Marketing/sales question for the experts here...

[4shotB]

This isn’t complicated. Often, a “standard” design is the most cost effective because of volume discounts on components. Pricing is used to steer customers to the most cost efficient offering. We like to think in terms of “custom” but the reality is most customers choose from a very limited set of options.

Dell has been doing this for decades.

Makes sense of course except in this case I mentioned. Not only Dell but the auto companies do this as well. The additional components (plugs or wire) offered in the bundle deal are not manufactured by the company who makes the reciever?! This is the puzzling part in my mind.

 

[Vespidae]

Makes sense of course except in this case I mentioned. Not only Dell but the auto companies do this as well. The additional components (plugs or wire) offered in the bundle deal are not manufactured by the company who makes the reciever?! This is the puzzling part in my mind.

Doesn't matter. I manufactured instrumentation. The volume discounts on components is high enough to overcome the labor cost to separate. Cheaper just to include and let the customer toss what he doesn't need.

 

[4shotB]

Doesn't matter. I manufactured instrumentation. The volume discounts on components is high enough to overcome the labor cost to separate. Cheaper just to include and let the customer toss what he doesn't need.

I still don't understand in the context of the situation described above. The vendor is Amazon. The order is fulfilled by Amazon. The receiver was manufactured by company A. The banana plugs are manufactured by company B. The plugs are not needed or used to manufacture the receiver. So, Amazon has to pick and ship 2 seperate unrelated items (from a production standpoint ) from 2 of their vendors. They are willing to do this for $50 less than just shipping the receiver.

 

[Vespidae]

I still don't understand in the context of the situation described above. The vendor is Amazon. The order is fulfilled by Amazon. The receiver was manufactured by company A. The banana plugs are manufactured by company B. The plugs are not needed or used to manufacture the receiver. So, Amazon has to pick and ship 2 seperate unrelated items (from a production standpoint ) from 2 of their vendors. They are willing to do this for $50 less than just shipping the receiver.

You don't know that. When we shipped, we included multiple power cords because we didn't know where the product would end up. So include everything. You may mot need it, someone else may or it's part of a larger contract.

 

[4shotB]

You don't know that. When we shipped, we included multiple power cords because we didn't know where the product would end up. So include everything. You may mot need it, someone else may or it's part of a larger contract.

I am confident that I in fact do know that. Vespidae I appreciate you attempting to answer my questions. Sincerely. But it is obvious to me that you do not have any knowledge whatsoever of the products in question and that makes it impossible for you to speak to this situation in a meaningful way. Not that it is a bad thing or even really matters. But banana plugs are not required to connect speakers to receivers!! In fact, many audiophiles or enthusiasts insist that they are a marketing gimmick similar to expensive cables and/or speaker wire.

 

[Vespidae]

I am confident that I in fact do know that. Vespidae I appreciate you attempting to answer my questions. Sincerely. But it is obvious to me that you do not have any knowledge whatsoever of the products in question and that makes it impossible for you to speak to this situation in a meaningful way. Not that it is a bad thing or even really matters. But banana plugs are not required to connect speakers to receivers!! In fact, many audiophiles or enthusiasts insist that they are a marketing gimmick similar to expensive cables and/or speaker wire.

That's the point I'm making. I can enter a contract for 100,000 60Hz cables for X. I can order another 100,000 50Hz cables for X-Y. Say the manufacturer (or distributor) offers another discount to move obsolete inventory. OK. I get 200,000 cables for 1/2 of what I planned and a promise to move the obsolete. I could take delivery of it and throw it in the trash or ... have a third party fulfill it and not care.

These deals aren't product specific. They happen all the time. Go to China. The same factory making a lawn mower is also making feminine personal care.

 

[RonJohn]

I still don't understand in the context of the situation described above. The vendor is Amazon. The order is fulfilled by Amazon. The receiver was manufactured by company A. The banana plugs are manufactured by company B. The plugs are not needed or used to manufacture the receiver. So, Amazon has to pick and ship 2 seperate unrelated items (from a production standpoint ) from 2 of their vendors. They are willing to do this for $50 less than just shipping the receiver.

Is it actually Amazon selling the products or a third party vendor on Amazon? Amazon uses AI and algorithms to set pricing instead of marketing people. The sold and fulfilled by Amazon items are not priced by mistake, they go off of maximizing profits based on the algorithms. It could be that nobody has a plan, nor understands why but the machine learning shows that selling an item at one price and selling a bundle at a lower price creates more profit overall.

 

[4shotB]

Interesting take @RonJohn. this order is being filled by Amazon. Perhaps it is an intentional (by humans or computers) ploy. They know no one unless they are careless is going to pay more for less so this way they create the illusion of a deal. WTBS, their (bundled) price was lower than just the receiver by itself on other web stores.

 

[Deleted member 2897]

Is it actually Amazon selling the products or a third party vendor on Amazon? Amazon uses AI and algorithms to set pricing instead of marketing people. The sold and fulfilled by Amazon items are not priced by mistake, they go off of maximizing profits based on the algorithms. It could be that nobody has a plan, nor understands why but the machine learning shows that selling an item at one price and selling a bundle at a lower price creates more profit overall.

Amazon doesn’t maximize profit.

 

[4shotB]

Amazon doesn’t maximize profit.

I am curious here. can you elaborate?

 

[Deleted member 2897]

I am curious here. can you elaborate?

It’s been their philosophy for 25 years. They deliberately for over 20 years did not earn money in order to grow the customer base and revenue. They only finally started making money in the last few years, and predominantly from cloud computing, not the online marketplace. It may be different now, but as recently as a year or two ago, their all time cumulative profit was still a net negative. They are absolutely sophisticated and know what they’re doing for sure.

 

[RonJohn]

It’s been their philosophy for 25 years. They deliberately for over 20 years did not earn money in order to grow the customer base and revenue. They only finally started making money in the last few years, and predominantly from cloud computing, not the online marketplace. It may be different now, but as recently as a year or two ago, their all time cumulative profit was still a net negative. They are absolutely sophisticated and know what they’re doing for sure.

They have been making a profit for several years now. They make a ton on cloud computing. Their EBITA has been above $1billion per quarter since about 2012. In 2020, their net income rose rapidly and reached over $8billion.

You are correct that at the very beginning, they even lost money on many of the sales in order to grow the business. But they haven't been doing that for a very long time. They have used income to do research and to purchase other companies instead of creating income. However, that does not mean that in a sale of some product to a consumer that they don't have profit. They have an AI system that will maximize profit on individual sales. I have heard commentators describe it as a knob that they can turn to set the companies income at whatever they want it to be.

 

[Deleted member 2897]

They have been making a profit for several years now. They make a ton on cloud computing. Their EBITA has been above $1billion per quarter since about 2012. In 2020, their net income rose rapidly and reached over $8billion.

You are correct that at the very beginning, they even lost money on many of the sales in order to grow the business. But they haven't been doing that for a very long time. They have used income to do research and to purchase other companies instead of creating income. However, that does not mean that in a sale of some product to a consumer that they don't have profit. They have an AI system that will maximize profit on individual sales. I have heard commentators describe it as a knob that they can turn to set the companies income at whatever they want it to be.

I guess that depends on your definition of profit. they are definitely maximizing SOMETHING for each and every transaction. But it’s not profit in the true sense of the word. Yes they have had positive cash flows for awhile now. But there are reasons they only just started paying taxes - for 85% of their life as a company the net total of their bottom line was a loss. Their carry forwards were massive. Your illustration of high R&D is what I mean - plowing money back into the business instead of taking it to the bottom line. They’re very shrewd and long term thinking in what they do.