders and valid quotations are not impacted.
We hope not to complicate things too much and I hope you will welcome the changes.
Please contact your sales account managers for concrete discounts tiers and contact me in case anything needs to be clarified from a strategic/conceptual point of view.
With best regards
Pavel Sodomka and Simple Hardware team